Moving with a mortgage: porting, blending and bridge financing

Plenty of people move before their mortgage term is up. Selling a home doesn't automatically end the mortgage contract, so it helps to know the options before listing, especially since the wrong one can cost a penalty you didn't need to pay.

The options when you sell

Port the mortgage. Many fixed-rate mortgages are portable: you can move the balance, rate and term to the new home. If it works, there's no penalty.

Break it. You pay off the mortgage from the sale proceeds and pay the prepayment penalty. That might make sense if you're not buying again, or if a new mortgage elsewhere is enough better to cover the cost. The refinancing lesson shows how to weigh it.

Let the buyer assume it. Some mortgages can be taken over by the buyer, with the lender's approval. It's uncommon but occasionally useful.

How porting works

Porting isn't automatic. You still need to qualify again, including the stress test, and the new property has to meet the lender's rules. There's also usually a time window between selling and buying, often somewhere between 30 and 120 days depending on the lender. Some lenders charge the penalty at sale and refund it if the new mortgage is in place within the window.

If the new home needs a bigger mortgage, the lender lends the extra at today's rate and blends it with your existing rate. If it needs a smaller one, you may pay a penalty on the part that isn't ported.

A blended rate example

Say you're porting $300,000 at 3.5% and need $200,000 more, with today's rate at 4.25%. A simple weighted average gives a blended rate of about 3.8%:

(300,000 × 3.5% + 200,000 × 4.25%) ÷ 500,000 ≈ 3.8%

On $500,000 over 25 years, that's about $2,576 a month, against about $2,698 if the whole amount were at 4.25%. Lenders use their own blending methods, sometimes weighting by the time left in the term, so the exact rate is theirs to quote.

Variable-rate mortgages

Many variable-rate mortgages aren't portable. Their penalty is usually three months' interest, which is often smaller than a fixed-rate penalty, so breaking one and starting fresh can be simpler. It's worth confirming either way.

Buying before you sell

If you buy the next home before the sale of the current one closes, you may need bridge financing: a short-term loan, using the equity in the home you're selling, to cover the down payment until the sale money arrives. It usually costs more than a mortgage, often prime plus a few percent, plus a fee, but it's only needed for days or weeks.

Things to check before you list

It's worth reading your mortgage documents for the portability rules, the porting window and the penalty method, or asking your lender or broker to explain them. The answers can affect when you list, when you close, and which offer you accept. Our move-up calculator brings the sale, the purchase and the mortgage options into one estimate.

Where to go next

That wraps up managing a mortgage. The final module turns to the most expensive debt most households carry: credit cards.