Before we discuss the advantages of a portable mortgage, we need to understand what the term denotes. In simple terms, a portable mortgage is one that enables the debtor to reassign the unpaid balance of an existing mortgage loan at the same price while selling one house and purchasing another. In this instance, in addition to title insurance and appraisal fees, the debtor shells out a payment on the fixed rate mortgages of an equivalent maturity when the mortgage document is handed over.
Incorporating the provision of portable mortgage in your mortgaged agreement is always beneficial as it enables the borrowers to avoid being penalized when they are selling their property to purchase another and yet continue with the same lender. In simple terms, when you have included the portable mortgage clause in your mortgage deed, the lender will permit you to transfer your arrears on the old house that you are selling off to the new property you are purchasing. And you are not liable to pay any fine if the arrears on the new property are not a smaller amount than the debt on the old property. On the other hand, if the debt on the new property is not as much of that on the old property, the lender will impose a fine on the amount equivalent to the difference between the two debts. For instance, if the lender sanction's your requirement for a greater loan for the new house, the interest charges on the additional loan sought by you will be greater than the rate on your previous credit. In this case, the lender or the mortgagee will combine both the loans into one and the borrower will need to pay a single payment, including both the interest rates.
A portable mortgage is only successful when there is an earnest home owner for the full mortgage term. However, this does not imply that the borrower will own the same property or home during the complete home equity loan term. In the majority of cases, a mortgagee will only consent to a home equity loan or mortgage to be transferred on the condition that the borrower makes an official application for the loan and usual standards for sanctioning a credit, such as the borrower's income and the evaluation of the property, are fulfilled. This is important because the security against the loan is shifted from the old home to the new one.
Here is some advice for people seeking to incorporate the facility of portable mortgage in their mortgage deeds. You will find many mortgagees advertising that the mortgages offered by them are transferable. However, many of them seldom follow it up while signing the mortgage document. Hence, it is essential to include a clause regarding the portability of the mortgage on specific conditions. If there is no such document to support this feature, it will be deemed that the 'transferability' offered by the lender is simply his personal strategy and subject to his or her whims and fashion. Remember, if the lender is representing an organization, his or her assurance on the 'portability' of the credit may be altered any time following instructions from their superiors. In case you have signed a mortgage agreement that does not make any mention about the loan being transferable, you should at least ask the lender to issue you a formal letter authenticating that the mortgage is transferable and also specifying the conditions for it to materialize.
As the portability of a mortgage is essentially a feature offered by the mortgagee, it is in no way affected by the actions of any lawyer in finalizing as well as implementing the credit deal. In other words, this implies that in the instance of a portable mortgage, a lawyer has to only make certain that the borrower reimburses the entire outstanding debt on the old house so that a new buyer is able to sign a new agreement on that property. The money paid towards repaying the mortgage on the old house is now used as a new mortgage or credit on the new property purchased by the borrower. The 'transfer' aspect of the mortgage is an internal feature offered by the lender to the borrower with the lawyer having nothing to do with it. Had it not been so, the borrower would be required to pay a pecuniary penalty for breaking the contract or mortgage agreement and settling the dues before its maturity.
It may be mentioned here that the 'portability' feature of a mortgage also provides an unyielding shield to property proprietors who plan to sell one house and purchase another before the end of the term of their current mortgage. This is because the portability aspect of the mortgage by removing the threats of penalty from the long-term mortgages. The 'portability' feature of a mortgage plays a vital role when a home owner goes for mortgage shopping and it often becomes the deciding factor while selecting the lender.