The mortgage question every Ontario seller asks too late
You’re selling. You bought your mortgage three years ago at 2.79%. New rates are 4.4%. Should you port it, break it, or assume the new rate? Decide wrong and you give back $15,000+ at closing.
Here’s how your mortgage actually behaves when you sell — and how to pick the cheapest path in 2026.
The three options every Ontario seller faces
1. Discharge (pay it off)
You sell, your lawyer wires the mortgage payout from sale proceeds, the mortgage closes. Triggers a prepayment penalty if you’re inside your term.
2. Port (move it to the new home)
You take your existing mortgage rate and term with you to the new property. The balance moves, the rate stays. May allow blending if you need more money.
3. Assume (let the buyer take it over)
The buyer qualifies for and assumes your mortgage at your rate and term. Rare but legal — and meaningful when your rate is well below market.
The penalty math when you discharge
If you discharge mid-term, you owe a prepayment penalty.
Variable rate
Three months’ interest on the outstanding balance. On a $620K balance at 5.1%, roughly $7,900. Painful but predictable.
Fixed rate — the IRD trap
The greater of three months’ interest or Interest Rate Differential. Big-bank IRD uses posted rates, often producing penalties of $20,000-$35,000 on a 3-year remaining fixed mortgage.
Monoline lenders (MCAP, First National, RFA, B2B) typically use discounted-rate IRD, often 60-80% lower. The lender’s penalty calculation method is in your commitment letter — pull it out and read it.
Porting — when it actually helps
Porting saves you from the penalty. But it has rules:
- The new home must close within 30-120 days of the old home sale (varies by lender)
- You must re-qualify under current stress test rules
- If you need to borrow more, the new portion is blended at current rates (“blend and extend”)
- Some lenders limit ports to the same provincial market
Blend-and-extend example
You owe $500K at 2.79% with 28 months left. You need $700K on the new home. Lender blends the extra $200K at the current 5-year rate of say 4.4%, on a new 5-year term. New blended rate: roughly 3.25%. You skipped the IRD penalty and locked the bigger balance at a sub-market rate.
Assumable mortgages — the rare unicorn
Most Canadian mortgages are technically assumable but require buyer qualification under current rules. Where it shines: your 2.5% rate with 36 months left is worth $30K+ to a sophisticated buyer. Their offer comes in higher because they save on financing cost.
Almost never used in retail Ontario transactions — but worth raising if your rate is dramatically below market.
The decision matrix for 2026
Port if:
- Your existing rate is 1%+ below current market
- You’re moving within 90 days
- You qualify under current stress test for the new home
Discharge if:
- You’re not buying another property
- You’re at renewal (no penalty)
- Your penalty is small (variable rate, late in term, monoline lender)
- You can refinance the new property at a meaningfully better rate
Investigate assumption if:
- Your rate is 2%+ below market
- Your buyer is financially strong and your agent can negotiate it into the deal
The Bottom Line for Ontario Sellers
Don’t take your bank’s first answer. Pull your commitment letter, find the penalty calculation method, and call your lender for an official quote. Then run port vs discharge on actual numbers — not assumptions.
For most 2026 sellers who bought in 2020-2022 with sub-3% rates and are moving up, porting (and blending) is the right answer. For sellers downsizing into smaller properties, discharge often makes more sense.
Run the spread math on the refinance calculator, and read the bridge financing breakdown for the move-up scenario.
I help RE/MAX Your Community Realty, Brokerage sellers model port vs discharge before listing — the answer changes your net by tens of thousands.
Curious what your home is worth — and what your mortgage will cost to move? Free range backed by real MLS sold data → instantcalculator.ca/home-value/
— Alex Goodman, Sales Representative, RE/MAX Your Community Realty, Brokerage
