Mortgage porting is a strategy relevant to homeowners contemplating a move and potentially facing an increase in their mortgage rate. Though commonplace in the UK and Canada, the concept is less frequent in the U.S. Still, it's worth discussing with your existing lender as they may suggest alternative methods to secure a lower rate on your new mortgage.
Mortgage porting entails financing a new house using your existing mortgage, retaining your current rate. Applicants must requalify for the mortgage, creating potential pitfalls if your financial circumstances have worsened. In the process, the proceeds from selling your current home are used to settle the remaining balance on your loan. The lender then essentially lends again for your new home, at your prevailing rate.
Should the new property require a more significant loan than the previous one, the lender could offer a supplementary loan to cover the discrepancy, likely at a higher rate.
For U.S. homeowners, options to secure a more appealing mortgage rate, if porting isn't an option, include: taking over the seller's mortgage if it has a beneficial rate, opting for a shorter loan term to reduce overall interest, considering an adjustable-rate mortgage (ARM), making a larger down payment for a smaller interest rate, or using 'points', a form of prepaid interest for a lower monthly rate. Another viable solution would be to enhance your credit score for a more advantageous rate.
The lack of widespread availability of mortgage porting in the U.S. necessitates seeking alternative methods to secure a mortgage rate below the current rate. Shop around and explore all your options, as rates can differ significantly among lenders.