A portable mortgage is an existing house loan that allows you the option to "port", or transfer that debt to another property that you may have purchased.
You can check to see if your house loan is eligible by reading your contract and/or calling your lender.
What is the Advantage?
Whether you want to take advantage of this option when you move, well it depends on your personal situation.
Here are a couple reasons to take your property loan with you when you move.
- You will have 3 more years to enjoy the lower rate.
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- This could add up to thousands of dollars.
- It's less expensive to take your home loan with you than writing up a new one.
- Perhaps when you took out the original contract, you were working for "We Make Things Manufacturing" and now you started your own business.
The banks may not want to write you up a new home loan, but if your existing contract is portable you can take it with you. Then, 3 years from now, you should be able to get a new mortgage.
What are Some Disadvantages
of a Portable Mortgage?
Let's look at some pitfalls of taking a mortgage with you to your newly acquired home.
- You could take the debt with you and put an extra $25,000.00 cash on the new house if available.
- You could take the mortgage with you and do a Mortgage Blend
- You could take the loan with you and get a second mortgage. (Usually a second will be at a higher rate than a first). You would want to calculate whether this was an advantage to you.
- You could borrow the $25,000.00 with a secured loan and put into the new property. Again, do the calculations first.
- Talk to a Mortgage Broker and see if they can come up with a solution for you. My wife and I have used brokers for every home we have purchased since somewhere in the 1980's.
- You might be able to put 10 or 15% down on your home loan without penalty before you transfer the portable. Check your documents and/or talk to your lender.
Do Your Homework
If you have a portable mortgage and are moving, please go to your present lender and get all the details before assuming that you can just take the debt with you and everything will be fine.
You don't want any unpleasant surprises once your present house is sold.
As in many mortgage and real estate options, some rules and options are different depending where you live.
The difference are very slight, but as an example, a portable mortgage in the United States is a newer add-on and the borrower in most cases, has to pay a slightly higher interest rate.
Of course, as always, everything is subject to change. ;)
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