Savvy Borrowers Are Straying from 30-Year Fixed Rate Mortgages

Mortgage and Lending with Home Loan Center of Washington, Division of Netmore America, Inc.

Today's affluent homeowners are moving further away from traditional 30- and 15-year fixed rate mortgages and instead are choosing less traditional products, like interest-only mortgages to enhance their financial situations.  This trend has started catching on among educated homeowners, who are following suit in an effort to better position their financial assets. "The percentage of financially savvy clients who choose 30-year fixed rate mortgages is very small," states Doug Roquet, a Certified Mortgage Planner with Home Loan Center of Washington & Oregon, division of Netmore America, Inc, a mortgage banking company based in Walla Walla, WA.  "Most of my affluent clients prefer to leverage their debts with loan products that provide higher tax savings and more cash flow than a traditional 30-year fixed rate loan.  But what we're finding is that this trend isn't just limited to high net-worth individuals.  I'm seeing more and more everyday homeowners interested in the long-term financial benefits of leveraging alternatives to the 30-year fixed rate loan, like interest-only loans and adjustable rate mortgages."  "A big part of being a responsible mortgage professional is understanding the risks and benefits of each product, and empowering the client with the education to make a sound decision," .  "Obviously, putting a borrower into a 30-year fixed rate, when they know that they're moving in less than five years, especially when that 30-year product is more costly, is not acting in the client's best interest."  "If a borrower is capable of investing in an interest-bearing, compounding interest side account at a favorable rate, the savings realized by a less traditional loan like an adjustable rate or interest-only mortgage can be an excellent option," states Roquet.  There is no universal optimal choice of mortgage product and potential borrowers are advised to contact a knowledgeable and reputable mortgage professional who can evaluate their current financial situation, consider their goals and capabilities, and take these factors into account when advising about potential mortgage options.  While many borrowers are attracted to the benefits of adjustable rate, hybrid and interest-only mortgages, which include easier qualification guidelines, lower monthly payments and higher flexibility, others are drawn to the consistent predictability of a traditional 30-year fixed rate. "I take numerous factors into account when evaluating a borrower's fit for a specific type of loan," says Roquet.  "There are far more factors than monthly payment and interest rates.  I always consider the borrower's spending habits, capacity to save, risk tolerance and future goals.  A good loan choice is the one that works best for the specific borrower.  Suitability is absolutely critical for the deal to make sense." 

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