Jeff's Blog

Is Hyperinflation Coming?

Jeff Trevarthen (Accessbanc Mortgage) — Fri, 20 Nov 2009 16:57:12 -0600

As I sit here in the office on a rainy Friday afternoon, I can't help but ponder the future of the United States of America. In particular, the monetary system that we've had for the past 100 or so years which involves the infamous Fed.

It seems that a little over a year ago an enormous amount of money was pumped into the system via the big "bailout". Billions of dollars were pumped into the system in attempt to jump start the economy. Did it help? Honestly, I don't think so.

The question can be posed as to where the money came from? How do you just make money out of thin air? It wasn't from taxes! The answer is that it's all paper money...just numbers on paper produced with a stroke of a pen. In 1971 the gold standard was removed from the dollar (by then President Nixon), essentially making the value of the dollar begin to decrease. You can't make more gold in the world, but you can certainly print more money which is what has happened.

Since 1971 the rate of inflation is up 443.01%! What that means is that something that cost $1.00 in January 1974 now costs $5.43. That's over 5 times as much. So your savings would have to be 5 times as much, just to be able to purchase the same goods.

But this magic money, as it is often called, comes at a very steep price. We all remember supply and demand right? More magic money means more supply. And as more supply happens, the demand weakens. Hence the US dollar has steadily declined in value based on the world currency. Smart money is buying up all the hard assets that it can right now like gold and oil.

I can't help but wonder what's next? Will the inflationary pattern continue? Will we get into a pattern of hyperinflation (because right now we are in a pattern of deflation which is scary in itself)? All I know is that my income hasn't kept pace with inflation, so in reality, I'm making less and less money instead of more!

Don't lower the price---Buy down the rate!

Jeff Trevarthen (Accessbanc Mortgage) — Thu, 16 Jul 2009 16:43:00 -0500

I admit it...as a lender, I've had to change my game plan over the last couple of years. Much of my old business used to be refinance business. But then, the big crash hit and all of the sudden people couldn't refinance anymore. As of late, some of the refinances have started to come back, but I wanted to share a strategy with you that you may or may not be aware of. It's actually been around for a long time, but I picked up on it about two years ago.

The strategy that I'm referring to here is called, "The Seller Buy down". In a nutshell, instead of reducing the list price of a home, the seller should offer to buy down the interest rate on a perspective buyer. This does two things for the homeowner:

1) It allows the homeowner to get full value for the property keeping most of the equity that they may or may not still have.

2) It allows less income to qualify for perspective buyers. By "buying" down the interest rate, the buyer's monthly payments will be lower and thus there will be more people who can qualify to buy the home.

Let's take a look at the following example and see if you get an "Ahh ha" moment.

Traditional Financing
Purchase Price: $500,000
Down Payment: 20%
Loan Amount: $400,000
Program: 5/1 IO
Rate: 6.75%
Payment: $2900
Income to qualify: $109,000
Monthly Savings: --

Price Reduction
Purchase Price: $480,500
Down Payment: 20%
Loan Amount: $384,400
Program: 5/1 IO
Rate: 6.75%
Payment: $2812
Income to qualify: $105,500
Monthly Savings: $87.75

Interest Rate Buy down
Purchase Price: $500,000
Down Payment: 20%
Loan Amount: $400,000
Program: 5/1 IO
Rate: 4.875%
Payment: $2275
Income to qualify: $85,500
Monthly Savings: $625

Do you see what I've just done here? I've created a win-win situation for everyone. As a seller, you will get a lot more equity out of doing a buy down, rather than reducing your price. As a listing agent, you'll get more commission. And as a buyer, you've just gotten a gift in the amount of $625 savings per month. More people will be able to qualify at the lower income as well.

Here's the kicker...if you were to reduce your price to attract buyers at that income level (for this specific scenario), you would need to reduce it to $363,500. That's a $136,500 price reduction which would a seller would NEVER agree to.

I hope this gets you thinking...

Please submit an article/essay about lead generation!

Jeff Trevarthen (Accessbanc Mortgage) — Mon, 06 Jul 2009 16:57:28 -0500

Dear agent,

I need your help!!

I'm trying to put together a book. More specifically a book about the best lead generating techniques that you've used (or are using) to get a continuous stream of leads.

My best technique is explained in detail here. It's called, "Leads Gone Wild". Please take a look at it. The blog post details my lottery ticket formula for obtaining countless purchase leads, which eventually turn into prospects, and in the end, clients!

My vision for this project is to put together one of the most highly touted books to date about the techniques used in today's society to generate real estate purchase business. I feel it would be AWESOME for new and experienced agents to have access to these great techniques in there neighborhoods.

If you would like to share your technique for the "greater good" of today's real estate market, please send me an email detailing what it is that you do. Please limit your response to 1000 words or less.

While I cannot give you money as compensation, I would be happy to promote your contact info and/or website at the end of your well written section.

Thanks in advance,

Jeff
jtrevarthen@accessbanc.com

A letter from the BOSS!

Jeff Trevarthen (Accessbanc Mortgage) — Thu, 12 Feb 2009 14:39:58 -0600

I got this email the other day about the economy. It was forwarded to me by a friend (not my boss). Personally, I think it brings up some great points about the benefits of business ownership as well as the socialistic ideal of a few. The question that comes to mind mind after reading this, is what can be done? Perhaps you have the answer.

Here's the email (it's actually a letter to employee's):

To All My Valued Employees:

There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job however, is the changing political landscape in this country.

However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.

First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a Back Story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You've seen my home at last years Chris tmas party. I'm sure; all these flashy icons of luxury conjure up some idealized thoughts about my life.

However, what you don't see is the BACK STORY :

I started this company 28 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.

My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn't have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business -- hard work, discipline, and sacrifice.

Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom's for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn't look like it was birthed in the 70's. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.

So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no "off" button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden -- the nice house, the Mercedes, the vacations...you never realize the Back Story and the sacrifices I've made.

Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed decades of my life for.

Yes, business ownership has is benefits but the price I've paid is steep and not without wounds.

Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:

I am being taxed to death and the government thinks I don't pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him.

Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero. Nada. Zilch.

The question I have is this: Who is stimulating the economy? Me, the guy who has provided 23 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.

The fact is, if I deducted (Read: Stole) 50% of your paycheck you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.

Here is what many of you don't understand ... to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the poor of America are the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.

So where am I going with all this? It's quite simple.

If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more.

Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

So, if you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about...

Signed, THE BOSS

Jeff is a mortgage planner in San Jose, California. He is also the founder of Mortgage Wealth, a blog dedicated to helping individuals build real long term wealth through mortgage planning.

A quick guide to helping a homeowner build wealth with mortgage planning

Jeff Trevarthen (Accessbanc Mortgage) — Thu, 29 Jan 2009 13:43:40 -0600

The idea for this plan has been at least a year in the making, and it's finally come to the point where I've heard enough. I want to lay out a step by step plan for any homeowner to follow, regardless of whether or not your are upside down on your mortgage, still have ridiculous equity, jobless, or even if you have no problems at all.

I can assure you that if you follow the sound advice in this blog post, you will be on the road to achieving the life of your dreams. There are so many different ideas of why people need more money, whether it be putting your kids through college, taking care of your parents, wanting to travel more, or even wanting to work less. Each of them has its own merit, and by no means does this make a difference or not, so try not to deviate from the plan.

Step 1-Analyze your personal situation--Ask yourself the all important question: "Do I want to simply become debt free or do I want to create wealth?" If the answer is the former rather than the latter, go ahead and stop reading. Keep doing what you are doing and keep getting the same results. In order for you to get to where you want to be, you'll need to break habits. These habits can inhibit you from getting to where you want to go. I like to call it, "The State of You" address because you're telling yourself where you are (you know, just like the State of the Union address or the State of the State Address where the president or governor talks about the condition of the matters of each respective unit).

A quick story. One day while I was walking around Barnes and Noble, I saw out of the corner of my eye, a book by Tony Robbins called, "Awaken the Giant Within". Honestly, I had heard a lot about him, especially in the real estate and mortgage industries, but I didn't have a care in the world about self help stuff. I've always believed that you are shaped and molded as you grow into the person you are today. More of a nurture rather than nature type thing. Self help, I though? Yea, right! But I went ahead and bought the book anyway and ended up reading it from cover to cover. I'll spare you all of the details, but the one main point that I have take from this book was that YOU have the power to change anything. It's a matter of mindset...PERIOD!

Here are some situations that you can apply to the current state of the US (bad economy and all) in order from most severe to least severe:

Jobless, homeless, just divorced
Jobless, homeowner, upside down equity
Jobless, homeowner, still have equity
Have a job, homeless, just divorced
Have a job, homeowner, upside down equity
Have a job, homeowner, still have equity

Which one are you? Chances are that if you're reading this, you are not jobless or homeless, but you might know someone who is. Use the rest of this guide to help them. If you're at the top of this list, there is still hope for you, but you'll need to dig even deeper. Let the human spirit endure. Thrive. Make the conscious decision to make a change right now. The difference is that you'll need to do more than the average individual who might not be as far in the hole as you are. The worst thing to do is panic, because when you panic, you won't make sound decisions. A friend of mine, went from being dead broke, no job, no home, and an unhappy family, to the head of a prominent real estate organization here in California. He did it because he finally realized that enough was enough. So, by analyzing your current situation you'll figure out where you need to go. There's this quote that I always remember, "you can't get where you're going without knowing where you have been." It applies here, doesn't it?

Step 2-Take Action-OK, so now you know where you are and you need to decide where you want to be. What is it that you envision for your life? Again, if your answer is to simply be debt free, you've read too far. If you want to be highly successful, rich, retired, doing what you want to do, now we're getting somewhere.

Since this action plan is for homeowners, the best advice that I can give for people who are not homeowners is to find a way to get one. You're long term wealth actually depends on it. Houses are dirt cheap right now, and by all means, buy if you can buy. If you try to chase the wave, I guarantee that you'll miss it.

If you're jobless, you'll need to go and get a job or make one. Become an entrepreneur, but make sure that money is coming in some way, shape, or form. Getting a bank loan depends on it. I don't care how good the deal is, the bank will not lend you money if you don't have the ability to pay it back. The other way would be through private money, which can be done, but not without a very detailed plan.

If you're a homeowner with upside down equity, keep making the payments. Do whatever you can to save a little in the bank until you have twelve months worth of expenses. By doing so, you are hedging against a potential job loss. In which case, you can live off of your savings while you make every effort to find more work. I would never advise someone to stop making their payments, because you won't be able to borrow money for a long time. Borrowing money is actually the key to making real long term wealth, especially mortgage money. Since you've got nothing else to lose, go ahead and try and have your mortgage modified. Maybe you can get lower payments or maybe the bank will reduce the principal. Also try and get your property taxes reassessed. These are two ways to minimize your expenses.

If you're a homeowner that still has equity, REFINANCE right now. The interest rates for various mortgages are still really good and the prediction is that they will be good for another month or two. Take advantage of a lower payment so you can stock pile your savings account. Take money out if you can, and use that to fill your saving first, then invest the rest. Diversity is the key with investments and I'm not just talking about different types of stocks. I'm talking about stocks, bonds, real estate, gold, oil, and international securities. Each of them creates a hedge, so when one is not doing well, another is. This is the way to maintain a consistent rate of return year after year, without losing money. Don't believe me? Check out a graph of T-bills vs. gold. They're almost mirror images of each other.

Step 3-Stick with the plan-You should always move forward. For this last section, I've created a list for you to go about doing in order to create wealth. By analyzing your current situation and taking action, you'll soon find you're doing the right things to make real hard earned money in this world.

In order of importance (with 1 being the most important):

1. Earn money-You have to make money somehow, or the rest is not possible.

2. Pay off bad debt-(credit cards, car loans, auto loans, and personal loans). The faster you can pay these off, the better.

3. Get a long mortgage-30 yrs or even 40 yrs, which ever has the lowest payments (must be affordable though...and don't extend yourself too far). The slower you can pay these off the better. Extend your payments for as long as possible. Minimize your monthly payment as much as possible. This leaves more money to invest. For other reasons, see my "Top 10 Reasons to use your mortgage to create wealth" blog posts.

4. Build up 12 months worth of savings-Liquidity is key. If you have 12 months in your savings, you have an entire year to turn things around should something bad happen.

5. Invest-Find a financial planner and invest what ever you can after everything else is taken care of. Why? You can now grow your cash and this is what creates the real long term wealth. Again, the key is to diversify.

And that's it. It really is that simple. Hopefully, these three simple steps will help you go from where you are now to where you want to be in your life. As a side note, this isn't some get rich quick scheme. It takes time and effort to make it happen for most people. Sure some people inherit money or come into money one way or the other, but this should help them reach their goals faster. Be the change that you want to see in your life.

Jeff is the founder of Mortgage Wealth, a blog dedicated to helping homeowners build wealth through proper mortgage planning.

Reason #9--Long term mortgages = more wealth creation

Jeff Trevarthen (Accessbanc Mortgage) — Wed, 28 Jan 2009 11:17:56 -0600

Ask yourself the following question: "Do I want to pay off debt or do I want to build wealth?"

I know, I know...there's A LOT of fluff out there in the world today about paying off your debt to become wealthy. We've covered several ideas in the "Top 10 reason's to use your mortgage to create wealth" series, but there are still two more. Some of the leading, self proclaimed, financial guru's will tell you that paying off all of your debt is the only way to be truly happy.

Understand one important point: Being debt free does not necessarily mean you are wealthy. There are a lot of debt-free people out there in the world who are dead broke. I even personally know a couple of them due to recent job loss.

So, in order to achieve financial freedom, being debt free isn't the best answer. If your real goal is to create wealth, you do that by adding as much money as you can to your savings (at least 12 months) and investments (highly diversified...not just stocks). In order to add as much money as you can to savings and investments, you need to pay as little as possible (meaning minimize your expenses).

That's why the longer term loans are better than shorter term loans (they cost less per month). That means a 30 year mortgage before a 15 year mortgage, and even a 40 year mortgage before a 30 year mortgage. In general, the longer the term, the lower the monthly payment. And the lower the monthly payment, the more money to invest.

Jeff is the founder of Mortgage Wealth, a real estate blog dedicated to helping homeowners create real long term wealth through proper mortgage planning.

Reason #8--Large mortgage equals more money to invest faster!

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 13 Jan 2009 22:38:49 -0600

Continuing on with my ten reasons to use your mortgage to create wealth series, is reason #8. The bigger your mortgage is, the more money you can invest faster.

Now, keep in mind, I am NOT suggesting that you go out and buy the most expensive home that you can find. That is a sure fire way to go broke...fast. What I am suggesting, is that you finance more and put less into the down payment. Several years ago, this was really easy to do as you could put essentially no money into a property and keep the rest for investments. It's a little harder these days, but FHA is gaining popularity and you can finance up to 97%.

Let's say you are going to buy a $400,000 home. You have $100,000 in cash from the sale of your previous home. Should you put down the entire $100,000 which is a 25% down payment, or should you put down $40,000 down payment which is 10% and invest the remaining $60,000.

By making the large down paymnet you have reduced the principal amount to $300,000. Let's assume your interest rate is 6% which results in a payment of $1800 for 30 years. Not bad!

By making the smaller down payment, your mortgage principal balance is $360,000. Again, assuming the interest rate is 6%, your monthly payments will be $2160.

The difference between the two payments is $360. Based on this fact alone, I would even consider the larger down payment.

But I know better, and here's why: I would rather invest the $40,000 in one lump sum payment, rather than invest the $360 per month savings for 30 years. The results are obvious after just one year. Assuming a 10% return on the investment (for calculation sake), the $40,000 investment is now worth $44,000 where as the $360 per month for 12 months is now worth $4752.

After 5 years, same story. The larger lump sum is now worth $64,420 where as the $360 per month for the first 60 months is now worth $6,957. After a full 30 years...well you guessed it, the larger lump sum is by far worth way more than the money put aside every month. Clearly, the larger lump sum investment wins the race.

Couple this with the fact that money invested in stocks, bonds, mutual funds, etc. is more liquid and easier to obtain than money invested in reducing the principal, and you have a great opportunity on your hands. So when it comes to creating wealth through the use of your mortgage, the smaller down payment wins the race.

Jeff is the founder of Mortgage Wealth, a website/blog dedicated to harnessing the power of your mortgage to create wealth, liquidity, increased rate of return on investments, and to minimize risk.

Two great websites to increase sales (ohh, and they're FREE)!

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 13 Jan 2009 09:05:58 -0600

In the past couple of months, I've been using some sites that offer some pretty cool features. So cool infact, that my clients have been "wowed" by them. No seriously, these are great tools for realtors, loan officers, or anyone else in business for that matter. So, here they are:

Jing--This simple piece of web based software enables you to add visuals to your online conversations. As an example, I've been using this software to look at mortgage plans for my clients. Often times clients just don't have time or they are just too far away to get in to the office for an appointment. So I use Jing to upload my mortgage plan and then record a voice over to go along with it. I get 5 minutes to talk about whatever it is that I want, so usually I talk about some of the highlights. When all is said and done, a unique webaddress is created and the client can just go and look at the personalized screenshot.

Animoto--I've been using this one on a personal basis for a couple of months now, but the business applications are tremendous, especially in the real estate field. Animoto allows the user to upload photos, pick a music selection, and then the online software will make a short 30 second video clip out of your pictures. For a small fee, you can upgrade to a 60 second video. I can imagine this being a tremendous opportunity to increase the online presence of listings, when all you have to work with are pictures. Try it out and go for it!

I hope that these two sites will add to your bottom line. They have definitely done so for me. Both sites don't take very much time to learn how to use and believe me....your clients will be very happy that you implemented them into your marketing plan! And the best part is, they are FREE!

Jeff

Jeff is the founder of Mortgage Wealth, a website/blog dedicated to helping the average homeowner create wealth through the use of mortgage planning, sound decision making, and at the lowest overall risk. He is also a mortgage planner with Accessbanc Mortgage in San Jose, CA.

Ohhh Baby...I hope your ready!

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 16 Dec 2008 16:21:23 -0600

As predicted, the Fed cut the federal funds rate today. That's the interest rate that banks charge each other. The mortgage market seems to be following suit as I've already received several "reprice for the better" statements from our various lenders.

What does this means for you as a Realtor, or financial planner, or CPA, or anyone else for that matter? It means be PROACTIVE and go through your database of past clients. Be the source of information for them and have them get in contact with their lenders immediately! If the value of the homes are still there and the clients still have an income, they are prime candidates for refinances to a lower rate which could have the potential to save them some money.

As you've probably read on several ActiveRain posts, being proactive rather than reactive will not only bring a smile to your referral partners faces, but it could result in reciprocated referrals and future income for you as well!

From the standpoint of a mortgage broker, I 'm glad that my partners have been calling and will be sending me referrals in the next couple of days. Why? Because I'm the guy they get many of their leads from. I turn prospects into borrowers which means someone needs to find them a house right? It just goes to show you that when you give, give, give, someone will pay it forward and you will receive, receive, receive!

The mini refinance boom has, once again, arrived, and I hope that you are ready. There still about 90% of homeowners in the US who are not in foreclosure!

The BIGGEST misconception in real estate lending.

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 16 Dec 2008 14:19:04 -0600

I always here this a couple of times per year, "We have $500,000 worth of equity in our home, but we only make $50,000 per year. We want to take out $400,000 worth of equity in a cash out refinance. Can you help us out?"(The numbers obviously vary, but for the sake of argument, they are somewhat exagerated in this example)

Nope! I sure can't. The biggest misconception in real estate lending is that you are not borrowing money using your house as collateral, you are borrowing money against your income. More specifically, you are borrowing money against your ability to repay the loan back to the bank. If you were allowed to borrow money against your equity alone, everybody would be taking cash out of their houses right now just to survive (at least those of you who still have equity).

So, when it comes down to it, make sure you are an educated borrower and you understand that you have to have an income to support the amount of money that you borrow.

Reason #7--Sell Without Selling

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 16 Dec 2008 12:59:20 -0600

One of the greatest things about owning your home is that you can actually sell without actually selling! That's right, you can actual cash out on your investment when suitable, assuming you meet the given conditions.

Over time, the value of real estate tends to appreciate in value (although this might be in question in some areas). Conversely, things like cars, RV's, boats, etc. tend to decrease in value. When something goes up in value, the "equity" in the investment goes up. This means that you have a return on your investment. But, it is important to remember that, the return can do back down just as fast as it went up.

So, if you want to capture your return, without actually selling your property, you can cash out your equity through a cash out refinance. Essentially, this means you are selling without actually selling. The best advice that I could ever give would be to cash out your investment while you can (although a cushion of 80% loan to value is my ceiling), but it is essential that you do the following things in order with the cash:

1) Pay off bad debt (i.e credit cards, car loans, etc.). These cost you money and you don't have an income tax advantages. They are also amortized over a shorter amount of time meaning they cost you more per month than a mortgage.

2) Have enough savings for a rainy day. That means that you should have a cushion of 6-12 months worth of living expenses in case you lose your job or ability to earn income.

3) Invest the remainder with a good financial planner. Make sure that you are diversified so that if one of your investments tanks, the other ones may thrive. Always create a hedge against the worst case scenario so you are always growing your portfolio. [Important note: the equity in your home is part of your asset "portfolio"...so diversify it by cashing out and investing it]

If you do these three things with the cash, I can assure you that you will be on the path to financial freedom. There will be a point at which your savings and investments equal the amount of money that you owe on your mortgage. It will usually be less than 30 yrs, but individual results may vary. I've seen people acheive this in a matter of 10 years and I've seen people take 28 years...it just depends.

A word of warning...be cautious with the cash. I've also seen people blow their money and end up right back where they started...in a crap load of debt. Not a good scenario, so listen to the advice of a professional.

To sum up, mortgages help you create wealth because they allow you to sell without actually selling.

Reason #6--Your income grows over time...your mortgage doesn't!

Jeff Trevarthen (Accessbanc Mortgage) — Wed, 10 Dec 2008 12:45:12 -0600

Another benefit of using your mortgage to create wealth is that it should (theoretically, I suppose) get easier over time to make the payments. Why? For the average American, ones gross yearly income typically increase over time. (Obviously, there are exceptions to the rule).

It can even get fun! I hear stories about how my father was barely able to afford his first house and it cost him a grand total of $50,000. He had mortgage payments of about $350 dollars per month and they way he tells me, "his parents thought this was absurd".

"How in the world could he afford this huge $4200 per year expense when his yearly income was only about $18,000," they thought? But that was way back in the early 1970's when the cost of homes was way lower. Twenty years later in the early 90's, he still hadn't refinanced, and he still hadn't made a payment bigger that $350 per month, but his income had more than doubled to approximately $45,000 per year! So the net result is that his mortgage actually became easier to pay over time.

The moral of the story is this: You might be struggling to make your mortgage payments at first, but don't sweat it. They will eventually get easier.

Leads Gone Wild!

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 09 Dec 2008 11:51:19 -0600

Well, it's time for me to share an open house technique that I've used over the past year that gets results. I feel like now is a great time considering a lot of us are putting together business plans for next year. New ideas and new ways to get business are always good to hear. Now, I'm a loan officer, and I help out my realtor and builder's with open houses as the "preferred" loan officer on that particular day.

But don't laugh when you hear this. Why? Because it works. ;)

At the end of last year, I was working on my 2008 business plan. One of the things that I wanted to improve upon was my conversion of people who come into open houses into real life clients. To be honest with you, before I came up with this idea, my conversion rate stunk! Maybe 1 out of 10 people would actually give me pertinent contact information for follow up. The rest would just give dummy info, and then, when I tried to contact them, I must have sounded like a prank caller because the phone numbers were bogus.

Then it hit me! I needed to find a way to break the ice so that people could begin to build trust with me almost instantly. So I came up with the "down payment assistance program".

It's quite simple, really. I put together a tri-fold poster board (you know the ones your kids use for school) and made some really nice graphics and such, but the important part is a little velcro strip . The sign reads, "Ask Jeff about our $__ million dollar down payment assistance program." I place it near the door as clients walk in.

Naturally, they see the sign and whammo, they ask "What's this $__ milllion dollar down payment assistance program?" I then pull out about 10 lottery tickets out of my sport coat. Naturally, they all laugh at me like I'm crazy, but the objective has been accomplished...I've broken the ice with this "potential" client. I then have them fill out my contact information sheet in which I capture names, phone numbers, addresses, and any other relevant info that you might use. I also have some address label like stickers that I place on the lottery ticket. They say "Don't forget to tip Jeff at Accessbanc Mortgage". I make a deal with the clients that if they win "the big one" they have to tip me by buying me a house! (Nobody has ever won in case you are wondering).

Now, you also have to be selective in the type of lottery ticket you buy. My ticket is the Mega Millions which has a drawing every Tuesday. This is key because I have an opportunity to call my clients on Monday morning and then again on Wednesday morning.

On Monday's I follow up with the client and say, "This is Jeff from Accessbanc Mortgage and I just wanted to remind you to check your lottery ticket at 8 pm tomorrow to see if you've won the big one. And, if you do, don't forget to tip your preferred loan officer?" Usually the client knows exactly who I am.

Then again on Wednesday, I call the client and say, "Hey there, this is Jeff again from Accessbanc and I was just checking to see if you've won the big one." They will be happy to talk to you again for a few minutes and you can keep the conversation going to keep gathering information.

So here's what you've accomplished for a $1 lottery ticket:

1) You've broken the ice immediately when they walk into your open house.

2) You've created an easy entrance on at least two more phone conversations with your buyer.

3) You've allowed yourself an entrance for any future follow ups...just send another lottery ticket (I use scratchers for this type of follow up).

4) And lastly, you've also begun to build trust with this client as your potential customer.

My business boomed in 2008 and I'm convinced that this technique was "the answer". I've had more leads than I know what to do with. Lastly,I wanted to reiterate that I'm a loan officer and so I'm looking for purchase loans with this technique (I would recommend a database management tool like ACT for lead follow up...your day will be planned before you even get there with this type of software). When I do get a purchase loan, I bring it right back to the realtor partner that got me the lead. It would be really simple for a realtor to implement this technique. I have my realtor partners doing it, and like I said, we're moving.

That's it! Good luck! I would love to hear about your best technique as well.

Reason #5--Mortgages are Tax Favorable

Jeff Trevarthen (Accessbanc Mortgage) — Mon, 08 Dec 2008 12:57:55 -0600

Not only are mortgages tax deductible (check out my previous post, Reason #4--Mortgages interest is tax deductible), they are also tax favorable. What does this mean for you?

Consider two scenarios. You have a mortgage that costs 6% in interest and you have also earned 6% on your invests over the course of one year. The mortgage interest is deductible at all levels of income tax brackets. The money you have earned in interest on your investments is taxed as low as 15% (depends on several factors).

So, your mortgage will actually only cost you 4.5% after taxes, while your investments will net you a 5.1% return after taxes are deducted. In other words, the government has structured tax law so that it is beneficial for you to maintain your mortgage and therefore it is tax favorable to carry a mortgage.

Just imagine the possibilities if you were able to decrease your interest rate on your mortgage, thus reducing your monthly expenses, and increase your rate of return on investments! I know several people in the same situation and even in this market, they are doing just fine!

Check out my outside blog, Mortgage Wealth.

Question of the Day!!!

Jeff Trevarthen (Accessbanc Mortgage) — Fri, 05 Dec 2008 23:12:27 -0600

I had a friend that I hadn't seen in a while run into me at the supermarket in our neighborhood. We proceeded to talk a little bit about what each other's been doing since the last time we talked.

And then it happened....

"Are the banks lending money again?" he asked.

As a mortgage planner, I was thinking, "Holy crap. Is he serious?" As it turns out, he really was.

So why is this such an unbelievable question from someone in my line of work? Becasue perception is reality people. If they media says so, it must be true, right?

Wrong!

I live and work in the Silicon Valley in California and to be honest, many of the areas around here haven't been hit too hard by the "recession". Banks never stopped lending money to the right people. They just tightened their belts and stopped lending money to the wrong people. This area is the global epicenter to the technology world and innovation is continuing to happen.

For most major banks, lending slowed down, but it NEVER stopped. People still need to borrow. We have several different types of lenders in our portfolio who are what we call "portfolio lenders." These folks have one specific niche that they are really good at. They will only loan you money if you meet their exact requirements...no exceptions. In talking to some of the account executives, their default rate is near ZERO! Why? Because they dio their due diligence before they say yes.

So, the moral of the story...is to not believe everything you hear about in the media. ;)

Here's a thought....spread the wealth!

Jeff Trevarthen (Accessbanc Mortgage) — Wed, 03 Dec 2008 11:52:03 -0600

I got to thinking the other day after I spoke with a buddy of mine who gave me some figures about that $700 billion dollar bailout passed by Congress last month. He said, that instead of giving the money to the banks to essentially "do what they want", why not divide that up amongst every taxpayer in this country. He proceeded to tell me that each taxpayer could get $275,000 per person with that amount of money.

He's not quite correct in his assumptions. To find out the amount of money per person, take $700,000,000,000 and divide that by the number of US taxpayers which is about 140,000,000 people. In doing so, you get approximately $5000 per individual. I don't know about you, but if you gave me $5000(and my wife $5,000) we'd be wallking away with $10,000. I guarentee that you could get the economy churning again, just by giving people a piece of the pie instead of letting the banks bail themselves out of an overindulgent mess.

Wouldn't that be nice!

Check out my website, Mortgage Wealth, for more on mortgage planning.

Working at work actually increases performance!

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 02 Dec 2008 22:05:11 -0600

It's funny, isn't it? I saw this article a while back on a sarcastic website called The Onion. Usually the stories are really fun to read and the give me a nice pick up when they come out every Wednesday.

This one struck me a little different though. It actually makes a whole lot of sense, doesn't it? But it got me thinking...how many people out there actually waste time away, especially in the real estate business, on a daily basis? How many people spend time on tasks that are really meaningless instead of doing what brings in business?

I can tell you that I'm a victim of it myself. There are times when I just wish I wasn't there to deal with the everyday tasks that need to be done. The reality is that it is tough to be "on" all the time. Coming to this realization has actually been a turning point in my career. I seem to work less hours because if I find myself wandering, I trigger something in my brain that says, "start doing what makes business happen".

Even though someone important finally came out and said that we are in a recession, we all knew it was coming for months (at least I hope you did). Each and everyone of us is responsible for making business happen. For me, it's continuously trying to work on building new relationships and making the ones that I have more meaningful. Business, for the most part, doesn't just walk in the door right now. You have to be proactive and go get it done for your business to make money.

There's a saying that I've heard that goes like this..."Be the change that you want to see in the world". In a commission only business like this one, this resonates deeply. If you aren't producing, take a look at your daily routine, and be the change that you want to see in your business. I guarantee that when you start focusing on the tasks that get you business, you will see your income increase over time.

For more info on mortgage planning, check out my Mortgage Wealth website.

Reason #4---Mortgage Interest is Tax Deductible

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 02 Dec 2008 16:51:46 -0600

Yep, mortgage interest is tax deductible on your personal income taxes. Compare that with credit cards, auto loans, RV loans, and even personal loans and the advantage still goes to the mortgage loan. Why would you pay 18% interest on credit cards that are not tax deductible, when you can pay as little as 4-5% on mortgage loans which are tax deductible?

The cool thing about mortgages is that the government wants you to own property, and therefore, they are willing to give you a tax deduction to do so.

Why do they want you to own property? Because the economy keeps churning when homes continuously change hands. This keeps the mortgage market going and it keeps things from collapsing. When you get into the current recession type scenario, sellers don't want to sell at such low prices because they feel the economy will turn around for the better...they are optimistic. Buyers don't want to buy because they think the economy will go lower and result in even better deals...they to are optimistic. This creates stagnation and with stagnation comes a lack of volatility (highs and lows). The volatility creates the movement that makes our money market system move.

So, when it comes to mortgages, go ahead and get one if you want to save some money on your personal income taxes. You could deduct as much as $0.35 on every $1.00 you spend on your mortgage interest payments. That means you're actually paying 3.9% on a 6% mortgage loan.

For more info, check out my outside blog at http://www.mortgage-wealth.com.

Reason #3--Mortgages are relatively cheap money

Jeff Trevarthen (Accessbanc Mortgage) — Mon, 01 Dec 2008 10:19:04 -0600

Let's compare two different types of loans: mortgages and/or credit cards. Interest rates on mortgages are currently in the 4-10% range where as interest rates on credit cards are in the 8-30% range with the average somewhere around 15%. Why is this so?

When you borrow money for a mortgage, you use your home as collateral. If you fail to repay your mortgage debt, the bank can (and will) recoup their money by repossing their property. This is called foreclosure. Contrast that scenario with a credit card. If you buy a nice Armani sweater with your credit card and you fail to pay back the debt, the card company can't repossess your sweater. It would be way to costly to do so.

As a result, the interest rate ends up being higher on credit cards as opposed to mortgages. Card companies charge higher interest rates to compensate for card holders who don't pay their debt. Thus the whole group sufferrs.

In today's day and age, debt is almost inevitable. From cars to college loans, and from credit cards to mortgages, most people need to borrow money in some way, shape, or form. Mortgages offer the cheapest solution (dollar for dollar) when you must go in debt. So your mortgage debt is the cheapest way to leverage your debt to create real long term wealth.

For more info, check out my blog at www.mortgage-wealth.com.

Reason #2--Appreciation...It happens

Jeff Trevarthen (Accessbanc Mortgage) — Wed, 26 Nov 2008 14:20:29 -0600

Appreciation is the increase in value of something over the course of time. Sound familiar? It should, because your house is one of the few things that actually increases in value over time (in the long term). Compare this to cars, boats, or RV's...the value on these is most likely a depreciating value meaning it goes down over time. Many people try to build equity by paying down the mortgage as fast as possible. When compared to making minimum payments without sending in any extra money, saving, and then investing the difference, the rate of return on your money will far out pace the equity you build in your home by putting extra money into the loan.

Over the course of my loan career, I don't think I've ever reccommended that someone get a short term mortgage (less than 30 years). Sure, you'll save a lot of interest over the course of the loan if you do that, but you'll also be buried up to your ears just trying to make the monthly payment. And payment is what matters...

One of the most common misconceptions that I hear is that if you make a larger lump sum payment (without paying off the entire loan amount) your monthly payment will go down. Not true! You will still have the same exact minimum monthly payment due again the next month. So go ahead, pay the minimum, and invest the rest...appreciation will happen regardless.

Reason #1--Value Increases (or Decreases) Regardless of Your Mortgage

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 25 Nov 2008 11:06:18 -0600

One of the coolest things about mortgages is that they have absolutely no correlation to the value of your home. Think about this for a second. When you go in and buy a home, you are assuming that the home will go up in value over time (if you don't assume that, you are making a bad choice right from the beginning). It's funny that even in this real estate market where foreclosures are perceived as the norm, people still are optomistic about the value of their homes. The reality is that the value of a home can rise or fall. Either way, your mortgage has absolutely no effect on that value of your home.

There's a saying out there that goes like this, "keeping money in your home is like putting money under your mattress". Let's say you put $10,000 dollars under your mattress today. Five, ten, or twenty years from now, that $10,000 still has exactly the same value. It earned no interest and thus it wasn't working for you. My point is that the value of your home will rise or fall, regardless of whether or not you have a mortgage or not. So, if you have equity, take it out and put it to work for you in an investment vehicle...you're $10,000 today could become $100,000 twenty years from now if you do.

Top 10 Reasons Why You Should Use Your Mortgage To Create Wealth

Jeff Trevarthen (Accessbanc Mortgage) — Tue, 25 Nov 2008 11:03:23 -0600

Over the next couple of days/weeks, I will be giving you my "top 10 reasons why you should use your mortgage to create wealth" series. The reasons are simple and easy to understand. With some critical thinking, my hope is to show you how mortgage planning should be a vital part of any financial plan to help create liquidity, increase rate of return, minimize taxes paid, and create long term wealth.

Stay tuned!

History of Mortgages

Jeff Trevarthen (Accessbanc Mortgage) — Mon, 24 Nov 2008 21:25:53 -0600

I did some digging, and here's what I've found:

You probably wouldn't normally think about the origin of mortgages, because it really doesn't matter to most of you. But, in reality, it plays such a huge role in the use of borrowed money today, that little history lesson is in order.

The first time the word mortgage was used was as early as 1190. English common law included a law that would protect a creditor by giving him an interest in his debtor's property. According to this common law, the mortgage was a "conditional sale". Even though the creditor held title to the property, the debtor could, in the event the debt wasn't paid, sell the property to recover his money. (Sound familiar!)

The history of the actual word "mortgage" begins with the root word "mort" which was the Latin word for death and the root word "gage" which means a pledge to forfeit something of value if a debt is not repaid. So when you combine the two together, you get, "death if a debt is not repaid". Brutal, I know!

Here's something else that is noteworthy. Originally, ownership rights extended from the center of the earth to the sky. Of course, now they're generally limited to surface rights only.

It's really important to look at the history of the mortgage before and after the stock market crash on October 29, 1929 because that's where you get your core set of beliefs. Mortgages were used both before and after the crash, but something significant happened in the world of finance before that terrible era.

Before the Great Depression, homeowners were still unable, for the most part (except for a very few), to actually buy a home outright with cash on hand. So, the mortgage was used as a security instrument for the bank. By loaning a home buyer money, they were able to "foreclose" on you, if you failed to repay the debt.

In 1929, when the stock market crashed, that's exactly what the banks had to do. They needed their money back so the started to ask their borrowers for the money due in one lump sum payment. Back in those days, stocks were similar in nature in that you could buy them with a huge amount of margin (try 90%). A borrower could bring some money to the table and the bank would essentially lend 900% more on your money to be able to purchase stock. When the market crashed, the stock brokers needed their money back. The investors had absolutely no choice but to go to their banks and withdraw whatever cash they had left. Do you see the death spiral? Banks began to run out of money, so they inturn started to call their mortgage loans due and payable in full. When homeowners who had taken out 30 year mortgages were unable to pay their loans in full, the banks were forced to foreclose. The result was that millions of people lost their homes due to foreclosure.

This is an important lesson because that is where you (or most likely your parents and grandparents) get your underlying beliefs about mortgages. You think that paying them off quickly and making extra payments is the way because you don't want your bank to call your loan due suddenly. Right? Well guess what? The US legislature actually changed the rules decades ago, so that banks are not allowed to call a loan due before it's maturity date. What this means for you is that if you send your payment in this month, there is absolutely, positively nothing that the bank can do except wait for the next months payment. As a result, carrying a mortgage doesn't actually carry the same risk that it did in the Great Depression era.

So, many of your underlying beliefs come from your parents (and grandparents) and they taught you that mortgages are bad news. You shouldn't have one because it is considered a burden or that the bank can call it due at any time. As you'll see on my successive blog posts, the rules of mortgages have changed since then. Carrying a mortgage should no longer be considered a burden, but rather a tool that can be molded to help you create real long term wealth...without all the risk!

For more info, check out my outside blog at http://www.mortgage-wealth.com

You think you know...

Jeff Trevarthen (Accessbanc Mortgage) — Mon, 24 Nov 2008 21:21:50 -0600

...but you have no idea. Remember that line when it was first uttered in MTV's Real World series? Maybe or maybe not, but the concept should ring a bell.

One of the things that is always hard to understand is the uneducated borrower who calls you up and asks you for your best rate. The reality is that each and every broker out there has the same exact lender list and each and every banker out there has the same products as the next guy at their bank. How then do you go about finding someone to work with one of the biggest financial transactions you'll every make (getting a mortgage) by simply asking for the best rate?

The answer is that you don't! You are trying to be educated in the eyes of the lender, but guess what? We hear it all the time. There are so many different products out there and so much variability in the market on a weekly, daily, and sometimes hourly basis, that quoting you rates really has no bearing on obtaining the best mortgage for you.

In my mind the educated borrower is not someone that assumes they know it all. The one that asks for a couple of different options, with the lowest payments, and with the least amount of risk, is by far and away a more educated borrower than the one who just asks for rates. Furthermore, the educated borrower actually takes the time to find a mortgage planner, and then takes the time to sit down in person and meet with them to go over their goals and aspirations first. After all, you wouldn't go to a doctor and ask for a prescription without the doctor first doing a thorough evaluation of what's wrong with you...would you? So with this ginormous financial transaction, why would you simply just assume you know what you are talking about before letting the mortgage planner gives his educated assessment of your situation? Again, my guess is that you probably wouldn't.

There's this great quote out there but I'm not really sure who the first person to say it was. It goes like this, "Knowledge is Power." Simple but yet powerful in meaning. Be the borrower who goes out there and gets in a conversation with the guy that's out there in the trenches day in and day out (the mortgage planner). You won't regret working with one of these professionals.

So, when you think you know, you really have no idea. Make it happen!

For more info, check out my outside blog at http://www.mortgage-wealth.com

Conforming Loan Limit...Ready, Set, Go!

Jeff Trevarthen (Accessbanc Mortgage) — Wed, 30 Jan 2008 22:12:29 -0600

Holy Cow! Are you kidding me with this conforming loan limit increase that's in the works? This is going to be ridiculous folks. There are and should be people refinancing all over the Bay Area. If you or anyone you know would like to refinance, please let me know and I'll have the honor of saving them a bunch of money on their home loan (kind of like the Geico commercial)! Realtors, bring your clients in now to get pre-approved and ready to take advantage of something that doesn't happen very often....low rates and low home prices.