The Benefits of Porting a Mortgage – 4 Points to Know

Porting your mortgage has benefits for you and for the economy.

The 30-year fixed-rate mortgage is above 6.0%, and nearly 89.0% of mortgaged homeowners have a rate below 5.0%.

59.4% of mortgaged homeowners have a rate below 4.0%.

22.6% of mortgaged homeowners have a rate below 3.0%.

The share of mortgages below 5.0% interest is constricting the housing market. Homeowners are hesitant to let go of their sub-5.0% mortgages even when they would like to move. Mentally, it is hard to leave a 4.0% mortgage for a 6.6% rate when you calculate how much more that higher interest rate will cost you.

Mortgage porting may be the way to loosen up the housing market, as it enables the borrower to retain the competitive rate and terms that they have already secured for their existing mortgage. From a market perspective, this is likely to result in increased demand for higher-priced homes while more “starter homes” or lower-priced homes become available.

From an individual consumer perspective, there are some pros and cons to think about.

The Pros:

• You get to keep the favorable rate and terms of your existing mortgage and apply it to your new house.

The Cons:

• If you are looking to make a purchase that is larger than what you currently owe, you could end up with an additional mortgage that covers the difference in the price of the new home at the higher interest rate. While this is likely still a better option from a financial perspective, not everyone wants to deal with two mortgages.
• While there is no “porting fee,” you will be required to go through the application and valuation processes, which will likely incur some fees.

The Caveat:

• Not all mortgages are portable. It is up to your lender, and you will need to reapply to transfer your mortgage.

While not all lenders will want to port a mortgage since rates have gone up, they may be more open to the conversation if it means they can keep a borrower’s business and increase that business by adding an additional loan at the current higher rate.

Mortgage porting is not likely to be a singular solution to the tight housing market. However, it could be part of the solution. Remember, a healthy housing market is good for the overall economy. As homeowners move, they free up inventory and, typically, increase their consumption of goods for the new home, which spurs further growth in the overall economy. Even if you are not looking to move, share the benefits of porting a mortgage with others; through the properties of velocity of money, you could very well be helping spur growth in your own business.