Moving Up in Markham? How Porting a Mortgage in Canada Works

The short answer

Porting a mortgage in Canada means taking your existing interest rate, terms and conditions with you to your new home. The Financial Consumer Agency of Canada (FCAC) advises that if you are buying a new home, you should ask your lender whether you can port your mortgage. If your loan is insured by CMHC, the portability request has a deadline and the premium credit shrinks the longer you wait, so the timing matters as much as the answer.

What porting means when you move up

When you upsize, you usually sell your current home and buy a bigger one. Your existing mortgage then has two paths. You can pay it off or port it to the new property.

Paying it off can cost money. FCAC lists paying back your entire mortgage before the end of your term, including when you sell your home, as a situation where your lender may charge a prepayment penalty. Porting avoids paying the balance out at the sale, which is the event FCAC describes.

Porting is not automatic. Ask your lender whether your mortgage is eligible. If your loan came from CMHC, the rules for insured loans are in the next section.

The CMHC rules for an insured mortgage

CMHC’s portability program covers CMHC-insured mortgage loans on residential properties that CMHC originally insured. Its page sets these conditions:

• The new property must be in Canada and suitable and available for full time, year-round occupancy.
• The new property must have the same intended use as the original one, either homeowner-occupied or rental.
• The new loan should finance the purchase of the new property.
• At least one borrower on the new loan must also be on the original CMHC-insured mortgage.
• The original loan must be in good standing and not in arrears.
• Assumed insured mortgages are not eligible.

The buyer services page is a starting point for the purchase side. Your lender can confirm how these rules apply to the loan.

How the premium credit and the deadline work

CMHC says the portability request must be received within 6 months of the original property’s closing date. It also says a premium credit applies when the mortgage is ported within 2 years. Insurance stays portable beyond 2 years, but no credit applies then. The credit is a share of the premium you paid when the loan was first insured.

Time from the original closing date	Premium credit
Within 6 months	100% of the premium paid
Within 12 months	50%
Within 24 months	25%
Beyond 2 years	No credit, insurance still portable

CMHC’s page states a 6 month deadline and also says insurance is portable beyond 2 years, without explaining how those two statements fit together. Ask CMHC or your lender which deadline applies to your loan before you plan the move around it.

Here is an illustrative example. The $10,000 premium is a made up number, not a CMHC figure. Only the percentages come from CMHC. If that premium had been paid and the loan was ported within 12 months, the credit would be half of it, which is $5,000. Within 24 months, the credit would be $2,500.

What a prepayment penalty costs

FCAC says a prepayment penalty “can cost thousands of dollars” and that the calculation varies from lender to lender. The penalty will usually be the higher of two amounts: three months’ interest on what you still owe or the interest rate differential. Your lender may also charge an administration fee.

FCAC’s own example is for breaking a contract to get a lower rate, not for a sale. The arithmetic still shows how the penalty is built:

Item in FCAC’s example	Amount
Outstanding mortgage balance	$200,000
Current interest rate	6%
Three months’ interest on the balance	$3,000
Interest rate differential	$12,000
Prepayment penalty, the higher of the two	$12,000

The three months’ interest figure checks out: $200,000 at 6% for three months is $3,000. The higher figure is the $12,000 interest rate differential, so that is the penalty in the example.

FCAC also suggests that if the penalty would be large, you should consider waiting until the end of your term to prepay. Federally regulated banks have a prepayment penalty calculator on their websites. FCAC advises you to review your mortgage contract to see exactly how your lender calculates the penalty.

Your lender may call the penalty a prepayment charge or a breakage cost, so search your contract for those words as well. FCAC also says to ask your lender to explain anything you do not understand. Check with your lender for the actual amount rather than relying on an estimate.

Questions to ask your lender

• What conditions apply to porting my mortgage to the new property I have in mind?
• Which portability deadline applies if my loan is CMHC-insured?
• If I need to borrow more for the bigger home, what rate and terms would apply to the extra amount?
• Can you give me the prepayment penalty calculation in writing if I paid the loan out instead?
• What fees apply to porting the mortgage?

What to do next

Start with your current mortgage contract and find the prepayment penalty wording. Then ask your lender the questions above before you make an offer on a bigger home. The order of your two closings affects how the timing works, so read our guide on selling first or buying first alongside this one. If you are borrowing more, our mortgage stress test guide explains how lenders qualify buyers. Our upsizing guide for Markham covers the wider move.

A mortgage professional, lawyer or accountant can confirm how any of this applies to your own situation. If you are planning a move up in Markham, contact us and we can talk through the timing with you.