Can You Keep Your Mortgage Rate When You Move?

Moving to a new home often brings up questions about existing financial arrangements, especially a mortgage. Many homeowners with favorable interest rates wonder if they can carry their current loan to a new property. The appeal of retaining a lower rate, particularly in a rising interest rate environment, is understandable for those looking to relocate. This process, if available, could offer significant financial advantages over securing an entirely new loan at current market rates.

Understanding Mortgage Portability

Mortgage portability refers to the ability to transfer an existing mortgage’s interest rate and terms from one property to another when moving. This means a homeowner might avoid the need to apply for a completely new mortgage at prevailing rates, potentially saving a substantial amount over the loan’s lifetime. Portability is not a universal feature of all mortgages, as its availability depends heavily on the specific lender and the type of loan held.

While some fixed-rate mortgages may offer portability, it is generally a specific product feature rather than a standard inclusion. Certain adjustable-rate mortgages (ARMs) or government-backed loans might also have portability clauses, though these are less common or come with specific stipulations. Lenders typically outline whether a mortgage is portable within the original loan agreement or in subsequent policy documents.

Conditions and Process for Porting a Mortgage

Homeowners interested in porting their mortgage must typically meet several conditions set by their current lender. Even if a mortgage is deemed portable, the borrower will likely need to re-qualify for the loan based on their current financial standing. This re-qualification process involves a comprehensive review of the borrower’s income, credit score, and debt-to-income ratio, similar to applying for an entirely new mortgage. Lenders assess these factors to ensure the borrower can comfortably afford the mortgage payments on the new property.

The new property itself must also undergo an appraisal to confirm its market value and ensure it meets the lender’s collateral requirements. An appraisal fee is usually required from the borrower to cover this assessment. If the new home is more expensive than the previous one, the borrower may need a “top-up” loan for the difference, which will be financed at current market interest rates. Conversely, if the new home is less expensive, a partial repayment of the existing mortgage may be required.

Specific fees are often associated with porting a mortgage, which can include application fees, legal fees, and potentially a re-underwriting fee. These costs can vary widely. Additionally, the type of loan can influence portability rules, with conventional loans, FHA loans, and VA loans each having distinct guidelines determined by the lender and applicable regulations. For instance, some government-backed loans might have more rigid rules regarding property type or borrower eligibility for porting.

The first step in the porting process involves contacting the current mortgage lender to inquire about their specific portability policy. Following this, the borrower typically submits an application for the mortgage port, providing updated financial documentation and details about the new property. This application then proceeds through the lender’s underwriting department, where all provided information is verified and assessed.

Underwriting for a ported mortgage is a thorough review, ensuring the new property and the borrower meet all current lending criteria. This stage can take several weeks, depending on the completeness of the documentation and the lender’s processing times. If the underwriting is successful and all conditions are met, the lender will issue an approval for the mortgage port. The final step involves closing on the new property.

Alternatives to Mortgage Porting

If mortgage portability is not an option or does not align with a homeowner’s financial goals, obtaining a new mortgage is the most common alternative. This involves applying for a completely new loan with any lender. When pursuing a new mortgage, homeowners must consider prevailing interest rates, which may be higher or lower than their existing rate, and the associated closing costs. These costs include origination fees, title insurance, and other charges.

The process for securing a new mortgage requires a full re-application, including a comprehensive review of credit history, income documentation, and an appraisal of the new property. While this path offers flexibility in choosing a lender and loan terms, it also means undergoing the entire underwriting process again. Homeowners should compare offers from multiple lenders to find the most favorable rates and terms for their new loan. This comparison can help mitigate the impact of higher interest rates or substantial closing costs.

Another alternative, though far less common, is an assumable mortgage. An assumable mortgage allows a buyer to take over the seller’s existing mortgage, including its remaining balance, interest rate, and terms. These mortgages are rare and are typically limited to certain government-backed loans, such as FHA or VA loans. Even with these loan types, the assumption is not automatic and requires the lender’s approval. The buyer must still meet the lender’s credit and income qualifications to be approved for the assumption.

Assumable mortgages are not a guaranteed option and often come with specific requirements that can make them impractical for many transactions. Due to their rarity and the specific conditions involved, assumable mortgages are generally not a primary consideration for most homeowners seeking to move.