Portable Mortgage
Definition of "Portable Mortgage"
A mortgage that can be moved from one property to another. Ordinarily, you repay your mortgage when you sell your house and take out a new mortgage on the new home you purchase. With a portable mortgage, you transfer the old mortgage to the new property. Benefits to the borrower: There are two. One is that it avoids the costs of taking out a new mortgage. This cost must be set against the cost of paying 3/8% more in rate, which rises the longer the period between the first purchase and the second. The break-even period comes out to roughly four years on a $150,000 loan. If you expect that you won't be buying your next house within four years, the cost saving on the future mortgage won't cover the cost penalty imposed by the 3/8% rate premium. The period is a little shorter on a larger loan, longer on a smaller loan. The second benefit is that it allows you to avoid any rise in market interest rates that occurs between the time you purchase one house and the time you purchase the next one. Since World War II, mortgage rates have been as low as 4% and as high as 18%. When rates are about 6%, there is clearly much greater potential for rise than for decline. If rates increase, the portable mortgage protects you, and if they decrease, you can get the benefit by refinancing. There is no prepayment penalty. Borrowers who confidently expect to move within five or six years and fear that a major spike in rates could seriously crimp their plans may find the 3/8% rate increment a reasonable insurance premium. It is less valuable for borrowers who expect to move every three years, since the transfer option can only be used once. Borrowers with the excellent credit needed to qualify for a portable mortgage should be confident that they can maintain that record. Borrowers in bankruptcy or behind in their payments cannot exercise the transfer option. In such a situation, they would have paid the 3/8% rate increment for nothing.
Popular Mortgage Terms
The number of days for which any lock or float-down holds. The longer the period, the higher the price to the borrower. ...
The dollar amount of interest paid each month. The interest payment is the same as interest due so long as the scheduled mortgage payment is equal to or greater than the interest due. ...
A lender who delivers loans to another (usually larger) lender against prior price commitments the larger lender has made to the correspondent. Mortgage brokers sometimes evolve into ...
A comprehensive and time-adjusted measure of loan cost to the borrower. IC on a Mortgage: IC is what economists call an 'internal rate or return.' It takes account of all payments made by ...
Authorization by the lender for the borrower to pay taxes and insurance directly. This is in contrast to the standard procedure, where the lender adds a charge to the monthly mortgage ...
The assumption that the index value to which the interest rate on an ARM is tied follows the same pattern as in some prior historical period. In meeting their disclosure obligations in ...
The sum of all interest payments to date or over the life of the loan. This is an incomplete measure of the cost of credit to the borrower because it does not include upfront cash ...
A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term 'mortgage' or 'mortgage loan' is used loosely to refer both to the ...
A non-citizen with a green card employed in the U.S. Non-permanent resident aliens are subject to somewhat more restrictive qualification requirements than U.S. citizens. Permanent ...
Have a question or comment?
We're here to help.