What is a Portfolio Mortgage?
A portfolio mortgage lender makes loans then holds those loans in their investment portfolio rather than selling them on the secondary market. Portfolio mortgage lenders are most often smaller institutions such as community banks. Large, trade-driven institutions do not have as much incentive to hold onto a loan for its entire life cycle. If you can locate a portfolio loan, you will benefit because:
- The terms are often more flexible because the lender is looking to establish a long term relationship with you.
- There is less predatory lending from individuals looking to make a commission on their work with you then dump the debt.
- You can use the same lender for future loans once you have established a good relationship.
Portfolio mortgages require better financial strength on the part of the borrower. Bad credit mortgages are more likely available through creditors who will later sell the loans because they have less at stake in the long-run. In the wake of subprime mortgage meltdowns in late 2007, more borrowers looked toward portfolio lenders, even if the qualifications for obtaining the loans were higher.