So it sounds like the 50 year mortgage idea has been scrapped.

I think it's fine to push out ideas, get a feel for it, and retract the idea.

Portable mortgages sound interesting, but will probably meet the same demise as the 50 year mortgage.

The idea is to get current homeowners out of their freeze. The current home inventory freeze is due to the combination of a sharp increase in home prices, and the sharp increase in interest rates we experienced from 2022-2023.

A portable mortgage would allow the owner to take their existing mortgage and rate with them and attach it to a new home.

The gap in financing

You're doing the basic math, and thinking to yourself, "if a homeowner wants to upgrade their home, and use a portable mortgage, how do they make up the difference?

Either cash or secondary financing.

If they don't have the cash, they'll need to take out a second mortgage.

Here are some numbers:

Current mortgage: $100k

Sales price (departing home): $200k

New home purchase price: $300k

It will look like this:

They'll need to come up with $100k in either cash or financing

Second mortgages usually go up to a max of 90% of the value.

$300k x .9 = $270k

so instead of needing $100k they'll need $30k

This lets them keep their 2.5% mortgage rate on their $100k

Then they have to deal with whatever the rate is on the second mortgage.

Let's pretend it's 8% (on the higher end)

$100k on 2.5% and $70k on 8% and $130k cash ($100k was proceeds, $30k came from savings)

Is the 8% on $70k worth it?

Would you rather split it up like that? Or would you rather get a new mortgage?

The $100k 2.5% rate probably has 25 years left. Monthly P/I payment is probably $448.62

The $70k on 8% over 30 years has a P/I payment of $513.64

Total P/I of $962.26

Compare that to $170k on a 30 year 6.38% (average rate on mortgage news daily)

That P/I is $1,061

So this would save about $100 per month in this scenario. And much more with higher purchase prices.

Here's a blended rate calculator (I'll work on my own sometime)

The blended rate between the two loans is 4.765% compared to the 6.38%

When it isn't worth it

In this case, the more money you have on your lowest rate, the better.

In this scenario, if you only had $50k remaining on the low rate 2.5% (maybe you paid it off at a faster rate) and $120k on the second mortgage at 8% your blended rate would be 6.382%

At that point, either option works.

big picture

If this portable mortgage becomes a thing, people will need to use this blended calculator more.

Countries with portable mortgages still have issues with affordability. These countries have a completely different system though, with fixed rates for only 5 years, then requalification is required.

If we took on portable mortgage:

This option has the possibility of unlocking a freeze.

Lenders won't like it because it cuts a significant amount of purchase/refinance transactions out of their profits.

First time homebuyers don't benefit

Existing homeowners will be able to bid higher on their new purchase.

It will not improve home affordability

But it could unlock the freeze.

The more and more I write on affordability topics, the more I'm convinced we need to address inflation. Not mortgage products.

But that's another post for another day.

I'll update if portable mortgages get any traction.

Sam