Experts pan Donald Trump’s portable mortgages plan. How homeowners can move without losing their ultra-low rates

On the heels of making major headlines with his call for a 50-year mortgage, Donald Trump earlier this month quietly unveiled another innovative idea to loosen the housing supply — and if the idea pans out, it could help homeowners size up without losing their 2% rates. But that’s a big if.

The Federal Housing Finance Agency is “actively evaluating” portable mortgages, director Bill Pulte posted recently. This would allow homeowners who secured a super-low rate during the pandemic to take their mortgage with them when they move. Mortgage experts say the plan isn’t feasible because the U.S. secondary mortgage market is so tied into the housing market. But all is not lost. There are other options for those who need a larger home but may be locked into their 2% mortgage rate.

But first, we explain why portable mortgages are unlikely to take hold in the U.S. 

They would “break” the U.S. mortgage securitization process, Realtor.com Senior Economist Jake Krimmel told CNBC Select in an email. He noted that securitization relies on the value and risk-rating of an underlying asset — in this case, a home — and as a result, untying them can be tricky.

Securitization, in effect, ties investments to their underlying property. Without that connection, that is, if a mortgage can simply be transferred to another property — which may ratchet up the risk level, depending on the borrower’s unique circumstances — the investment itself may be undermined. It probably wouldn’t be a win for mortgage borrowers either, Krimmel said, as the product may even undermine the long-term, fixed-rate mortgage model, which makes homeownership possible for many Americans. After all, lenders like securitization as it allows them to leverage capital to approve new mortgages. 

“Widespread implementation would introduce thorny technical problems and significant unintended consequences — many of them worse than the issue they’re trying to solve,” Krimmel said. 

Trump is not wrong to think the idea could help free up homeowners who may be reticent to move in the current rate environment. In the UK and Canada, as lenders offer mortgages at fixed rates for 2 to 5 years at most, portable mortgages can work because securitization does not underpin mortgages. Consequently, lenders in these countries typically don’t offer longer-term, fixed-rate products.

Even so, there are alternatives that similarly allow homeowners to size up without paying off an underlying mortgage or securing a lower-than-average rate on a new home. Here’s how.

If you love your current home but it’s just become too small for your family since you got that 2% mortgage, chances are you’ve built up enough equity to make it work for you now. 

Home additions cost $51,073 on average, according to home-services marketplace Angi. Meanwhile, the average homebuyer in the U.S. has $112,430 in their home than they did in 2020, up 143% over the last five years, according to a recent Bankrate Analysis. You can tap into this growth by taking out a home equity loan, which you can then use to build an extension onto your existing property. 

Third Federal Savings and Loans is our pick for the best home equity lenders for low rates. It reports that its rates are consistently at least 0.50% lower than the average and, with its Lowest Rate Guarantee, it will beat a lower rate offer from another lender or give you $1,000 at closing.

Third Federal operates in only 25 states, and while most lenders offer a 20-year repayment term, Third Federal caps its repayment options at 10 years. 

Another option for those looking to move without losing a desirable interest rate is to consider other low-rate options. Government-backed mortgages typically offer lower rates than conventional mortgages. 

Department of Veteran Affairs-backed VA loans are available to those who are serving or have served in the military and Department of Agriculture-backed USDA loans are available for those who buy in certain rural and suburban areas. Federal Housing Administration-backed FHA loans are open to all, regardless of veteran status or a property’s location. 

If you are a veteran or actively serve in the military, Navy Federal Credit Union is a good option for getting a low rate: It consistently offers VA loans with some of the lowest rates on the market. Unlike most lenders, though, NFCU does not disclose its minimum credit score requirement for its loans, so it may be more challenging to determine whether it’s the right fit for you based on your credit. 

 If the home you’re eyeing falls into a qualifying area on the USDA loan eligibility map, Prime Lending is among our top picks for USDA loan lenders and is known for its speedy closing times. It guarantees a 21-day closing for qualifying borrowers and will pay $5,000 if it misses that date. But there’s also limited information available about how to qualify for its loans, so, again, it may be hard to figure out if it’s right for you. 

If you’re not a veteran, don’t plan to buy in a USDA-eligible area and want to consider an FHA loan, Pennymac is one of the largest providers of FHA loans and consistently offers rates that are below the national average. It does not have any brick-and-mortar locations, though, if you prefer to take out a mortgage in person. 

These loans are not for every home; each requires a strict property inspection with relatively high standards compared to conventional mortgages, so it may be more challenging to get approved for one. The government also caps these loans at $806,500 to $1,209,750, depending on the area in which you’re buying. 

With an assumable mortgage, you, as a buyer, can take over your seller’s mortgage — meaning you’ll have their rates, terms, and conditions when you move into the house. If the seller took out their loan before rates shot up, you can move without giving up your sub-4% rate. 

Of course, this plan has significant drawbacks: You’ll have to make up the difference between what the existing mortgage covers and what you owe on the home. That secondary mortgage will likely have a higher rate than what you would pay with a traditional mortgage.

It also limits your search in an already undersupplied market, because you will only be able to take over homes from those who bought within a specific timeframe and that are available to assume. To make matters even more difficult: Most conventional loans — the most common type of mortgages —  are not assumable, so you will need to find a seller with an FHA loan, VA loan or FHA loan. 

Still, if you can find a seller with a loan that qualifies and a house that you love, assuming a mortgage may be the perfect way to keep your mortgage rate low — and the closest you’ll likely ever come to a portable mortgage.

At CNBC Select, our mission is to deliver high-quality service journalism and comprehensive consumer advice to our readers, enabling them to make informed financial decisions. Every mortgage article is based on rigorous reporting by our team of expert writers and editors. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content independently of our commercial team and any third parties, and we pride ourselves on maintaining high journalistic standards.

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