Personal Finance

Should I break my mortgage or port and increase?

  • Last Updated:
  • May 2nd, 2015 2:52 pm
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[OP]
Deal Addict
Feb 24, 2008
2230 posts
734 upvotes

Should I break my mortgage or port and increase?

I have a 5-year closed variable rate mortgage right now with a balance of $140,000 at 2.30% with 4 years left in the term.

According to the mortgage contract, the penalty to break the mortgage is simple 3 month interest + admin fees, which equates to around $1200.

I am planning to sell my existing home and buy a new property. I would need to increase by mortgage by another $75K approximately, so the new mortgage amount will be around $215,000.

I am not sure whether I should port and increase my mortgage or if I should break the existing mortgage and negotiate a new mortgage at the best rate with a new lender. I am thinking that if I try to port, the existing lender may not offer me the best rate on the increased amount.

Can somebody tell me if I should break my mortgage or if I should port and increase? What are the pros and cons for both options?
3 replies
Deal Guru
Nov 21, 2011
10749 posts
4007 upvotes
I ran into this issue awhile ago. It's not as simple as 3 months interest, it's the interest rate differential. Chances are the penalty will be more like $4000. The other thing is when you increase the amount of your mortgage, you'll get a higher blended rate instead of the straight 2.30% on the total amount.

I was with BMO when I dealt with this, and they were complete idiots. I ended up breaking my mortgage and switching to another company because I would have saved more than the penalty. I ended up going through the Ombudsman's office at BMO and they reimbursed me 90% of the penalty so I definitely came out saving way more money by breaking.

To be sure of the penalties, contact your lender so you know the exact amount of the penalty and the exact interest rate of the new mortgage.
[OP]
Deal Addict
Feb 24, 2008
2230 posts
734 upvotes
clseea: Mine is a variable rate mortgage, and penalty is 3-month simple interest. The IRD penalty applies in the case of fixed rate mortgages.
Deal Guru
Nov 21, 2011
10749 posts
4007 upvotes
kulb wrote: clseea: Mine is a variable rate mortgage, and penalty is 3-month simple interest. The IRD penalty applies in the case of fixed rate mortgages.
Ah, should have read more closely then. Still find out if there's a blended rate on the new amount.

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