Buying a new home in 2025 is exciting. Then reality hits. You already have a mortgage. Now you need to decide whether to port your mortgage, blend it, or break it and take on the penalty for breaking mortgage.
If you are a Canadian homeowner planning a move this year, this choice matters more than ever. Many borrowers are sitting on ultra-low fixed rates from 2020 to 2022, while today’s rates are much higher. The decision you make now could determine whether you save thousands or accidentally overspend on penalties and interest.
Canadian Market Context. Why This Decision Is So Important in 2025
The mortgage landscape in Canada has shifted quickly. Here is what is shaping your decision this year.
1. A Larger Gap Between Old and New Rates
Most homeowners still hold fixed rates between 1.49% and 2.99%. Today’s fixed rates are noticeably higher. This rate gap is one of the biggest factors in whether porting or breaking is cheaper.
2. IRD Penalties Are High
When interest rates rise, fixed-rate mortgage penalties also rise. That is because the Interest Rate Differential (IRD) becomes larger. For many borrowers, the penalty for breaking mortgage is now a much bigger decision point.
3. Canadians Are Moving More
More buyers are upsizing, relocating to more affordable regions or taking advantage of regional incentives. That means more people are deciding what to do with their existing mortgage.
4. Stress Test Rules Are Tighter
Canada’s mortgage stress test still uses the higher of your contract rate plus 2% or the minimum qualifying rate. Refinancing into a higher rate can make qualifying tougher.
All of these factors come together when deciding whether you should port, blend or break.
1. Should You Port Your Mortgage
This option is strongest when your existing rate is much better than today’s market.
Porting allows you to transfer your current mortgage rate and terms to your new home. This means you avoid the penalty for breaking mortgage entirely.
Pros of Porting
- You keep your low rate.
- You avoid all penalties.
- Your monthly payments stay predictable.
Cons of Porting
- You must meet your lender’s strict deadlines.
- If you need additional funds for the new home, the extra amount is priced at today’s higher rates.
- Some lenders do not allow porting between provinces or certain property types.
Interactive Moment
Ask yourself:
- Will your new home cost more? If yes, how much extra borrowing will you need?
- Does your lender offer extended porting windows?
- Is portability even allowed in your mortgage contract?
To estimate your new monthly payments after porting or adding extra borrowing, try the Mortgage Payment Calculator.
2. Should You Blend and Extend
This is ideal for Canadian homeowners who need extra mortgage funds and want to avoid penalties.
Blending combines your current lower rate with the lender’s current rate for the top-up amount. The result is a new blended rate.
Pros of Blending
- You avoid the penalty for breaking mortgage.
- You may reset your term for stability.
- Qualifying may be easier than a full refinance.
Cons of Blending
- You stay with the same lender for longer.
- Lenders often add small premiums on blended rates.
- If rates fall later, you may end up overpaying.
Interactive Moment
Try this quick example:
- Existing mortgage: 450,000 dollars at 2.49%
- New funds needed: 150,000 dollars at 5.19%
The blended rate will fall somewhere between the two based on your lender’s formula.
To understand whether the blended payments still fit your budget, use:
Mortgage Payment Calculator (for new payments) and
Mortgage Affordability Calculator (to ensure the new total borrowing still fits within your income).
3. Should You Break Your Mortgage
Sometimes breaking the mortgage and starting fresh is the most strategic move, even with a penalty.
This is where the penalty for breaking mortgage becomes central. You end your old mortgage and take a new one, often with a new lender.
Types of Penalties in Canada
Variable-rate borrowers usually pay three months’ interest.
Fixed-rate borrowers pay the greater of:
- three months’ interest, or
- the Interest Rate Differential (IRD)
In 2025, IRDs can be high since contract rates from the pandemic era are far below today’s posted rates.
Pros of Breaking
- You can shop across the entire mortgage market.
- You can change your amortization or term to match your plans.
- You may position yourself for lower rates in the next couple of years.
Cons of Breaking
- The penalty for breaking mortgage can range widely.
- You must requalify under today’s stress test.
- Refinancing into a higher rate may increase your payments.
2025 Decision Checklist for Canadians
Here is a simple six-step process to decide your next move.
Step 1. Find Your Exact Penalty
Request a written penalty quote from your lender. Verify it using the Prepayment Penalty Calculator.
Step 2. Compare Your Existing Rate to Today’s Market
If your rate is more than 1.5% lower than today’s rates, porting or blending often makes more sense.
Step 3. Understand Your Porting Rules
Ask your lender:
- What is the porting window?
- What if my closings do not align?
- Do you allow bridge financing?
Step 4. Calculate Payment Changes
If you need new borrowing, use the Mortgage Payment Calculator to estimate new payments.
Step 5. Simulate a Full Refinance
Use the Mortgage Affordability Calculator to compare:
- Penalty costs
- New rate
- Long-term interest paid
- Payment differences
- Overall savings or losses
Step 6. Match the Mortgage to Your Life Plans
Will you move again soon? Renovate? Change jobs? Your future plans should influence whether you break, blend or port.
The Bottom Line for Canadian Homeowners in 2025
Your best option depends on three questions.
1. How large is the penalty for breaking mortgage?
This can make or break your decision.
2. How much additional borrowing you need?
If you are upsizing, blending may balance cost and convenience.
3. Where Canadian mortgage rates are headed?
If rates are likely to fall further, breaking and renewing with a shorter term may position you well for the next rate cycle.
- For many Canadians with ultra-low rates, porting is still the most affordable path.
- For those who need extra funds and want stability, blending is often the middle ground.
- And for borrowers looking for maximum flexibility or a fresh start, breaking can open up new opportunities even with a penalty.
Contact us to start your home journey with Pegasus Lending and explore solutions designed to help you move forward with confidence.