Key takeaways 

• Portable mortgages would let homeowners transfer their existing mortgage and rate to a new property.
• Nearly half (48%) of current mortgage-holders have rates below 4%, according to Empower research.
• Portable loans have never been used in the U.S and would likely require changes to how Fannie and Freddie structure mortgage-backed securities.

The U.S. is studying portable mortgages that could let homeowners carry their existing rate to a new home. The proposal aims to ease the housing market’s “lock-in effect,” which has kept many from selling and moving with current mortgage rates above 6%.

The U.S. housing regulator that oversees Fannie Mae and Freddie Mac is evaluating portable mortgages — loans that would let homeowners carry their existing mortgage rate to a new property.¹

The agency hasn’t released details of the review, but the goal is to ease the “lock-in effect” that’s made many homeowners reluctant to sell and move after getting ultra-low mortgage rates during the pandemic era. With 30-year fixed mortgages now in the low-6% range, switching homes often means a more expensive mortgage^.2

Only about one in five (21%) mortgage-holders are considering moving or selling their home, according to Empower research. Nearly half of those surveyed (48%) have mortgage rates below 4% while nearly three-quarters (74%) have loans below 6%.

Read more: Mortgage rates and the housing market

How portable mortgages would work 

Portable mortgages could provide financial benefits to homeowners who need to move, whether it’s for a job, an expanding family, health reasons, or retirement.³

A portable mortgage would allow a borrower to transfer their existing mortgage and rate to a new property. A borrower selling a $400,000 home with half the balance remaining on a 3% mortgage could move that $200,000 loan to their next home and keep the low rate.⁴

Transactions might get more complex if the new property costs more than the gains on the old property and the value of the portable mortgage. For a new property costing $450,000, the buyer would need to find an additional $50,000 in cash or take out a second, smaller loan — likely at higher rate.⁵

Portable mortgages don’t exist in the U.S., but they have been used in other countries like the U.K. and Canada. One reason they work there is that portability is short; borrowers typically have fixed-rate loans lasting only up to five years before they must refinance.⁶

Potential ripple effects of portable mortgages 

It’s unclear how portability would work with longer-term loans such as the 30-year fixed-rate mortgage. Such loans are unique to the U.S. — as are government-backed housing finance companies Fannie Mae and Freddie Mac.⁷

Fannie and Freddie support about 70% of the U.S. mortgage market by purchasing loans from lenders, bundling them into securities with federal guarantees, and selling them to investors — a process that keeps mortgage credit flowing back to borrowers.⁸

A potential shift to portable mortgages could  impact how mortgage-backed securities (MBS) are structured and priced, along with investor demand and ultimately loan rates. Homeowners typically pay off their existing mortgage in full when they sell their house and move, and prepayment is key dynamic in MBS valuations.⁹

Some housing finance professionals think portability could make the real estate market more liquid by making it easier for mortgage holders to move, freeing up inventory for new borrowers. Others says the benefits would be selective; first-time homebuyers and other purchasers currently without mortgages would still face today’s rates.¹⁰

Read more: Rent vs. buy: The new math in today’s housing market

Buyers find openings in shifting housing market 

The combination of elevated mortgage rates and higher home prices — up more than 50% since 2019 — has also prompted Fannie and Freddie’s regulator to examine assumable mortgages. Available on other types of government loans, assumable mortgages are essentially the inverse of portable ones: They allow buyers to take over a seller’s existing mortgage and interest rate — if certain criteria are met.¹¹

While it’s unclear whether these studies will lead to product changes, homebuyers can take some comfort in easing rates. The average 30-year fixed-rate mortgage stands at 6.26%, about half a percentage point lower than at this time last year.¹²

Buyers looking to move in today’s market have options for potential savings:

• Some are turning to adjustable-rate mortgages (ARMs), which carry risk but include more borrower safeguards than in the past and currently offer initial rates in the mid-5% range.
• A mortgage buydown is another avenue that borrowers can use to temporarily lower the interest rate for the first few years of a home loan. Such breaks are often offered by homebuilders with larger inventories of houses they’re looking to sell.
• Sellers of existing homes have also been more willing to cut deals in recent months, granting more buyer concessions for home repairs, closing costs, inspection fees, and other expenses that come with real estate transactions.
• Borrowers can also actively look for assumable mortgages. Such features can be found on select loans backed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and others. A borrower would pay the current owner a lump sum for their equity and take over the loan with lender approval.

While it’s too soon to know whether portable mortgages and other new loan options will gain support among lenders and investors, borrowers have ways to manage rates and find a savings edge in today’s market.