Are Your Clients Paying Too Much for Their Mortgage
There are 3 Lifelines that you can send them.
The typical American household lists housing as their biggest
monthly expense. It is not uncommon for
households to spend more than 50% of their income toward housing – more than 12
million based on a recent survey by the MacArthur Foundation. The survey went on to say that more than 50%
of Americans had to make at least one major financial sacrifice to cover a
housing payment. Let’s throw them a
lifeline (…& they’ll love you for it)!
Lifeline #1
– Getting Rid of Unnecessary Mortgage Insurance
If your clients bought a house with less than 20% down,
chances are that they used mortgage insurance. This is sometimes called PMI, or
private mortgage insurance. The cost of
this PMI is typically equal to .5% to 1% of the loan amount annually. A $350,000 loan could be costing your
borrowers $3,500 extra per year – or $291 per month. Imagine if you told them that they could
recapture the expense to remove it in only 2 months. Although lenders are required to
automatically cancel the PMI after the loan balance reaches 78% of it’s
original balance through normal payments (this
takes 11 years in many cases), most lending guidelines allow a borrower to
remove the PMI after just 2 years if the loan to value ratio is 80% or less –
verified with an appraisal.
Lifeline #2
– Credit Has Improved
When you’re young and starting out things happen – from a
missed payment on a student loan, to unwinding out of an unwanted cellular
plan, your credit can take some hits – things you don’t work out until
later. If your buyers have an FHA loan
or a higher interest rate because they were still working through credit issues
when they bought their home, perhaps homeownership, having kids, or moving up
the corporate ladder a couple rungs has made them more protective of their
credit. Good news, the folks with the
best credit get the best rates. There’s
a chance your once 1st time homebuyers are now seasoned homeowner’s
paying more than they need to. Throw
them a lifeline and have the Easterbrook Team analyze their ability to save
some money.
Lifeline #3
Increase their Mortgage
Huh? Perhaps your buyers have gotten a substantial salary
increase or gotten married. They have 20
years left on their 30 year mortgage but have goals of retiring in 10 years and
living the good life. If they still had
house payments in retirement, they may be limited on their mobility and have to
make sacrifices. Suggest to them that
they may want to explore shortening the term of their loan to 10 or 15
years. Shorter term loans often have
great breaks on their interest rates.
They will be living the good life and singing your praises for the
advice.
