Washington Revisits Portable Mortgages. What It Would Mean for Locked-In Homeowners in San Diego and Chicago

The rate you have usually stays with the house you leave. With mortgage rates climbing again, Realtor.com reports that Washington is once more discussing portable mortgages. A portable mortgage would let a homeowner carry an existing loan, and its rate, to a new home. For now it is only an idea. A standard U.S. home loan is tied to the property that secures it, so selling usually means paying off the loan and starting over at today's rates.

Why the idea keeps coming back. Many homeowners bought or refinanced when rates were far lower, and a lot of them have stayed put rather than give that rate up. Economists call this the lock-in effect, and it is one reason inventory stays tight in markets where owners tend to hold for a long time. San Diego is a clear example. Plenty of coastal and North County owners have rates they are unlikely to see again soon, and that keeps good move-up homes off the market.

Chicagoland feels it too. Price points there are generally lower than in coastal San Diego, so the gap between an old payment and a new one can be smaller in dollar terms. Even so, for many families the low-rate loan is the main reason a move gets pushed back a year or two.

What portability would change, and what it would not. If it ever arrived, portability could loosen supply by letting owners move without a payment shock. It would not make expensive homes cheaper. Any version would also have to settle how lenders and mortgage-bond investors price that flexibility. We would expect that to take years, if it happens at all.

What to do in the meantime. Don't plan a move around a policy that doesn't exist. Several tools are available today:

• Many FHA, VA and USDA loans are assumable, which means a qualified buyer may be able to take over the seller's rate. Sellers with one of these loans should know it can be a real selling point, and buyers should ask about assumability on any listing where it might apply.
• A bridge loan or a sale-contingent offer can let owners buy before they sell.
• Putting more of your equity into the down payment can bring the new monthly payment down more than many owners expect.

If you are thinking about a move in San Diego or Chicagoland and the rate you would give up is what's holding you back, our team can work out the real monthly difference with you. That way the decision rests on your own numbers rather than on headlines out of Washington.