Keep Your 3% Rate Forever? “Portable” Mortgages Could Be Coming

0:00The housing market is hitting its typical seasonal slowdown. Listings are tapering off, price growth is definitely flattening, and mortgage demand has stalled for the fourth straight week. But under the surface, investors are positioning what's next and starting to look forward to 2026. I'm Dave Meyer, alongside Kathy Feke, Henry Washington, and James Daynard. And today, we're walking through the headlines and trends that are shaping the end of 2025. You're listening to On The Market. Let's jump in.

0:33James, Kathy, Henry, thank you all so much for being here. Kathy, how are you? I'm doing great. I am here in Phoenix. I'm going to stalk James later. I'm going to go find where he lives. I mean, just look for the biggest house in the city and you'll find him. James, how are you doing? I'm doing good, man. It's nice and sunny here. We have four more weeks of shooting. We have to complete nine houses. Three of them are in studs. So we'll see what happens. That's unbelievable. Wow. Henry, I hope your life is a little simpler than that. Yeah, I have to complete five. projects, but I don't have a timeframe.

1:05I just have to pay holding costs if I don't go fast. Yeah, there's no TV crew chasing you down right now. Correct. Well, we got a lot to talk about today. Thank you guys all for being here. We are entering sort of the last stages of 2025, but at least to me, it really feels like housing has come into focus, especially housing affordability in the last couple of weeks. It's been in the news. It was definitely a major part of the elections that went on the other couple of days. So we'll talk a little bit about housing affordability and some ideas to improve it. We'll talk about recent trends in the housing market, of course, how margins are being impacted by recent cost increase and how the job market is developing and actually what it means that might be positive for real estate investors.

1:50So let's jump in. Kathy, you're up first. Bring us your headline. Okay. Well, mine is from Yahoo Finance and it is Trump administration is evaluating portable mortgages and what that means for homeowners. OK, I had to look up what in the world portable mortgages are. And I was a mortgage broker for years. So it sounds cool. Yeah, I had never heard of it. I'm like, OK, it kind of makes sense. You carry it with you. And I thought, OK, this is granted. The Trump administration is no stone unturned in terms of trying to figure out how to make how to unlock the housing market. We know, obviously, home prices are defying gravity, even with high rates, even with wage growth slowing, even with inflation, you know, this, the prices just keep going up and not everywhere, not everywhere.

2:37Right. But nationally. So, and of course we have so many people locked into lower payments that don't want to leave that. So it's like, how do you unlock this housing market? They floated the idea of the 50 year mortgage. Of course, that was headline news for a while. And there was a lot of backlash because again, having been a mortgage broker, for the first years that you're paying your loan, you're really not paying down your loan anyway. You're paying interest only for the most part for the first year. So most people sell, I think, within 10 years. So it doesn't matter that much. But what does matter is that 50-year mortgages tend to be higher costs.

3:12So it doesn't really, I mean, we don't have 50-year mortgages, but 30-year fixed rate mortgages are higher than shorter term. So the idea would be a 50-year would be higher price. So then this idea came out because there was backlash. How about the portable mortgage? And apparently this is something they do in Canada and the UK. It is not new. I thought it was just something they dreamed up in a boardroom, but it's actually been done. But the difference is that in Canada and the UK, they are shorter term loans. So I suppose, you know, you can, it's different than a 30 year term where you can kind of carry it from house to house with you.

3:50But I love the concept and it would be amazing. I have a low interest rate and I think it would be fun to carry it to another property. I have a 2.3 % interest rate and I would carry this thing with me for the rest of my life. Are you kidding me? But is that the idea that you could keep your current one at a 30 year and make it portable? Or is it that new mortgages would be portable? It sounded like they're just talking about any possibility, right? Okay. They're trying to reverse the lock-in effect. So they're saying, what if we could stimulate the economy by people buying houses if they can take their low interest rates with them?

4:26And so it would be, it's my understanding that it would be for people who currently have mortgages, not just new mortgages. Okay, I have thoughts about this. I mean, I actually think it's an interesting idea. I kind of like the idea. I just, how does that work? Because all of these mortgages have already been originated, packaged and sold to investors. Those investors aren't going to then agree retroactively to change the terms of the loan. Like, is this even, that just doesn't make sense. Yeah. I mean, it sounds like the state of Maine floated mortgage portability legislation in 2025. So it's not just the Trump administration that's been talked about because it actually does exist in other countries.

5:11But I guess it like I get that exists in other countries, but it exists at the point of an origination. So like the fees and the interest rate and the terms are all factored into that. Yeah. Like if I was the owner of those mortgage backed securities, I'd be like, I don't know if I want that to just be portable going forward. Well, it seems like they would have to underwrite the new property, right? They'd have to make sure it's a similar situation because probably the people who have the mortgages that would be portable that they'd want to take with them have a ton of equity. So very low risk.

5:43So would they have that same amount of equity? Maybe. Maybe just the whole thing moves like a 1031. But the banks don't want this. They want them to refi at a higher interest rate. They don't want to be carrying Henry's 2.3 % interest rate for the next 27 years. If someone can pull off negotiating that deal, I'm hiring them. That is the ultimate negotiator. Why would they do that? I mean, so they do it in Canada, you said. Are their rates way higher there? Yeah, and they're only like three-year terms or five-year terms. So that makes sense, right? The bank shares upside or they share risk in that or they can mitigate.

6:19But on a fixed, like I'm not buying Henry's loan for 2.25%. No one's buying that. So it sounds like a good idea, but hard to imagine it happening. The fact that we could even lock in 30-year fixed rate loans is amazing. And then that we could do it at 2 % and 3 % is also amazing. What bank would ever agree to that? I don't know. They did. But what was also interesting about this article that I forgot is assumable mortgages are a thing. And they are a thing on FHA loans, on VA loans, and USDA loans. So this article kind of says, go look for those. You know, go look. That's a great strategy. Yeah.

6:57Those are amazing. If you can find an assumable mortgage, you should absolutely look for those. I should just note that those are only available for owner occupants. And my guess is if somehow they miraculously pull off this portable mortgage idea, it would also only be available for owner occupants. I don't think this is about to be an investor loan. For the record, I asked you at GPT, like, what would mortgage securities holder, why would they sign up for this or what makes it good for them? And it basically said absolutely nothing. Yeah, there's no reason. which honestly could backfire. Cause like, if you do stuff to upset the MBS market, they're just going to demand higher rates for current mortgages to compensate for that.

7:39So it just doesn't make sense retroactively. If they started introducing this as a new loan product moving forward, I think that would be cool. I know now I'm super stoked about that in terms of their rates, but just if a homeowner, if you were moving, it's just easier. You get to keep your amortization schedule. It's better for you for building equity. So, I mean, I would be interested in introducing it now. I just don't think it could reasonably happen looking backwards. All right. Well, interesting idea. I mean, the way I feel about this, we put out an episode on the market where I was just rambling about 50-year mortgages.

8:15And I just want to say, like, I'm not opposed to short-term solutions that help the housing market, but I just don't like ones that make the long-term solution further out. Like that's kind of how I feel about the 50-year mortgages. Like I get lowering the payment$200 a month for the average home could be meaningful to some people, but it's actually just going to make affordability challenges worse instead of actually making homes more affordable, which is what actually needs to happen. And so I think that's not going to work. I unfortunately don't think portable mortgages are really going to work for long-term solutions.

8:50But I hope as they're trying to figure this out, they come up with something that might actually work because affordability is a real challenge. Some might even call it a crisis in the United States right now. And it does need to be addressed. All right. Well, let's move on to our second story. Henry, what do you got for us? Yeah, I brought an article. It essentially says 10 things to know about the property market. So I was looking through these 10 things and or 10 statistics, and a few of them caught my eye. And I just wanted to chat with the group about them. The first one that caught my eye says approximately 85 % of outstanding mortgages carry interest rates below 6%.

9:32So that kind of ties into what Kathy was talking about. That number surprised me. I thought the numbers would have been skewed a little differently given the past two and a half years, three years, rates have been well above 6%. And there were still transactions happening. But 85 % seems pretty staggering, which kind of plays into what we're seeing in the market. why the lock-in effect is a real thing and why transaction volume is down and why more inventory is coming on the market with less buyers. This just explains so much here. There's like two classes of homeowners right now. People who refinanced or originated a loan from 2020 to 2022 or 2023, not just housing affordability, like their whole spending is like in a different realm than everyone else, right?

10:20Like they just locked in this low, this better affordability than everyone else. And it's going to be, I don't think people are giving that up. It's just going to be a long time to work this out. All the data I've seen that shows that for the housing market to really unlock for people to start actually transacting, thinking about moving, it has to get below 5.5%. Yeah. This article says something similar. It says, if a 30-year mortgage rate falls to 6%, about 3 million borrowers would be primed for a rate and term refinance. So that would be nearly 2 million housing units. I'm looking at the chart right now.

10:5520 % of people are in Henry category, under 3%. Those people are never going to sell those homes. I'm sorry. Who would sell a home with that? You hand it down, you rent it out, you do something else with it. You did not sell. That's an asset in itself, the 3%. Then another 35 % are between 3 % and 4%. So that's insane. So nearly 55 % are below 4%. That's crazy. I personally have a hard time imagining interest rates ever going below 4 % again, unless there's an economic emergency. Black's one of them. So, yeah. So you have half the country with once in a lifetime, once in a generation at least, types of mortgage rates.

11:42Man, I respect that Trump administration, state governments are trying to unlock this. But, man, it's hard to argue with money. It's hard to argue with a really good deal. Yeah, it's interesting. 40 % of homes, apparently, I think that's what came out this last week, are owned free and clear. Yeah. So there's just a lot of stability within the housing market as far as people who own them. However, you know, even homes that are paid off might get sold if they're inherited. People, the kids are like, I don't really want to rent it. I don't really want it. I'll sell it. So I think there'll be some movement over time as these homes age and as the equity gets so big that those who inherit are like, you know, I want the cash.

12:26Well, that's a great transition, Kathy, because number 10 on this list says the number of homes that are inherited has been increasing and this summer that figure reached its highest point in over the past decade over 300 000 homes were inherited over the last 12 months it's 100 % going to keep going and this figure is 15 % greater than the number recorded three years earlier i mean i just think that's this is going to be the new status symbol you know it's not going to be trust fund babies it's going to be it's going to be inherited a pay off house baby that's like that's like, if you had a paid off house, that is such a gift you could give, you could pass down.

13:01It's incredible. But I do think Kathy's right. I think some people will appreciate that, want to live in it. It's a good property. I think a lot of people will look at that and be like, that's just 400 grand I could have and are definitely going to sell it. So, well, thank you, Henry, for bringing those stories. We do have to take a quick break, but when we come back, we'll talk more about investor margins and how they're being impacted by rising costs. and we'll talk about how a bad job market might actually be a good opportunity for investors. We'll be right back. Okay, we're gonna shift gears for a minute to cover something important, especially for new landlords.

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16:02Welcome back to On the Market. I'm here with Henry, Kathy, and James. James, you're up next. And I think we got a very special story here you're bringing to us, right? We do. We have a, I don't quote the Seattle Times much, but we have a story from the Seattle Times that talks about you, me. Yes. A case study. It was on the front page of the Seattle Times. Top story last weekend. It is a very relevant article, not because of anything I inputted in, but just because of the topic. The article was about how flippers have been compressed and I kind of have to eat my words in the last 12 to 24 months.

16:39We have seen investments get compressed across the board, but flipping actually was holding pretty strong as far as high yield. And now it's getting caught up with the rest of them. And that's kind of what this article talks about. The main point of this article is that rising costs, cost of money, cost of construction, and declining sales has totally compressed the market. And we're seeing it pretty dramatically across the board, even in the numbers. It quotes a lot of Adam data where it talks about how in 2021, there was 3 ,100 homes that were flipped. Last year, it dropped down to 1 ,900. And what we're seeing is we're seeing a very big decline in flipper activity just because the margins aren't there.

17:24And the reason the margins aren't there is just because of all these increasing costs. And flippers can't keep up with it. And going from making very high profits have been shrunk dramatically. And there was something I wanted to point out about this because it is true in the data, right? Flipping activity has declined over 33%. They were saying on average, when a flipper purchases a property, they're selling it for around 26 % higher when their costs are over 30 % when they're doing that deal. And that cost comes down to money, construction, and time on market. And so I grabbed just a normal Performa that was for a flip property that we would often see where we're shooting for like a 35 % return, 40 % return.

18:09And it really does show you, you know, just little impacts across the board. We have to pay attention to as investors and start pivoting. Because on a flip property, let's say in Seattle, you pay$650 ,000. You put$150 ,000 in the renovation. You sell it for$999. $199, that's going to be a cash on cash return of 42%, which is kind of what we're shooting for, or net profit$64 ,000. If that flip goes 90 days too long, which has been the trend for flip properties, they're taking anywhere between 90 and 120 days longer to sell, that knocks off 21 ,000 or 33 % of the profit. If your construction costs on that project rise by 10%, which is the average, it's at 9.8 % according to the Adam data in the article.

18:52That's another loss of$17 ,500. And if we see a price decline of 2.5%, which is a little bit lower than the higher end in Seattle, that's another$24 ,000. And you go from making a deal that had$64 ,000 in profit or a 42 % return to breaking even. And that's if you can control those costs, get it sold on time, and only have a 2.5 % decline, which we've really seen a 5 % since peak. And so that's why flippers are getting in trouble. So I think it's just a good article about talking about rising costs and how to prep your deal going forward because you just can't do it the same. Do you think any of this will get baked into housing prices, James?

19:34It seems to me like at a certain point, these rising costs of renovation have to negatively impact housing prices, meaning that you could buy things for cheaper. There is a lot more deals right now out there, and we're seeing bigger discounts because investors, you know, like for us, if it goes 90 days too long, that eats up 33 % of the profit. So buying going forward, we're just adding 90 days to that price. If we think construction is going to go up by 10%, we're adding even bigger buffers because we do have some bigger tariffs coming in. Like cabinet costs are going to rise dramatically in the next two to three weeks.

20:10Appliances, they are through the roof. I was just shopping them. I'm like, wow, these really did go up 35%. it is going to cause a decline in people selling as is. And it is going to give a lot of, you know, I think it's almost a benefit for a lot of home buyers too, because some of these properties are not zombie properties where they need everything. They're just dated. But as that price drops, because people have to renovate, I mean, it is a good opportunity also for like first-time home buyers and people that want to buy a little bit cheaper where they can buy grandma's house a little bit dated for a little bit less money.

20:39But yeah, all these costs are going to be built in the pricing. But right now, investors have, they were buying all of last year's numbers. So that's where everyone's getting hit. Yeah, I mean, I would reflect those sentiments here in my market on a smaller scale. Obviously, our price points are different. But that is why I've just been so conservative in my offers, because I'm truly only doing deals if it's a solid double or triple, like in terms of the quality of the deal. Whereas before, I would hit a single. I'd take a deal where I'm going to make, you know, 30 ,000, 20 ,000 net profit in and out easy flip.

21:17But now I shoot for a net profit of about$50 ,000. And in my market, that's substantial because you're talking about a$65 ,000 net profit in a place where the purchase price is 400 to 500 ,000. I want a$50 ,000 net profit in a place where my purchase price is average between 100 ,000 and 200 ,000 dollars. And like, that's all I'm doing. The last deal I'd put under contract earlier this week,$80 ,000 purchase,$50 ,000 rehab, $265 ,000 ARV. And I'm probably going to keep it. I probably won't even sell it. I'll probably keep it as a rental. That's just, the numbers have to be phenomenal. Yeah, that's amazing.

21:55But what does that rent for? That'll rent for between$15 ,000 and$18 ,000. Okay, so cash flow. Yeah. A little bit. Yeah. Nice. That's great. Well, if someone pays you$300 ,000, would you sell it? Now, if somebody's going to come give me a cash offer to take it off my hands at$300 ,000, I'll sell that thing all day long. Are you seeing more of those deals? Like you're saying you're being conservative, which I get means you may need to look at more to find the ones you're willing to offer on or execute. But are you seeing more total good deals or is it kind of slow still? I'm seeing more leads, which means I'm making more offers.

22:28People need to sell. But then when they hear the conservative offer, they go, you know what? I think I'll just keep it. So I'm getting leads. People are interested. They want to hear the offer. Leads are through the roof right now. But that's kind of what I mean when my question to James before is like, eventually that's going to stop. They're waiting, holding out to see if they're going to get better than your conservative offer, Henry. But personally, I don't think those offers are coming anytime soon. I think the reality is going to set in with the sellers that flippers can't pay what they were paying a year ago.

23:02They just, it's not realistic. Your followup is so hugely important right now. That's what happened with this deal. I made the offer and he was like, yeah, I mean, just give me a few days, which means I want to go get more offers. Right. And then take the best offer. And so I followed up two days in a row. Didn't, uh, and he told me he wasn't ready yet. Then I called him the next week and I was like, Hey, what do you think? And he was like, yeah, I think I'll take it, which means he went, he got other offers and they were all in that same ballpark or lower. And then he ended up taking my offer that you're right.

23:31If you're not following up right now, you're missing opportunities because the reality check is hitting the people who need to sell. You do have some tire kickers out there who would like to sell and would, would, would sell for a little bit of a discount. But once they get the reality of the market, you're starting to see people say, okay, maybe I, I do need to let it go in this price range. So just be super conservative because your numbers will dwindle fast. Well, and the thing is too, the good thing about negotiating right now is there's data that I'm not asking for a discount. We can offer them market value for the as is condition.

24:06There's low sales on market. And once you back out all the real estate commissions, like they're not low numbers like you. And that's why there's a lot more transacting off market is because you can bring people comps going, hey, this one just got sold. It had better roof, better windows, and they paid a broker. I just have to adjust down for those costs and take it or leave it. And people are definitely taking it a lot more than they were 24 months ago. That is for sure. Awesome. Well, it was great press. Congratulations on that. And thanks for bringing the story. I think this is super important, not just for flippers, but for people who are doing borough renovations too.