Buying a home today is tough if you don’t have a leg up, like an existing home whose equity you can tap, or rich parents who can help subsidize your down payment.
Buyers are dealing with the dreaded double whammy of elevated home prices and stubbornly high mortgage rates.
Granted, rates have come down since summer, but they’re still lingering above 6%. Meanwhile, in September, the median existing-home sale price rose 2.1% from a year prior to $415,200, according to the National Association of REALTORS.
When we look at these numbers and consider that inventory is still pretty sluggish, it paints a bleak picture.
But there may be one piece of good news in the context of mortgages.
Lawmakers are contemplating a new rule that could be a game-changer for homeowners. And while it may not benefit first-time buyers directly, it could open up the housing market in a meaningful way.
You may get to take your mortgage with you
The Trump administration is contemplating a new rule that could be a huge money-saver for homeowners — portable mortgages.
When you sign a mortgage, it’s tied to the home you’re buying. When you move and buy a new home, you have to apply for a mortgage all over again.
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Now, Federal Housing Finance Agency Director Bill Pulte said the administration is looking into the idea of portable mortgages — loans borrowers could take with them from one property to another.
Imagine you locked in a fantastic mortgage rate on a starter home and are ready to upsize five years later. If mortgage rates are up at that point, you may not want to move. Or, a move may not be affordable.
But if you could take your low-rate mortgage with you and transfer your loan to your new home, it could make a move far more feasible.
A change that could rock the housing market for the better
Portable mortgages won’t be an easy thing to pull off. Lenders approve mortgages based on the values of the homes they’re being used to finance. Allowing homeowners to transfer mortgages between properties could put lenders at serious risk of not getting repaid.
Still, portable mortgages could be just the thing that opens up the housing market, giving first-time buyers a shot at those entry-level homes that are so hard to find.
A big reason housing inventory has remained stagnant is that many homeowners refinanced to record-low mortgage rates during and right after the Covid pandemic. So they’re not too eager to move and give those rates up.
After all, if you were sitting on a 30-year fixed mortgage at 2.75%, would you want to swap it for a loan at over 6%? Doubtful.
But if borrowers with ultra-low rates are able to take their existing mortgages with them to new homes, it could free up inventory and also bring home prices down.
Of course, right now, portable mortgages are really just an idea. And some insiders say they’re not going to be easy to pull off.
“It’s going to be a logistical nightmare,” Justin Demola, president of Lenders One, told CNN. “All mortgages have a property address, a legal description. How do you get around that as you’re taking the mortgage to the next property?”
In addition to portable mortgages, the Trump administration is also contemplating a new 50-year loan option. That, too, has its challenges and drawbacks.
But it’s a positive thing that lawmakers are looking at ways to open up the ridiculously tight housing market and perhaps bring home prices back down to earth.
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