When your hunting for your dream home, there’s so much to think about. Between finding the perfect backyard oasis and the kitchen that you’ve always wanted, it can be very easy to sign off on your new mortgage pre-approval without really investigating your options. Some might not even realize that there are a variety of mortgages available that are advantageous to each individual for one reason or another if their broker hasn’t taken the time to offer them.
A portable mortgage is a new kind of mortgage available to certain applicants, first offered in 2003… But what makes it so special?
A portable mortgage in its most basic form is a mortgage that can be transferred from house to house, instead of having to repay your mortgage in full before taking out a new mortgage each time you buy or sell a home. Having this option can be very advantageous for those that move often, or perhaps those buying and selling homes for profit. With an ordinary mortgage, you would simply repay the lender once you’ve sold the home that the mortgage was for, then take out a new mortgage for the new home. With a portable mortgage, you wouldn’t repay the loan when you sell, you would simply transfer the mortgage and details to the new home you’ve purchased.
The benefit of a portable mortgage VS. a conventional mortgage?
The benefit of a portable mortgage comes into play when we look at the savings that can be had when buying a new home in closing fees, as well as the savings in not having to pay a penalty for breaking a mortgage term when you decide it’s time to sell.
Another benefit of a portable mortgage is avoiding increases in interest rates throughout your mortgage term. For example, if you were to take out a mortgage with a 2.5% interest rate, and decide it’s time to move two years later… Your interest rate if you were to set up a new mortgage might increase to the current market rate of 4.5% – leaving your 2.5% mortgage rate from your previous mortgage in the dust.
What’s the downside to the portable mortgage?
With every bonus, there is usually a price to pay. In regards to a portable mortgage, the downside to the previously mentioned perks is that you will pay a higher interest rate in general for reaping the benefits of being able to transfer it to other houses while maintaining your protected rate. Also in order to obtain a portable mortgage in the first place, you must have impeccable credit making this type of mortgage more difficult to get approved for.
Taking the time to get pre-approved for your mortgage before shopping for your new home, is always the best strategy to make sure the mortgage you sign onto has the right fit for you today and in the years to come. If you have any questions about your mortgage options or would like to setup an appointment to become pre-approved, give me a call at 705-737-6161. It only takes a few minutes, and we’ll be sure to take a look at all of your options, along with the benefits of each.