Mortgage Portability.

When it comes to getting a mortgage, one of the more overlooked elements is the option to be able to port the loan down the line.

Porting your mortgage is an option within your mortgage agreement, which enables you to move to another property without having to lose your existing interest rate, mortgage balance and term. Thereby allowing you to move or ‘port’ your mortgage over to the new home. Plus, the ability to port also saves you money by avoiding early discharge penalties should you move partway through your term.

Typically, portability options are offered on fixed-rate mortgages. Lenders often use a “blended” system where your current mortgage rate stays the same on the mortgage amount ported over to the new property and the new balance is calculated using the current interest rate. When it comes to variable-rate mortgages, you may not have the same option. However, when breaking a variable-rate mortgage, you would only be faced with a three-month interest penalty charge, which is much lower than the average penalty to break a fixed mortgage. In addition, there are cases where you can be reimbursed the fee with your new mortgage.

If you already have the existing option to port your mortgage, or are considering it for your next mortgage cycle, there are a few considerations to keep in mind:

1. Timeframe: Some portability options require the sale and purchase to occur on the same day. Other lenders offer a week to do this, some a month, and others up to three months.
2. Terms: Keep in mind, some lenders don’t allow a changed term or might force you into a longer term as part of agreeing to port you mortgage.
3. Penalty Reimbursements: Some lenders may reimburse your entire penalty, whether you are a fixed or variable borrower, if you simply get a new mortgage with the same lender – replacing the one being discharged. Additionally, some lenders will even allow you to move into a brand-new term of your choice and start fresh. Keep in mind, there can be cases where it’s better to pay a penalty at the time of selling and get into a new term at a brand-new rate that could save back your penalty over the course of the new term.

To get all the details about mortgage portability and find out if you have this option (or the potential penalties if you don’t), book a call with me today for expert advice and a helping hand throughout your mortgage journey!

The True Cost of Downsizing.

Many Canadians consider downsizing during their retirement years. Once their children have left the nest, the choice seems obvious: relocate to a smaller residence or a more affordable town and capitalize on the price difference. For many retirees, the funds from the sale of their home can significantly impact their overall lifestyle and financial well-being.

However, there are downsides of downsizing you should be aware of before you call your realtor.

Downsizing in Canada: A Cost Analysis

The cost of moving is probably one of the biggest downsides to downsizing. To give you an idea of the figures involved, we conducted a cost analysis for a typical downsizing scenario using an example of selling a home in Toronto for $1,000,000 and buying a condo for $700,000.

Theoretically, this would free up $300,000 in equity while moving you into a smaller home. According to Ratehub, you need a nest egg of $450,000 if you want to retire comfortably in Canada. The money from the sale of your home could have a meaningful impact on your retirement finances. But how much of that chunk will you get to keep to boost your nest egg? Below is an estimated list of cost considerations when choosing to downsize:

As you can see, downsizing could cost you between $72,175 – $94,875.

If you live in a big city like Toronto, $300,000 of equity could shrink to just $205,125* after considering these downsizing costs. However, these costs are not the only negative effects of downsizing to consider.

The Downsizing Dilemma 

Many Canadians underestimate the financial and emotional costs of downsizing, overlooking various aspects:

• Home Improvements: Before selling, homes often need upgrades, from simple fixes to major renovations like kitchens or roofs. Also, many invest in staging their homes.
• Belonging Decisions: Downsizing means deciding which possessions to keep due to space constraints, often leading to emotional challenges and storage expenses.
• Leaving Family Homes: Leaving a home that carries so many joyful memories, especially if someone is widowed, can be challenging. Relocating might disconnect you from communities and loved ones.

An Alternative to Downsizing in Canada: A Reverse Mortgage 

A Reverse Mortgage can be the ideal alternative to downsizing. Unlock up to 55% of your home’s equity in tax-free cash while staying in your beloved home without leaving the neighbourhood you love. This money improves your retirement finances and can be used to renovate and retrofit the home for accessibility and livability as you age. With no required monthly mortgage payments to make, a Reverse Mortgage is becoming a popular solution.

Book a strategy call with me to learn how a Reverse Mortgage can help you save on the stress and expense of downsizing and live the retirement of your dreams.

*Based on $300,000 of equity minus $94,875 (the highest downsizing cost).