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
A documentation requirement where the applicant's income is not disclosed. ...
A particular combination of loan, borrower, property, and transaction characteristics that lenders use in setting prices and underwriting requirements. ...
The specific interest rate series to which the interest rate on an ARM is tied, such as 'Treasury Constant Maturities, One-Year,' or 'Eleventh District Cost of Funds.' ...
The period until the last payment is due. The maturity is usually but not always the same as the period used to calculate the mortgage payment. ...
A home built entirely in a factory, transported to a site, and installed there. Manufactured homes are distinguished from 'modular,' 'panelized'' and 'pre-cut' homes. Manufactured houses ...
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 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. ...
The array of laws and regulations dictating the information that must be disclosed to mortgage borrowers, and the method and timing of disclosure. ...
An upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., '3 points' means a charge equal to 3% of the loan ...
Have a question or comment?
We're here to help.