Americans who are thinking of selling their homes may decide to stay put when they look at today’s interest rates, especially if they’re currently locked in at a low rate.
The Trump administration appears to be hoping to change that. William Pulte, director of the Federal Housing Finance Agency (FHFA), recently posted on X that the agency is “actively evaluating” portable mortgages. His statement came shortly after Trump said that he was considering introducing 50-year mortgages for borrowers.
So, what does this mean for American homeowners and people looking to break into the market?
A portable mortgage lets you transfer your mortgage and your existing rate to a new home instead of taking out a new loan when you move. But what happens if the place you buy costs more than your current home? According to CNN, you would need to either cover the difference in cash or take out a separate loan for it (1).
Why consider this now? Millions of Americans have low rates. Redfin, using FHFA data, found that 52.5% of homeowners have a mortgage rate below 4% (2). The average 30-year fixed rate climbed above 6% in 2022 and hasn’t dropped below that since.
High rates may be keeping Americans from moving. Susan Wachter, a professor of real estate at the Wharton School of the University of Pennsylvania, told CNN that a portable mortgage could nudge homeowners who have been staying put to sell, opening the door for new buyers.
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Portable mortgages are only a proposal at this point and the administration has not rolled out any formal plans, but critics are already raising concerns.
The New York Times reports that portable mortgages exist in other countries for shorter-term loans, but introducing them in the U.S. could shake up the economy. U.S. mortgages are bundled and sold as investments called mortgage backed securities (3).
CNN noted that portable mortgages could “disrupt the engine powering the U.S. housing market,” because mortgage-backed securities give banks the cash they need to issue new loans and keep the “mortgage market flowing.”
Experts also questioned whether portable mortgages would improve affordability and supply.
“If the market opens up and people can carry those low rates with them, demand jumps overnight. Prices move higher. No question about it,” Kevin Thompson, CEO of 9i Capital Group, told Newsweek (4). “This does nothing to solve affordability.”
Thompson also doubted it would fix the supply crunch.
Jake Krimmel, a senior economist at Realtor.com, said portable mortgages might help with supply issues, “in theory.” He noted that the gap between borrower’s current rate and the market rate has been a big drag on mobility, so rate portability might unlock some activity and free up inventory (5).
However, Krimmel said the so-called “lock-in effect” accounts for only about half of the recent drop in mobility. He also pointed out that portable mortgages would mostly help homeowners who already have low rates. First-time buyers and people without mortgages wouldn’t benefit.
Portable mortgages and 50-year mortgages are still just proposals, and it’s unclear whether they will ever be implemented. If you want to move but hate the idea of giving up a low interest rate, here are a few options:
Assumable mortgages: An assumable mortgage lets you take over the seller’s mortgage and their rate. According to U.S. Bank, most government-backed loans from the Federal Housing Administration (FHA), Veterans Affairs (VA) and U.S. Department of Agriculture (USDA) are assumable. Conventional loans typically are not (6).
Negotiate a rate buydown: A mortgage-rate buydown can lower your interest rate temporarily or for the full loan term. This involves buying mortgage points, which CNBC describes as prepaid interest (7). It can save you money depending on your loan type and how long you plan to live in your home.
Shorter-term mortgages: If you can afford higher monthly payments, a shorter loan term usually comes with a lower rate..
Sit tight: You can wait and see whether rates improve, though some experts warn against trying to time the market.
Of course, buyers who can pay all cash can avoid the mortgage market entirely.
If you need to move and can’t wait for rates to fall or for new policies to take shape, a higher rate might simply be the tradeoff. Sometimes you need to prioritize space for a growing family, a promising job offer or the chance to move from a high-cost area to a more affordable one at a better price.
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CNN (1); Redfin (2); New York Times (3); Newsweek (4); Realtor.com (5); U.S. Bank (6); CNBC (7).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
