Navigating the Process of Mortgage Porting

Even though life is unpredictable, you can rest assured that there exists options that can make the process of buying a house easier. Porting your mortgage is one such option. While not always straightforward, mortgage porting can come in handy when your circumstances suddenly change, such as when you want to move, buy a new home, or adjust to a different income bracket. 

This article will cover the details of porting a mortgage, including the pros, cons, and factors you must consider before taking this route. 

What Is Porting a Mortgage?

Mortgage porting is the process of transferring an existing mortgage, along with its current rate and terms, from your current home to a new one. This financial strategy is often employed when homeowners decide to move before their mortgage term ends.

One of the most common reasons you might consider porting an existing mortgage deal is to maintain the same mortgage conditions when moving to a new property. For instance, if your existing mortgage has a low-interest rate, porting allows you to carry this favorable rate to your new property. 

Can I Transfer my Mortgage to Another House?

Yes, you can transfer a mortgage to another house. This is essentially porting a mortgage. However, not all mortgages are portable. For instance, you can port most fixed interest rate mortgages, while with variable rate mortgages, this isn’t possible. Also, porting a mortgage depends on your lender’s terms and conditions. So even if your house is technically under a portable mortgage, it isn’t guaranteed that your lender will approve it.

How to Port Mortgage

Before you transfer existing mortgage to a new house, it’s best to consult with a mortgage broker or attorney to understand your options and the implications. You’ll also need to follow a series of steps, each important in ensuring a smooth transition. These include:

• The first thing you must do before porting a mortgage is to review your current mortgage terms and conditions by checking if it’s portable. You can do this by contacting your mortgage lender or broker to determine.
• Your lender will likely require a professional appraisal of the new property to ensure it meets their lending criteria.
• If the new property meets the lender’s criteria, you can apply to port your mortgage. Your mortgage lender will conduct credit checks, income verification and reassess your financial situation. If your credit score has taken a hit since you secured your original mortgage, it might affect your ability to port your mortgage.

What Are the Pros and Cons of Porting a Mortgage?

Porting a mortgage comes with several advantages. These include:

• It can help you avoid early repayment charges that may apply if you were to end your current mortgage agreement prematurely.
• If you’ve secured a particularly low-interest rate and rates have since risen, porting your mortgage enables you to keep your current rate.
• Porting your mortgage can provide financial flexibility and reduce the costs of buying a new home, especially if you’re moving to a cheaper house.

While porting a mortgage is beneficial in certain circumstances, there are certain downsides involved. These include:

• Porting a mortgage can limit your options as you must stick with your current lender. You might miss out on better deals or rates available elsewhere.
• Porting a mortgage can be complex and require legal assistance, adding to the cost and time involved.
• Moving to a more expensive home may increase your repayment since most lenders charge a different rate on the extra amount on the current mortgage. 

What Are the Implications of Porting a Mortgage When Moving to a Higher Value Property?

Porting a mortgage to a higher value property will require you to borrow more. This means that the extra amount might be at a different rate and may affect your monthly mortgage repayments and the overall cost of the loan.

Assuming you own a home worth $200,000 and have a mortgage balance of $150,000 at an interest rate of 3 percent. You then decide to move to a new property valued at $300,000. 

In this scenario, you would port your existing mortgage ($150,000) to the new property. However, because the new property is more expensive, you’ll need to borrow an additional $150,000 to cover the cost difference. Say your lender offers the extra amount at an interest rate of 4 percent. Here’s what your new mortgage might look like:

• Ported mortgage: $150,000 at 3 percent interest
• Additional borrowing: $150,000 at 4 percent interest

Can You Port Mortgage to a Cheaper Property?

If you’re downsizing to a cheaper home, you may end up with surplus funds that you can use to pay off part of your mortgage. However, this can trigger early repayment charges, so checking your lender’s policy is important.

Following the same example above, you decide to move to a cheaper home worth $150,000. You would port your existing mortgage ($200,000) to the new property. Because the new property is cheaper, you’ll have a surplus of $50,000 after selling your original home and paying off your existing mortgage.

If your lender imposes a 3 percent early repayment charge and you decide to use the $50,000 surplus to pay off a portion of your ported mortgage, you could incur a penalty of $1,500 ($50,000 * 3 percent).

What Are Secondary Mortgage Notes?

Secondary mortgage notes are an alternative way of financing property, particularly for sellers. One such alternative is seller financing, where the buyer does not take out a traditional mortgage with a bank or mortgage company. Instead, you (the seller) act as the lender and hold a promissory note where the buyer agrees to repay the loan. You, therefore, hold the mortgage note as an asset. With this, instead of porting the current mortgage to your new property, you can just take out a new mortgage. 

Additionally, if you, as a seller, need cash sooner rather than later, you can sell the note to a mortgage buyer at a discount. 

Is Porting House to Another Person Legal?

Transferring a mortgage to another person is possible, but several factors and requirements are involved. Legally, you can only transfer a mortgage under special circumstances. For instance, if a mortgage is “assumable,” you can transfer it to another person. An assumable mortgage is a loan that allows a buyer to take over a seller’s home loan. However, not all mortgages are assumable. The most common assumable mortgages are often government-backed, such as USDA, FHA, and VA mortgages. 

An assumable mortgage could be a good idea if the home buyer wants to take advantage of lower interest rates and lower closing costs. But, even if the mortgage is assumable, the mortgage lender usually has to approve the new borrower, which may involve credit score checks and income verification to ensure they can afford the mortgage payments.

Other circumstances that may allow you to transfer your mortgage include divorce, separation, inheritance, and financial hardship, where you can no longer afford your mortgage payments.

Transfer mortgages can have implications for both the original and new borrower. For the original borrower, transferring a mortgage could help avoid penalties for breaking your mortgage contract early. For the new borrower, assuming an existing mortgage might mean getting a lower interest rate than what’s currently available in the market, especially if the original borrower secured the loan when interest rates were low.

Final Thoughts

While porting a mortgage is an option that can provide financial benefits and flexibility when moving properties, you should make the decision to port a mortgage after carefully considering its potential drawbacks. It’s also best to consult with a mortgage advisor or financial professional to ensure you make an informed decision that aligns with your financial goals and needs.

FAQs

Can you port a mortgage in the USA?

Generally, mortgage porting in the US isn’t allowed. Unlike in some other countries, U.S. mortgages are typically not transferable from one property to another. When you move, you usually need to close out your current mortgage and apply for a new one for the new property.

Which lenders allow mortgage porting?

Wells Fargo, Bank of America, Capital One, and Quicken Loans are some of the lenders that may allow mortgage porting. 

What is the home loan portability procedure?

Home loan portability allows transferring an existing mortgage to a new property, maintaining the same loan terms. The process involves checking if your mortgage is portable, applying for portability with your lender upon finding a new property, and then transferring the mortgage to the new property upon approval, usually timed with the sale of your old property.

What does it mean to port a mortgage?

Porting a mortgage means transferring your mortgage—with the same terms, rate, and lender—from one property to another. In essence, it allows you to transfer your existing mortgage to a new home without having to break your current loan agreement. This is often ideal if your current mortgage is locked in at a fixed-rate mortgage and current mortgage rates are higher than when you signed. While this strategy can save money, it only works with certain mortgage options and is subject to your lender’s approval.

Can I transfer my mortgage rate to a new property?

If your mortgage is portable, then yes—you may be able to keep your existing mortgage rate when moving to a new property. This is especially helpful if you locked in a low fixed-rate and are now facing a potentially higher interest rate on a new mortgage. Just note that this doesn’t mean you’ll avoid all new costs; you may still need to borrow additional funds, especially if the new property is more expensive.

Can you transfer your current mortgage rate to another house?

Transferring your current mortgage rate to another house is essentially what mortgage porting is. However, not all lenders offer this feature, and variable-rate mortgages typically don’t qualify. Lenders will also reassess your credit and income before approving the port, which means you won’t be able to port if your financial position has weakened.

Why did my mortgage company transfer my loan?

Mortgage companies sometimes transfer your mortgage to another lender or loan servicer as part of routine business operations. This doesn’t mean your terms have changed—it’s simply a mortgage transfer of servicing rights. Your mortgage amount, interest rate, and monthly payment should remain the same unless you refinance. If you’re unsure why this happened, contact your servicer directly.

What is the portable mortgage definition?

A portable mortgage is a type of loan with the same lender that lets you transfer your mortgage terms to a new property. This allows you to move to a new home and sell your old one without breaking your current mortgage contract. Porting can help avoid prepayment penalties and lock in a better rate if current interest rates have increased. That said, not all mortgages are portable, and the porting process can involve credit checks and new underwriting.

Can I keep my mortgage rate if I move?

If you want to port your mortgage and your lender allows it, you may be able to keep your existing mortgage rate—but only under specific conditions. These usually include moving within the same mortgage term, maintaining lender approval, and having your sale of your existing property and purchase of the new home align closely.

Can I move my mortgage to another bank without refinancing?

No. You can’t move your mortgage to another bank without initiating a refinance. To transfer your mortgage to another property and switch lenders, you would need to break your current mortgage and apply for a new loan, which could incur prepayment penalties and other fees.

Can you add someone to a mortgage without refinancing?

In most cases, adding a co-borrower requires a refinance to update the legal and financial responsibilities of the loan. Mortgage lenders generally won’t allow you to modify the terms of the loan or add a new borrower to an existing agreement without reassessing credit and affordability. If you’re unsure, use an affordability calculator or speak with your lender directly.

Does Mr. Cooper allow mortgage porting?

As of now, Mr. Cooper does not commonly advertise mortgage porting among its services. Their mortgage options may not include portability features, so you would likely need to break your current mortgage and apply for a new loan when moving homes.

Does PennyMac allow mortgage porting?

PennyMac, like many U.S.-based mortgage companies, typically does not offer mortgage porting. Porting is more common in countries like Canada and the UK. In the U.S., homeowners usually have to pay off the old loan and take out a new one when they sell their old home and purchase a new one.

How do I know if I can port my mortgage?

The easiest way to find out is to review your loan agreement or contact your lender directly. Look for clauses related to portability, loan type, and prepayment. A mortgage broker can also help determine whether you’re able to port and whether doing so makes financial sense based on current mortgage rates and your next home’s value.

Is porting a mortgage easy?

Porting works well when your finances are in good shape, the new property is less expensive, and your lender supports it. However, the process can be tedious, especially if there’s a larger mortgage involved or the timing between the sale of your current property and purchase of the new one doesn’t align. Legal and administrative steps may add to the complexity, so it’s not always an “easy” route.

Are all mortgages portable?

No. Most fixed-rate mortgages may allow porting, but many variable-rate mortgages do not. Even among fixed options, your ability to port the mortgage depends on the lender’s policy and the specifics of your mortgage contract. If portability is important, verify this before locking into a new loan.

Can I transfer my mortgage to another property?

You may be able to transfer your existing mortgage to another property if your mortgage is portable and your lender agrees to the terms. This is the core concept behind mortgage porting—it allows you to avoid new loan setup costs while maintaining your current interest rate.

How much does it cost to transfer mortgage from one bank to another?

Transferring your mortgage from one bank to another typically requires refinancing, and costs can include prepayment penalties, appraisal fees, new application fees, and legal charges. If you’re switching lenders as part of moving homes, factor in any penalties from breaking your current mortgage, as well as closing costs tied to the new loan.