# Should we port our mortgage over or get a new one altogether?



## canabiz (Apr 4, 2009)

Folks, we are 4 years into a 7-year term at 4.99% with National Bank (we were first time home buyers and didn't know any better).

We are looking at building a new house and closing date for said property will be March 2012. We will have to sell our current house beforehand. I have had preliminary discussions with my National Bank advisor and I was told I can *port* the existing mortgage to the new property at the same rate (4.99%) and for the remainder of the initial contract (2.5 more years) without paying any fee and still maintaining the same pre-payment conditions and what have you.

Alternatively, I can get a better rate by locking it in for a longer period of time so essentially a new agreement altogether.

In light of the current climate (interest rates could/would/should go up for the government to rein in inflation), what options do you guys think is best for us?

1. Port the existing mortgage over and continue at 4.99% for the next 2.5 years.

2. Get a better rate from National Bank (not sure what it is at this point, I have another appointment with the advisor tomorrow) for a longer period of time

3. Pay the penalty (about $7K) and seek the best possible rate on the market. If it helps, the new mortgage amount will be in the ballpark of $270K - $300K.

Thanks.


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## Dana (Nov 17, 2009)

canabiz said:


> 3. Pay the penalty (about $7K) and seek the best possible rate on the market. If it helps, the new mortgage amount will be in the ballpark of $270K - $300K.


If the new house won't be closing until 2012, how do you know now what the penalty will be? The penalty calculation will be dependent on the balance at the time (you may make principle pre-payments) and interest rates at the time - which are an unknown variable right now. 

I would hold off and make this decision closer to the time of closing...a lot can change between now and then.


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## marina628 (Dec 14, 2010)

I would leave it alone for now and Shop around a couple months before the new closing date.there are probably some members here who can work out the numbers to see if it is worth paying the penalty and taking a lower variable rate mortgage.
Actually my friend just paid $9000 to break her $240,000 mortgage and go to a 2.25 variable rate mortgage.She was at 5.1%.


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## financialnoob (Feb 26, 2011)

Office of Consumer Affairs: Mortgage Savings Calculator

This might help with the math.


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## Jungle (Feb 17, 2010)

I might be wrong but..

I thought there was a legislation stating that after 5 years in a term, the bank can no longer charge you a penalty fee?


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## canabiz (Apr 4, 2009)

Thanks for the feedback. You guys are right, it's still a tad early, many things can change between now and next spring.

I will still have an appointment with the NB advisor tomorrow and will ask him/her how much it is to break the mortgage 5 years into the term...the $7K is the number given to me last December, i expect it to be much less than that for next summer.


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## kubatron (Jan 17, 2011)

Jungle said:


> I might be wrong but..
> 
> I thought there was a legislation stating that after 5 years in a term, the bank can no longer charge you a penalty fee?


Based on the Bank Act, after 5 years they will charge you 90-days interest only. Therefore if you wait. .5 years for the 5th year to expire, your penalty will always be 90 days interest.

_According to Professor Jacques Deslauriers, Faculty of Law, Laval University, in Article 10 of the Act, interest is that which determines the parameters of the compensation payable upon termination of a mortgage.

“This article says that the maximum penalty for breach of contract mortgage exceeding five years may not exceed the equivalent of three months interest on the contract,” says Jacques Deslauriers, Professor in the Faculty of Law at Laval University. Law contracts difficult to understand are why banks and credit unions are capable of imposing harsher penalties._


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## kubatron (Jan 17, 2011)

OP, don't kick yourself, 4.99% 7 year term wasn't bad at all 4.5 years ago, you didn't make a bad decision. although variable would have been a better option, I can't say for sure it will be moving forward.


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