Interpreting one of the main challenges of today's mortgage market isn't as difficult as it might seem. With interest rates on the rise, a lot of consumers are extremely troubled by the negative effects of increasing interest rates on their Adjustable Rate Mortgages. Each month, they are forced to watch hopelessly as their monthly payments increase and interest rates climb closer and closer to the lifetime caps of their loans. For these homeowners who are struggling, refinancing into a 30-year fixed rate mortgage may not help them right now. In fact, doing so could increase their monthly payment and further strain their finances.
So, what's the solution for homeowners who are stuck with an ARM they don't want or can no longer afford? And, what can real estate agents, builders, and other professionals do to move more inventory in today's changing market?
Solution for Homeowners:
One solution to this dilemma is a special tiered-rate mortgage program which was extremely successful back in the much more challenging mortgage market of 1994. This special program has no margin and no index associated with it at all. Let's examine a loan scenario where the prevailing interest rate is 6.75% on a 30-year fixed. For the first year of the loan, the borrower would pay a rate of 4.75%, which is 2 full percentage points below the current prevailing rate. This enables the borrower to save money and address monthly cash flow needs. The second year of the mortgage, the borrower would pay a rate of 5.75%, which is 1 full percentage point below the prevailing rate, enabling even greater savings. From years 3 to 30, the loan will cap out at a rate of 6.75%, which is much lower than their current cap rate. This helps to create stability and frees the borrower from having to wait for an unpredictable turn in market conditions. In addition, it's possible to roll exorbitant credit card balances into this special loan, allowing the consumer to now calmly wait out the market for the next refi boom.
Solution for Home Sellers:
Special tiered-rate programs can also offer a unique advantage when selling a home in today's tough real estate market. By attaching an exclusive financing program to a specific property for a limited time, the seller provides added incentive along with a sense of urgency, making marketing a breeze. Obviously, the financial element of any purchase transaction has a substantial impact on a borrower's ability to qualify for and buy a home. However, with a tiered-rate mortgage program attached to a property, consumers will discover a financial benefit that's not offered anywhere else. Believe me, your competition won't even know what hit them.
Contact me to learn more about strategic financing opportunities that will help you to sell homes faster!