The Portable Mortgage: A Little Known Option

Portable mortgages: a home loan for those on the go.

The reality of today’s world is that we are very mobile. Climbing the corporate ladder has given way to moving from city to city chasing better jobs. This can make it very hard on people who want to purchase a home. Why take out a mortgage when in a couple of years you know you’re going to have to up and move again, sell this house, buy another house, take out another mortgage with different interest rates, terms, addresses, etc.?

Enter the portable mortgage. Invented by E*Trade in 2003, it allows you to set up a mortgage with one lender for a specific house, then upon moving and selling that house, taking your mortgage and its terms and conditions with you to the next home you buy. Instead of losing equity and paying closing costs all over again, you simply keep writing a check to the bank every month. And closing on a new home in the next city, after you sell your old home, is expedited because you have the cash on hand to buy the house. It’s also easier to cut a deal on a house that may be a little outside your price range: you have cash in hand, but that’s absolutely all you have, as far as the home sale goes.

The Real Deal

E*Trade is not the only lender to offer portable mortgages today; however, not every lender offers them. You may have to shop around. E*Trade’s portable mortgage is good for only one transfer and you can’t use it to refinance – which is fairly restrictive. They offer it only on a 30-year fixed-rate mortgage. Other lenders may have different deals, but you can probably expect them to be similar to the one offered by E*Trade.

The best thing about a portable mortgage is its stability. You know that you will be paying the same amount every month through this home and the next one, and you won’t have to renegotiate a mortgage.

Like anything, you’re going to pay for a service like this. Your interest rates will be somewhat higher than another fixed-rate mortgage, and you should factor that in when you consider whether you’ll be saving money. You will need to have a 20% down payment and pretty good credit, with no history of foreclosures or a late mortgage payment recently. You’ll have to use it on a primary residence. And at least through E*Trade, it’s only available on the thirty-year loans.

You can also borrow more money if your new home costs more than your first home, but you’ll have to renegotiate the interest rate on the difference, which can get interesting. If, however, your new home costs less, you’re allowed to pay down the first mortgage without penalty and then re-amortize your loan to lower your payments.

When You Should Consider This Loan

If you really want to buy a house today at today’s interest rates, and you’re pretty darned certain you’re going to have to move (or choose to move) within ten years, it can be worth the added interest to get a portable mortgage. The most beneficial part of this mortgage is that it locks in today’s interest rates; and even though they’re currently going up, they’re still better than at almost any time in US history.And one more hitch: E*Trade is offering them for only a limited time. They’ve been around now since 2003. There may, however, be other financial institutions that offer portable mortgages or something similar.

If you’re not sure whether this option is for you, you can discuss it with your realtor or your mortgage broker.