For straight portability, the following 3 criteria must be met:
- The amortization period of the new loan cannot exceed the amortization remaining from the original loan (up to a maximum of 25 years).
- The new loan-to-value (LTV) is equal to or less than the current LTV of the existing property.
- The new loan amount is equal to or less than the current outstanding balance.
Example
A property was purchased 3 years ago for $200,000 at 90% LTV. The current outstanding balance is $172,000.
- The new property purchase price is $210,000
- A new mortgage is sought for $172,000, and the amortization will be maintained at 22 years.
What is the premium to be charged?
- Outstanding balance = $172,000. New loan $172,000. This means no new money.
- Current property LTV (original purchase price) = $172,000 / $200,000 = 86%.
- New property LTV = $172,000 / $210,000 = 82% & therefore LTV has decreased.
Since there is no new money, no increase in LTV, or increase in amortization, there is no premium to be charged. This qualifies as a straight port.