Retaining Your Favorable Mortgage Rate During Relocation: Strategies Revealed
Transferring Your Mortgage: A Strategy for Home Buyers in Higher-Rate Markets
Homeowners who secured mortgage rates of 4% or below a few years ago may find themselves hesitant to let go of these low rates as current rates rise to beyond 7%. However, if you are planning to sell your current home and purchase a new one, there's a potential strategy to consider: mortgage porting.
While mortgage porting is more common in Canada and the UK, it is less prevalent in the United States. Nonetheless, it doesn't hurt to ask your current lender if they offer this service. If they don't, they might suggest other options to help lower your rate on a new mortgage.
Mortgage porting enables you to finance your new home using your existing mortgage and retaining your current rate. To port your mortgage, you'll need to reapply for the mortgage and meet the qualification criteria, as you did initially. If your financial situation has changed since then, this may present a challenge.
To port your mortgage, you'll sell your current home and use the proceeds to pay off the remaining loan balance. Your lender will then provide you with a new mortgage for the purchase of your new home, based on your existing rate. If the new home requires a larger loan amount than your current one, the lender may offer you an additional loan at a higher rate to cover the difference.
If your lender doesn't support mortgage porting, there are alternative strategies to obtain a more competitive mortgage rate. For instance, you could consider taking over the seller's mortgage if it has a favorable rate. Alternatively, a shorter loan term could result in lower interest charges in the long run despite higher monthly payments. Adjustable-rate mortgages (ARMs) may also have lower interest rates on occasion, but it's essential to research and understand the terms carefully.
Buying down points or increasing your down payment are other options to secure a more attractive mortgage rate. Lastly, improving your credit score may also help you secure better terms.
In summary, mortgage porting is not common practice in the US, but there are alternative strategies to secure a more competitive mortgage rate. When shopping for a new mortgage, it's crucial to compare rates from various lenders for the best possible terms.
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- While navigating the complexities of home-buying, considering the advantages of shorter loan terms or buying down points could potentially lower your interest rates, similar to the strategy of retaining a favorable mortgage rate through mortgage porting.
