Moving the Mortgage Goalposts: Portability vs the 50 Year Loan

Why US Mortgages Are Not Portable

In Canada and the UK, mortgage portability is a standard feature — when you sell your home and buy another, you can transfer your existing mortgage (and its rate) to the new property. This feature does not exist in the US. American mortgages are tied to a specific property, not to the borrower. When the property is sold, the mortgage is paid off.

The reason is structural. US mortgages are typically sold into the secondary market — packaged into mortgage-backed securities and held by investors. Portability would require the ability to substitute collateral (swap one property for another) within an existing security, which is not how the US secondary market is structured. The result is that every home purchase requires a new mortgage at current market rates.

The Rate Lock-In Problem

For homeowners who locked in rates at 3% or 4% in 2020 and 2021, the lack of portability creates a real dilemma. Moving to a larger home, a different neighborhood, or a different city means giving up a rate that may not be available again for years — and taking on a new mortgage at a significantly higher rate. This has contributed to the suppressed resale inventory that has characterized the market since 2022.

The lock-in effect is real, but it is not permanent. Life events — job changes, family changes, financial changes — eventually force moves regardless of the rate environment. And for buyers who are not locked in, the current market offers more inventory and more negotiating leverage than the 2021 and 2022 markets did.

Assumable Mortgages: A Partial Solution

VA and FHA loans are assumable — a qualified buyer can take over the seller's existing loan, including its rate, with lender approval. This creates an opportunity for buyers to access below-market rates on properties with existing VA or FHA loans. The catch: the buyer must qualify for the assumption, and the seller's equity above the assumed loan amount must be covered by cash or a second mortgage.

Assumable mortgages are not a mainstream solution, but they are a real option worth exploring for buyers who are specifically looking for rate relief and are willing to search for properties with assumable loans.

Buy Before You Sell: Managing the Transition

For homeowners who want to move but do not want to sell first, bridge financing and buy-before-you-sell programs provide a path. These structures allow you to purchase the new home before selling the existing one, using the equity in the current home to fund the down payment on the new purchase. The existing home is then sold, and the bridge loan is paid off from the proceeds.

This approach does not solve the rate problem — you will still have a new mortgage at current rates on the new home — but it solves the timing problem and eliminates the need to make a contingent offer on the new purchase. For homeowners in a competitive market, removing the sale contingency can be the difference between winning and losing a deal.