During the peak of the refinance boom, interest rates were at an all time low. In June of 2003, the average rate for a 30-year fixed mortgage was 5.21%. Many people were wondering how long those rates would last and how could they keep them that low. There’s no doubt some people have had hesitations about re-locating for fear of losing their unbelievably low fixed-rate mortgage. Because the majority of loans written today contain a “due-on-sale” clause, mortgages are required to be paid off in full if you are selling your home.

Assumable Mortgages

Exceptions to that rule are assumable mortgages. In these mortgages, the new borrower can basically take the place of the previous borrower and assume the terms and payments of the mortgage currently held. Although some adjustable rate mortgages (or ARM’s) may contain an assumability option, the majority of assumable mortgages are government-insured mortgages, such as FHA and VA loans (as opposed to “conventional” mortgages.

Portable Mortgages

In July of 2003, the company E*Trade introduced its "Mortgage on the Move". With this program, E*Trade introduced the concept of a “portable” mortgage. This is commonly thought of as the first time in the modern mortgage industry that such a product had been available, although other lenders have since started offering them. The benefits of a portable mortgage include a fixed interest rate and the time spent on mortgage shopping. Also, the closing costs associated with obtaining new mortgages could be avoided. But, you can only transfer the mortgage once and the loan amount must be between $60,000 and $1,000,000.

Things to Consider

There are several things to take into consideration before seeking out a portable mortgage. First of all, your credit rating must be very good. Also, the rate on the loan will be approximately 3/8 of a percent higher than an identical conforming loan and you will need to make a down payment of at least 20%. If you decide to upgrade or move into a more expensive area and purchase a more expensive home, your existing loan balance will be transferred to the new property. If you need additional financing however, you will need to take out a second mortgage to make up for the difference.