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 interest rate adjusted for intra-year compounding. Because interest on a mortgage is calculated monthly, a 6% mortgage actually has a rate of .5% per month. If there were no principal ...
Charging unwary borrowers interest rates and/or fees that are excessive relative to what the same borrowers could have found had they shopped the market. ...
The largest loan size permitted on a particular loan program. For programs where the loan is targeted for sale to Fannie Mae or Freddie Mac, the maximum will be the largest loan ...
Assuming responsibility for someone else's payment obligation in the event that that party defaults. ...
Same as term Interest Rate: The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A mortgage interest rate is a rate on a loan secured by a ...
Employees of lenders or mortgage brokers who find borrowers, sell and counsel them, and take applications. Loan officers employed by mortgage brokers may also be involved in loan ...
A very large increase in the payment on an ARM that may surprise the borrower. The term is also used to refer to a large difference between the rent being paid by a first-time home buyer ...
A bundle of mortgage characteristics that lenders view as comprising a distinct category. The characteristics used include whether it is an FRM, ARM, or Balloon, the term, the initial ...
A measure of interest cost on a reverse mortgage. ...
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