Portable Mortgages: How They Work and Why They’d Reshape the U.S. Market
For decades, U.S. mortgages have worked the same way: you buy a home, get a mortgage, and when you move, you pay that mortgage off and take out a new one—usually at whatever the market rate is at that time.
Today, regulators are exploring an alternative used in Canada and parts of Europe: portable mortgages, which would allow homeowners to transfer their existing loan and interest rate to a new home.
If adopted, portability would be one of the most significant changes to the U.S. housing finance system in modern history. Below, we break down what it is, how a consumer would actually use one, and why the shift could introduce new risks into the mortgage-backed securities (MBS) market.
🏠 WHAT EXACTLY IS A PORTABLE MORTGAGE?
A portable mortgage allows a homeowner to move their current mortgage—its rate, balance, and remaining term—to a different property when they sell and buy again. Keep in mind – you can only port the remaining principal balance of your mortgage. This has likely been paid down over time, so you probably won’t have the exact same amount of principal available as you did when you originally took out the loan.
Example
Let’s say you originally borrowed $600,000 at 2.75%, and after several years you’ve paid it down to $480,000.
If you want to port the mortgage to a new home, the amount you can port is only the outstanding principal, not the original loan amount.
✔️ You keep:
• Your current balance ($480,000)
• Your original interest rate (2.75%)
• Your remaining term (e.g., 22 years left)
• Your amortization schedule
💡 HOW A CONSUMER WOULD USE A PORTABLE MORTGAGE
Let’s continue the example: you’ve found a new home to purchase that requires a $650,000 loan. Here’s what typically happens:
(1) Your financial profile must still qualify at the time of the move
Assuming you have the ability to port your existing mortgage under new regulations, when you go to move homes, you’ll likely be subject to the following:
• You still must re-qualify under current underwriting standards
• Your income, credit, assets, and debt must meet the lender’s requirements
• The new property must meet appraisal and risk rules
• In other words, portability is not automatic—it’s a right to apply, not a guarantee.
(2) If the new home is more expensive, you may need a “blend-and-extend”
If your existing mortgage principal is $480,000 but your new home requires a $650,000 loan:
• You port the original $480,000 at 2.75%
• You take an additional $170,000 at the current rate
Lenders typically “blend” the rates and extend the term, or create a second tranche.
This is standard in Canada and would likely be the U.S. model too.
(3) The property change must be approved by the lender
Because the collateral backing the loan is changing, lenders must:
• Approve the new home
• Ensure it meets risk thresholds
• Verify the LTV and appraisal
• Confirm insurability
📋 Note: You can typically buy a less expensive property as well—in this case, you’ll often be required to pay down your existing principal to the amount required for the new property. It’s also worth noting that you generally can’t re-up your existing mortgage – that is, get more principal at your original mortgage rate (for example, bringing your mortgage principal back up to its original amount).
⚠️ COMPLICATIONS OF A PORTABLE MORTGAGE SYSTEM
(1) Less predictable payments
Today, most loans pay off early because homeowners:
• Sell their home, or
• Refinance into a lower rate
Portable mortgages reduce both behaviors.
Result:
• Mortgages live longer
• Cash flows slow down
• Lenders and investors face more uncertainty
This makes mortgage pricing more complex.
(2) Changing Collateral Behind the Loan
Under portability, the house securing the loan can change.
That means:
• New geography
• New risk profile
• New local market
• New valuation
For a system built around property-specific collateral, this is a major structural shift. This, in addition to point (1), introduces more uncertainty/risk into the mortgage market for lenders and investors.
(3) Higher Funding Costs and Mortgage Rates for New Borrowers
More uncertainty/risk for lenders and investors typically leads to:
• Higher yields demanded on mortgage-related securities / wider MBS spreads
• Higher mortgage rates for new households accessing the market
Ironically, portability may help existing borrowers but raise costs for first-time buyers.
➡️ BOTTOM LINE
Portable mortgages could solve one of the biggest issues in the housing market today—rate lock-in. They may help families move more easily, improve mobility, and create more flexibility in homeownership.
But they also introduce meaningful structural risks:
• Less predictable mortgage cash flows
• Changing collateral
• Potential upward pressure on mortgage rates
• Fewer new loan originations
For investors and clients, portability is a housing innovation worth watching—but it is not without trade-offs.