Rates Ease Up, Home Sales Slow and Prices Drop

Mortgage Planning can help protect homeowners in declining markets 

Freddie Mac released its weekly economic outlook for the first week of the last quarter, reporting that after three weeks of increases, mortgage rates eased slightly this week. 

But rates aren’t the only thing to come down.  In case you’re wondering, the effects of the credit turmoil you’ve been reading about since August has indeed started to surface in housing statistics.  New home sales fell to the slowest pace in more than seven years, the median sales price had the largest 12-month decline since 1970, and August’s pending existing home sales fell to the lowest level on record, which begins in 2001. 

What does all of this mean to the average homeowner?  Well, that depends on whether that homeowner has a good mortgage plan in place. 

Borrowers with a strong plan that not only helps them to build wealth faster and easier, but also safeguards their assets and gives them access to their money, are probably less concerned about the shifting market.  They’ve got their assets liquid, where they can access money should they need it in a pinch.  Homeowners who do not have a good mortgage plan may be feeling wary, cautious, or perhaps even downright panicked, because with each dip in the market, their appreciation slips out the window.

The fact is, markets rise and markets fall.  And while there’s no way to predict or control the market, there is a way to safeguard your equity.  A qualified Mortgage Planner can help to create a plan that not only keeps your assets working for you, but also helps you to position them where you can access them if you need them. 

Especially in fluctuating markets, homeowners should consult a qualified Mortgage Planner to help them create a mortgage plan to secure their equity and protect it against the market’s changes.  Under the guidance of a reputable Mortgage Planner, homeowners can significantly reduce their exposure to the risks that come with a slowing market.  Remember, the best action is strong prevention.  

Don’t worry…we’ll help you grow!

Have you ever wondered we save all of our lives just to have the government take back 1/3 of our money when we retire?  Wouldn’t it be nice to find a product that allows tax free growth, tax free access at any time, and transfers income tax free to your heirs? 

 Well, when I begin to tell people about this, most people don’t understand it. So here’s a brief snapshot of the amazing Universal Equity Index Life Insurance:

• A Universal Life contract where the funds in the accumulation account are linked to the growth of an Equity Index (S&P, NASDAQ, Dow)
• Principal Guarantee
• Annual lock in of index gains, annual reset of index
• Minimum rate of return combined with maximum cap on gains.
• Contractual “no cost loans”

Now, most people have never thought of a life insurance contract as a means to grow your financial net worth.  Most people are taught to put their money into their company funded 401K or their IRA. 

What I would love to hear is some of your comments or questions on this product and if you think you have something better out there, let’s talk!  And if you don’t know much about Universal Equity Index Life insurance, there will be constant postings on this blog so that you can get the latest up to date information. 

How To Determine Whether Your Loan Officer is Reputable 

In slower markets, some loan officers may feel pressured to close deals that aren’t in the homeowner’s best interest.  In order to avoid getting into difficult and financially compromised positions with their mortgages, borrowers are well advised to be acutely aware of the signs of a responsible loan officer when selecting a mortgage professional.     

First, look for a Mortgage Planner whose values are focused on helping individuals to achieve their financial goals in both the fastest and the safest way possible.  A reputable Mortgage Planner will show you the numbers associated with the proposed loan and provide you with concrete information that backs up his or her claims. Review all of the numbers. If they don’t add up, ask for clarification.  If your loan officer can’t or won’t answer your questions, move on–without the loan. 

Secondly, a responsible Mortgage Planner will present you with financial information that goes beyond the point of the transaction, and will illustrate the total cost of the loan over time.  If your loan officer is focusing only on rates and fees, you may be working with someone who’s looking out for his or her own best interests, not yours. 

Responsible Mortgage Planners will also tailor their strategies to fit your unique situation. In other words, they always take your personal financial goals into account.  No one should try to place you into a loan without knowing the intricacies of your personal financial situation.

Finally, if your loan officer is advising you on issues other than mortgages, you could be working with someone who is compromising your best interests. Issues like investment rates of return and real estate appreciation aren’t the areas of expertise for the vast majority of mortgage professionals and should be left to the professionals who have training and direct experience in those areas.

When seeking a loan officer, look for someone who specializes in mortgage planning, which is the process of evaluating a borrower’s unique financial situation and advising the borrower on a loan that best suits his or her individual needs and goals. If your loan officer is trying to put you into a loan without evaluating how that loan will effect your entire financial situation–including debt management, tax benefits, investment goals and net worth–it’s quite possible that you’re only getting half of the picture.

The bottom line is that your mortgage representative should always be looking out for your best interests, regardless of market conditions.

Annual Mortgage Reviews Bring Borrowers Closer to Achieving Financial Goals

Yearly reviews are a great way to keep on track with your financial goals. You’re probably already meeting with your financial advisor and other asset manager for quarterly or annual reviews, and you should do the same with your Mortgage Planner as well.

An annual mortgage check-up is an ideal way to make sure your mortgage is still having the maximum positive impact on your overall financial plan. A lot can happen in one year.  The market can take turns that can open up new opportunities, such as reduced interest rates, new loan products or changes in home values. 

Furthermore, your personal and financial situation could be mildly to radically different than it was just 12 months prior. Perhaps one or more of the income earners got a raise or lost a job. Maybe you received an inheritance. Even a minor, one-year change in one of your kids’ college plans could impact your financial situation in a way that would benefit from an adjustment in your mortgage strategy.    

Periodic reviews serve several purposes.  First, they establish a consistent path toward achieving your financial goals. Secondly, they ensure that you stay on track with your goals. Sometimes plans need minor adjustments, but without the knowledge that comes from a thorough evaluation, those minor adjustments may go unnoticed.  Often, by the time an adjustment becomes apparent, you may have already lost valuable time and/or resources that could have been spared with a few minor modifications along the way. Finally, periodic reviews help to keep you accountable toward your commitment to achieve your objectives.

Without accountability, it’s very easy to let your savings and investment actions fall by the wayside, especially when unexpected expenses arise.  Knowing that you’ll be discussing your action steps will help to keep you committed to your goals.    Consider scheduling a periodic review with your Mortgage Planner in conjunction with your asset manager’s review. In addition to saving time, you’ll also gain the advantage of your own personal management team for your financial asset-building program.   

Remember that getting clarity on your financial situation is never a waste of time.  If you find that your current financing is more desirable than the financing that is available in today’s market, you’ll know that your Mortgage Planner did a great job advising you last time.  If you find that your changing circumstances have dictated that a new loan will better suit your new situation, your Mortgage Planner can bring you one step closer to achieving your financial goals.    

Option ARMs Can Be Helpful or Harmful, Depending on the Borrower

With the record number of defaults and foreclosures occurring in today’s market, many homeowners have been led to believe that Option ARMs are bad loan products.  The truth is that Option ARMs are great choices for some borrowers, but very dangerous choices for others.  Whether they’re helpful and harmful depends primarily on whether they’re suitable for the borrower’s individual situation. 

On the one hand, Option ARMs can be a great way to take further control of your finances.  They offer a flexibility of payment choices that enables the borrower to utilize funds in a way that suits his or her financial objectives.  On the other hand, when these loan programs are provided to borrowers who haven’t been properly educated or borrowers who otherwise couldn’t qualify for a mortgage, they can quickly lead to disaster.

If you’re considering an Option ARM or if your Mortgage Planner suggests that you consider one, make sure you understand how they work.  Lack of education is one of the primary reasons that numerous homeowners have gotten into trouble with these loans.  Know that two payment options will not pay down the principal balance.  With the minimum payment option, the interest that’s not covered by the monthly payment will actually be added on to the principal balance, which will recast (readjust to accommodate the growing principal balance) after a specified period of time, usually five years or sooner, unless the accumulated interest is paid.  The interest-only option will cover the interest payments, but not the principal. 

Reputable Mortgage Planners always take the time to determine whether these products are suitable and appropriate for their borrower’s individual financial capacity and goals. Your Mortgage Planner should conduct an in-depth evaluation of your financial situation before recommending any loan product.  Especially with Option ARMs, your Mortgage Planner should provide a clear explanation of how the loan works. 

These products should never be used to put people into a higher priced house than they can truly afford. Instead, the borrower should be capable of making the fully-indexed (principal and interest) payment.  Positioned properly, Option ARMs can be an incredible wealth-building tool that can help set homeowners on a faster and safer path to achieving their financial goals.

Consult with your mortgage professional today for more information on whether an Option ARM is the best or worst choice for achieving your financial goals.