Realtors Ignore the Biggest Part of Home Ownership

Realtors sell the largest investment a family ever makes - then walk away. This presents an opportunity for Realtors who take the time to learn how home ownership impacts long-term financial security.

What's the opportunity? To educate their client about reducing their mortgage cost through acceleration. The benefit is that the homeowner will be have considerably more money for retirement. The Realtor demonstrates a concern for the client's financial well-being that transcends the sale. This need not be altruistic on the part of the Realtor, as acceleration systems also pay referral fees for recommendations.

A Realtor can then tie the purchase of a home to having a more secure financial future. This knowledge also gives the agent greater esteem in the eye of prospective clients.

The American dream of home ownership is only one step in a family's long-term financial plan. Overall, people also do some kind of retirement planning at the same time they are paying their mortgage, like contributing to an IRA. This is a mistake.

Most homeowners are limited in terms of both time and money when it comes to planning their financial futures. The commonly accepted "wisdom" is to start saving for retirement as soon as possible. The problem is that interest on a mortgage is front-loaded, and it is impossible for IRA income to overcome the cost of mortgage interest.

Example: put away $3,000 in an IRA earning 6% and it earns $180 in year 1. But if the homeowner has a $300K, 6% mortgage, their annual payment is $21,000 - most of it interest until year 22.

Instead of funding the IRA, the homeowner would be FAR better off by using that money (and other discretionary funds) to accelerate the mortgage. In the first year alone, the $3K would cut $18K in interest payments. Forego the $180 income and you get a $18,000 improvement to net worth. Makes a HUGE improvement to a family's long-term finances.

A financial plan using mortgage acceleration will pay off a mortgage in less than 15 years (often much less) for most homeowners. Discretionary income skyrockets - as does the ability to build wealth.

Mortgage acceleration is something every Realtor should know about - and be able to explain and offer to clients.