Buying your first home: Three steps to successful mortgage shopping

-Table of contents

 

Step 1: Know what you need and want in a mortgage

Mortgage options 

Portable mortgages

Porting a mortgage refers to transferring some or all of the terms and conditions and outstanding balance of the mortgage on your existing home to a new property while remaining with the same lender.

Homeowners often port their mortgages when they have a lower interest rate on their existing mortgage than is available for a new mortgage.

By porting your mortgage to your new property, you can usually avoid prepayment charges for breaking your mortgage contract early.

Check with your lender to see whether your mortgage is eligible for porting and whether any conditions or restrictions apply.

Assumable mortgages

An assumable mortgage allows a home buyer to take over the seller’s existing mortgage along with the property. The terms of the original mortgage must stay the same. In most cases, the lender must approve the transfer as well as the buyer who wants to assume the mortgage.

If approved, the buyer will take over the remaining mortgage payments to the lender. Lenders may charge the buyer a fee to assume the mortgage.

Important: In some provinces, the seller may remain liable for the mortgage after it has been assumed by the buyer. However, some lenders may agree to release the seller from any personal liability if the buyer meets the lender’s qualifications.

Cash back

Cash back is an optional feature that provides you with a percentage of your mortgage amount in cash right away.

While it can help you pay for things you’ll need when getting a new home, such as legal fees or furniture, you usually have to pay a higher interest rate to get a cash back option on your mortgage. The interest charges you will pay due to a higher interest rate could cost you more than the money you receive as cash back.

The lender can impose certain restrictions on the cash back. You may not be allowed to use cash back funds as part of your down payment. If you decide to renegotiate, transfer or renew your mortgage before the end of the term, you may be asked to repay some or all of the cash back amount.

Shop around and ask about all the conditions before applying for cash back on a mortgage.


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