Can You Benefit from a Portable Mortgage?

Ever heard of a portable mortgage?  They are fairly new, so the term may or may not be too familiar to you.  Portable mortgages were nonexistent before 2003, but for the past eight years they have been available as another option for home buyers.

The idea behind a portable mortgage is simple and ingenious, but took surprisingly long to hit the public market.  When you buy a house and move several years later, you usually lose a fair amount of money through the additional transactions involved with ending your current mortgage and starting a new one.

This also is complicated and takes time and mental resources, and moving is stressful enough.  With a portable mortgage, you are allowed to simply transfer your existing mortgage to your next home and skip all the paperwork and fees.

Usually there are certain terms and limitations associated with portable mortgages.  For instance, the first company to offer portable mortgages only offered them as 30 year fixed rate mortgages.  The interest rate on portable mortgages is also usually a bit higher than the interest rates which you’d find on comparable non-portable mortgages.

To get a portable mortgage you generally need excellent credit.  The type of house is usually limited by certain constraints.  You may also only be permitted to transfer the portable mortgage a certain number of times (in some cases only once).

Is a portable mortgage worth it?  This depends on how long you plan to stay in your first residence.  If you’re planning to stay in the home for only several years, and then you plan to move to another residence, it can make a lot of sense to get a portable mortgage.

If you’re planning to stay in the current home for longer though, you may lose money because of the higher interest, which may eclipse the fees you’d have paid to get a new mortgage. 

The other reason to consider a portable mortgage is that if you are buying a home at a time when interest rates are low, but you expect them to rise before you buy your next home, a portable mortgage could protect you from those higher interest rates.

Since the landscape of mortgages and interest rates is always changing, it is up to you to do the math and figure out for yourself whether you should get a portable mortgage or not.  You should be able to calculate precisely how much money you’d potentially save (or lose) using a portable mortgage based on your expectations for the housing market and your own duration in your first home. 

Using this kind of concrete mathematical analysis, you can be assured that you will be making the very best decision.