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What Is Portable Mortgage?

By Eric Goodwill

Learn about portable mortgage is and secure your home mortgage today!

The transfer of mortgage borrowings without any kind of penalty is known as portable mortgage or portability. This facility is very useful for all those people who are availing mortgage with a tie-in or lock-in period with Early Repayment Charges. Lock-in period applies where the mortgage program comes with capped, fixed or discount rate. It is important to bear in mind that there is a huge difference between portable and ordinary mortgages. Most of the times, in ordinary mortgages, Early Repayment Charges have to be paid off on switching the lender or when moving by remortgaging.

Mortgages on the Move

July 2003 saw a remarkable change in the traditional mortgage programs when E Trade introduced “ Mortgage on the Move”. This program introduced a new concept of portable mortgage, which saved borrowers from time spent on obtaining a mortgage by benefiting from fixed interest rates. Moreover, by availing portable mortgage, borrowers could cut down closing costs on the purchase of new mortgage loans. Mortgage transfer is only possible if the amount of loan obtained is $ 60,000 to $ 1 million.

How does Portable Mortgage help?

Portable mortgages are very helpful if the borrower moves home before the period of fixed mortgage rate is over. For instance, lets assume that a borrower takes a fixed mortgage loan at the rate of 4 percent annually with Early Repayment Charges incorporated throughout the tie-in period of those years. If the borrower is using a portable mortgage program and decides to move his home during the first year due to any reason, then his mortgage program will continue to stay the same for the remaining period with the original fixed rate of 4 percent with similar underwriting terms. However, if the borrower does not have portable mortgage, then Early Repayment Charges would be due at the time of sale and a new mortgage plan will be decided upon considering new home requirements. Hence, the borrower would not only have to pay Early Repayment Charges but also 4 percent annual preferential rate for the remaining period. If, in case, the interest rate rises, the borrower will have to pay a huge compounded amount.

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