As published in Scotsman Guide's Residential Edition, July 2005.
The old-school thought about mortgages was to lock into the lowest 30-year fixed-rate mortgage — maybe even a 15-year fixed, if clients’ debt ratios could handle it. Clients would pay an extra $100 per month but pay off their houses so they wouldn’t have mortgage payments when they retire.
There is a reason and catalyst for clients thinking they really need to pay off their houses or will pay off a home mortgage. Many clients, however, do not consider the significant changes in our economy, society and legal community over the past few decades.
As a mortgage professional, under-standing these changes and how they affect financial decisions is critical to helping your clients overcome their “superstitions” and misconceptions about loans.
World keeps turning
During the Great Depression, mortgage lenders foreclosed on homes for any number of reasons. The securities acts of the 1930s, however, now protect consumers from losing their homes unless they are delinquent on their mortgage. As long as borrowers make payments, they are safe. Remembering this allows us to entertain numerous strategies to create wealth for clients.
Another change over time relates to employment. Most people used to work for one company their entire careers and earned a pension. To control rising costs because of personnel turnover, companies have shifted from defined-benefit plans to defined-contribution plans. Further-more, the disparity between home prices and income has increased dramatically. Our national personal savings rate was a paltry 0.4 percent this past April, and inflation is a growing concern — especially when you include the volatile-yet-important food and energy sectors.
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