At one time, a person purchased a house at a young age and lived in that house for many years. Many paid off mortgages at a young age, staying in that home long after children had graduated and moved out. However, recent generations are far less likely to stay in one place for an entire lifetime. In fact, the U.S. Census estimates that the average person will move 11.7 times over the course of his or her life.
In light of these generational changes, the concept of a 30-year mortgage may seem outdated. Even signing the paperwork to commit to a long-term mortgage may seem daunting to a young professional, especially if that professional is uncertain where his career will take him in the coming years. A homeowner could sign a mortgage, only to find he has to relocate across the country for a job opportunity a few months later.
The Portable Option
Instead of committing to spend the rest of his life in one place, young homebuyers can choose a portable mortgage option. With a portable mortgage, a borrower can transfer the mortgage to his future home purchases. This means the interest rate he locks in with the first house remains throughout his lifetime.
If a homeowner takes out a $500,000 mortgage on a home and stays there several years, that $500,000 would transfer to the next house he purchased. If the next home cost $750,000, the homeowner would pay the current interest rate on the additional $250,000, but the original $500,000 would retain the original rate. Another benefit to a portable mortgage is that certain fees transfer from one mortgage to the next, potentially saving homebuyers as much as $750.
How to Qualify
A homeowner doesn’t have to set up a mortgage as portable from the beginning. If he qualifies, he can port his existing mortgage from one home to the next. However, he’ll face major challenges in finding a lender who will agree to a portable mortgage option. Since it debuted in 2003, it has remained a rare option, provided by only a handful of lenders. At one time, E-Trade advertised a portable mortgage but no information exists on its site.
While many large banks may not offer portable mortgages, some credit unions and smaller lenders may. Consumers should inquire about the option before beginning a new home search. Provident Credit Union in California offers portable mortgages under the name “movable mortgages,” so you may have more like in your search if you use that term.
Portable mortgages may not be easy to find, but you can save a large sum of money over time if you can locate a lender who will agree to one. By eliminating some of your fees and locking in a low interest rate over multiple decades, you can enjoy the luxury of moving as you need to without finding yourself at the mercy of rising interest rates. At a time when Americans stand poised to begin moving from one location to another again, portable mortgages may become more prevalent.
Filed Under: Borrower Tips, Commentary, First Time Home Buyer, General
Tagged with: 30 year fixed rate mortgage, portable mortgage, short term mortgage, thirty year mortgage, transferable mortgage, what is a portable mortgage