Why This Trending “Mortgage Cheat Code” Might Be Too Good to Be True

published Sep 19, 2023
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My boyfriend and I both own homes. Our ideal real estate game plan would be to eventually sell his place, rent out mine, and buy a place together in Denver. There’s just one hurdle: We both have historically low interest rates tied to our homes, so it’s hard to stomach the thought of selling a house with a mortgage rate below 3 percent and taking on a new mortgage with an interest rate that’s flirting with 8 percent. 

So we perked up when we heard buzz about something called “mortgage porting” — a potential cheat code that would allow us to carry over one of our favorable interest rates into a new property. We enthusiastically began Zillow scrolling and each called our mortgage companies to see if either of our respective loans would “port.”

But as the saying goes, if it’s too good to be true, it probably is — and I’m pretty sure the chain of command at my mortgage company, which had never even heard of mortgage porting, thinks that I’m a delusional time machine salesperson.

So I reached out to several mortgage experts to find out if mortgage porting is really a thing or just a real estate fantasy in today’s difficult homebuying landscape. The short answer: You’d be hard-pressed to find home loans in the U.S. that qualify for mortgage porting, says Ralph DiBugnara, the founder and president of Home Qualified, an online real estate information and lending resource. He’s mostly seen the loan product offered by Canadian banks. Also common in the United Kingdom, mortgage porting “is virtually unheard of in the United States,” agrees Kate Wood, home expert at NerdWallet.

Cheat code, denied.

In a nutshell, the way mortgage porting (theoretically) works in places where it’s more common is by allowing homeowners to sell their house, but keep their mortgage. “Instead of getting a new loan when you buy your next home, you essentially take your mortgage with you,” Wood explains. “The proceeds of the sale pay off your original mortgage, and you get a new mortgage from the same lender for the new property.”

In this scenario, you’d still have to apply for a mortgage, Wood says, so it’s important that your credit score, income, and other financials are in tip-top shape.

Of course, the biggest pro of porting a mortgage is keeping your interest rate, which could extend your buying power. In some cases, borrowers are able to keep their rates even while making other changes, like adding a borrower or changing the loan’s term, Wood says.

“The downside of porting a mortgage is that because you’re locked in with your current lender, you miss the chance to shop around for a better deal,” she says. “If your finances have changed or if your new home is much more costly, even though your interest rate remains the same, your lender might change other aspects of the loan.” 

The closest option to mortgage porting in the U.S. is something known as an assumable mortgage, Wood says. Assuming a mortgage means taking over a seller’s existing mortgage when you buy a home, and all aspects of the loan stay the same except for who’s paying it, Wood explains. This is great news if the seller bought when rates dipped below 3 percent. The biggest hitch: Only government-backed loans — VA, FHA, or USDA loans — can be assumed, Wood points out.

The takeaway? “Mortgage porting is something homeowners looking to move but hesitant to give up their low interest rates might look into, but it’s unlikely to become popular simply because it’s not something most U.S. mortgage lenders and servicers offer.”

While it may feel excruciating to give up a low interest rate in order to move, Wood says, you can also look around for other options that could ease the pain of higher rates. Some mortgage lenders, for instance, are offering temporary buydowns, which lower the buyer’s interest rate for the first one to three years of the mortgage. Knowing about little tricks like this can certainly help.