The Trump administration is exploring a new idea to make housing more affordable: portable mortgages. This concept would allow homeowners to take their current mortgage rates with them when they sell their homes.
Recently, Bill Pulte, the director of the Federal Housing Finance Agency, mentioned that the administration is actively looking into this possibility. The goal is to address the ongoing shortage of available housing.
Currently, many homeowners enjoy lower mortgage rates. According to a study by Redfin, over half of those with a mortgage pay below 4%. However, average mortgage rates have been stuck between 6% and 7% for some time. This makes it tough for homeowners with lower rates to sell, as they face higher costs if they buy again at current rates.
The idea behind portable mortgages is that it could encourage more people to move, thus freeing up homes for sale. However, experts like Susan Wachter, a real estate professor at the Wharton School, express caution. They worry that if portable mortgages are implemented, it could potentially raise overall mortgage rates due to market disruptions.
A portable mortgage would let someone transfer their remaining loan balance—and its interest rate—to a new property. For instance, if a homeowner has a $200,000 mortgage at a 3% rate, they could transfer this to a new home. However, if the new home costs more than the remaining balance, they would still need to cover that difference, possibly with a new higher-interest loan.
Experts believe that allowing this flexibility could help increase the available housing supply, but the overall impact may be limited. The administration might need Congress to pass a law to fully implement these ideas effectively.
There are also concerns about how portable mortgages could disrupt mortgage-backed securities, which are bundles of loans sold to investors. If fewer loans are paid off early due to portability, this may increase risk for investors, leading to higher interest rates.
The administration is also considering a 50-year mortgage option, though some experts are skeptical about its benefits. They believe the long-term costs would outweigh any short-term savings.
Furthermore, the idea of assumable loans has been mentioned. This would allow buyers to take over a seller’s existing mortgage. However, few first-time buyers tend to choose this route due to the typical large upfront payments required.
So while portable mortgages sound promising, they bring with them a host of challenges and questions about feasibility that need to be worked out. As this conversation evolves, the housing market will be watching closely. For more on housing trends and policies, check out the Federal Housing Finance Agency’s official website.
