With mortgage rates on a brutal climb, Washington has once again brought up the idea of creating portable mortgages.
With mortgage rates on a brutal climb, Congress has once again brought up the idea of creating portable mortgages.
The idea might sound good, but it could have huge implications for the U.S. housing market and would be more difficult to implement than it may seem.
A portable mortgage would allow you to take your existing mortgage—and its rate—with you when you move to a new home. Congressional leaders proposed the idea a few times as a solution to rising housing costs. But experts say things would get complicated and quickly.
Also, the idea might not bring the affordability relief that leaders hope for. Realtor.com® senior economist Jake Krimmel says it could actually make the market less affordable.
"Investors of mortgage-backed securities in a world of portable mortgages would demand compensation for that uncertainty around a different pre-payment risk schedule as well as the new unpriced risk that comes from porting a mortgage to a new home," Krimmel says. "And those latter two new risks could translate into higher mortgage rates."
The latest bill in Congress to create a portable mortgage, the Making Ownership Viable for Everyone, or MOVE Act, was introduced by Rep. Thomas Kean (R-NJ) in June. Since then, housing affordability has only worsened as mortgage rates climbed.
Last week, the average rate on 30-year fixed home loans rose to 7.40%, according to Freddie Mac. That's the highest it's been since 2023. The year has been marked by an upward surge in rates driven by inflation fears, a global bond sell-off, and rising concerns about government deficits.
What is a portable mortgage?
With a portable mortgage, you wouldn't have to buy a new mortgage when you buy a new home. That means those who locked in low rates when they bought homes a few years ago could keep them. Those low rates, experts think, discourage many would-be sellers from entering the current market environment. Instead, in theory, they'd be able to take the loan, rates, and terms with them to a new home.
The problem is that the math gets very complicated very quickly. If you move to a more expensive home, you'd have to pay down the difference in price, or get a second loan just to cover that amount. And the system would face far larger problems, too, Krimmel says.
"Feasibility is the whole game when it comes to portable mortgages," Krimmel explains. "The U.S. mortgage market is built on securitization, where investors buy pools of loans priced against the specific homes behind them.
"A portable mortgage breaks that link by decoupling the loan from the home it was originated against," Krimmel continues. "It also removes the loan payoff that happens when a homeowner sells (called pre-payment), which makes the loans much harder to value in a securitized market."
The U.K. and Canada both allow that. But their markets are different, Krimmel says. That's because their systems don't have built-in 30-year fixed-rate mortgages. Rates reset every few years and mortgage durations are shorter. And loans have pre-payment penalties.
As a result, loans aren't securitized and more often stay on bank balence sheets.
Assumable mortgages, another idea
The other idea sometimes floated is an assumable mortgage. In an assumable loan, a homebuyer can step into a seller's loan. Those are available in some programs, including FHA, VA, and USDA loans.
Realtor.com estimates about 10% of active listings today are potential candidates for assumability. But it's hard to tell how many actually are. Only about 0.6% of listings mention "assumable" in the description. Krimmel says this model, too, faces an uphill battle to wider acceptance in the U.S. housing market.
"Again, it's all about prepayment expectations and securitization," Krimmel says. "Investors in mortgage-backed securities get repaid when a home sells because conventional loans come due when the home sells. If you break that link between sale and the loan coming due, that changes pre-payment expectations, the securitization market, and likely mortgage rates (via spreads) as a result."
Former Federal Housing Administration Commissioner Frank Cassidy tells Realtor.com there could be broader impacts on the secondary market if portable or assumable mortgages became available.
"It significantly affects the attractiveness of the mortgage-backed security and in turn can affect the interest rate," Cassidy says. "So it may solve one problem in order to be able to hold your mortgage longer. But the pricing may look much different."
Portable mortgages a perennial proposal
Federal Housing Finance Agency Director Bill Pulte said last year the Trump administration was considering portable mortgages along with a few other ideas. It also suggested a 50-year mortgage but backed away from the idea.
Kean's Making Ownership Viable for Everyone Act has no co-sponsors and is stuck in committee. It would direct Fannie Mae and Freddie Mac to begin purchasing portable mortgages.
Federal Housing Finance Agency Director Bill Pulte said last year the Trump administration was considering portable mortgages (Bloomberg via Getty Images) “I have heard directly from residents across our state who feel stuck in homes that no longer meet their needs because moving would mean giving up their mortgage rate," Kean said in a statement. "I wrote this bill, the MOVE Act, to give homeowners more freedom, help put more homes on the market, and make the American Dream of owning a home more attainable for families across New Jersey.”
Congress most recently discussed the idea in a House Financial Services hearing in February. In it, leaders also expressed some skepticism about the feasibility of changing the mortgage system so drastically.
"If you wanted to have a portable mortgage, that would be really hard for an existing mortgage that's been sold in the secondary market, wouldn't it?" Rep. French Hill (R-AR) asked Norbert Michel, director of the Center for Monetary and Financial Alternatives for the Cato Institute.
"It would be a contract violation," Michel responded.