A portable mortgage is a mortgage that can be transferred from one home to another. It is especially beneficial for those who have to shift base frequently due to the nature of their job. If you want to buy a home but may have to relocate in the near future, then a portable mortgage is the right option for you. It offers several benefits to homeowners on the move, but also has a few shortcomings that you need to be aware of. It is a good idea to know how does a portable mortgage work, before you go for this mortgage solution.
The biggest benefit of a portable mortgage is that you don’t have to deal with the hassles of closing one mortgage and applying for another when you move. It saves you a lot of time and energy. More importantly, you don’t have to pay any charges associated with closing and opening a mortgage. You may have to pay a slightly higher interest rate, but the cost savings realised can be significant, depending on how frequently you plan to relocate.
If you have a fixed rate mortgage, then you can transfer it to your new home at the existing rate of interest, without worrying about any increases in interest rates that can occur when you take out a new mortgage. The loan terms and rates from your current mortgage do not change in a portable mortgage. This makes it very useful when the rates are in an upward trend. You have protection when the rates increase while a decrease in interest rates gives you an opportunity to refinance.
Though a portable mortgage has several benefits to those who need to relocate frequently, it also has a few shortcomings that may not make it a suitable option for everyone. It is offered with a higher rate of interest than regular mortgages. So, if you are not sure whether you’ll have to relocate or not, it may end up being a slightly more expensive option. Similarly, if you have to shift base too frequently, say every three years, such a mortgage may again not be the right option as it can be transferred only once. For any subsequent relocation, you’ll have to apply for a new mortgage or a second mortgage.
A portable mortgage is also not a good option if you are planning to purchase the second home at a significantly higher price than that of the existing home. In that case, there will be a large difference between your mortgage amount and house value, which means that the existing mortgage will not be able to cover the purchase.
Now that you know how does a portable mortgage work and when to take such a loan, you can go out and look for suitable options – make sure you compare multiple mortgage offers to get the best deal.