Over the years we have had the privilege of working with many past and repeat clients and also new clients who currently have a mortgage and would like to purchase their next home. This article is specifically for clients who have a current home and are interested in purchasing their next home. If you are looking for information on purchasing a vacation home or second home for your children or an elderly parent to live in please click here.
When we are working with our clients on purchasing your next home we typically have two options that we discuss:
*Porting (moving) your existing home mortgage onto your new place and increasing it if required.
The advantage of porting your existing mortgage is that you generally avoid paying the current lender’s payout penalty. There are a couple of approaches that lenders use however the most common is called “blending to term”. For example if you have a $300 000 mortgage at 2.5% with 2 years remaining on your mortgage term and you would like a new $400 000 mortgage, we would take your current $300 000 mortgage at 2.5% and blend it with $100 000 of new 2 year mortgage money to achieve a blended rate for your new home. If for example the current two year rate was 3.0% the new blended mortgage rate would be 2.63%. The disadvantage of this approach is that sometimes clients will keep an existing mortgage at a higher mortgage rate when their larger benefit could be to repay the current mortgage and obtain a new mortgage with much better rates and terms. The other potential draw back to this option is it can leave you more vulnerable to future rate increases as you have blended to a shorter remaining mortgage term instead of selecting a new longer term.
*Obtaining a new mortgage and repaying your existing one from the sale of your current home.
The potential advantage with this option is to obtain better rates for a longer term on your new home. The disadvantage is that most times the current lender will charge you an early pay out penalty so when we are considering your options we will ensure that we analyze the benefits and costs for you.
How we can help you when purchasing your next home:
In deciding the best course of action we would typically weigh several factors including the best cost savings for our clients, future market outlook, and each client’s overall best lender fit given their current employment and credit situation. We will work through in depth and side by side comparisons for you that will equip you with the information needed so you can make the best decision possible. This information includes an analysis of your interest paid and principal reduced if we were to port your mortgage as opposed to the principal and interest if we were to approve a new mortgage for you while balancing this with your penalty if you do decide to obtain a new mortgage. Long and short, typically by the time we have completed our analysis the choice is usually quite clear for most of our clients and once that choice is made we look after your approval for you and ensure everything is excellent moving forward.
When you are purchasing your next home, give us a call or complete the online contact form and we would be happy to discuss your options with you to ensure you receive the best rates, terms, and fit to meet your goals.
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