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 payment made by the borrower over and above the scheduled mortgage payment. If the additional payment pays off the entire balance it is a prepayment in full; otherwise, it is a partial ...
A biweekly mortgage on which biweekly payments are applied to the balance every two weeks, rather than monthly, as on a conventional biweekly. ...
Fees assessed by lenders when payments are late. Late fees are usually 4% or 5% of the payment. A borrower with a 6% mortgage for 30 years who pays a 5% late charge every month raises his ...
A borrower who submits applications through two loan providers, usually mortgage brokers, without their knowledge. Home purchasers sometimes submit more than one loan application as a way ...
Equations used to derive common measures used in the mortgage market, such as monthly payment, balance, and APR. ...
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 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 ...
An option attached to a mortgage, which allows the borrower to pay only the interest for some period. A mortgage is 'interest only' if the monthly mortgage payment does not include any ...
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 ...
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