First Step to Borrowing SMART

141830_stavki3If you’ve ever met with a trusted Financial Advisor, one of their favorite questions is, “What is your risk tolerance?”  It just so happens that this is also where we begin our strategic planning and advice for homeowners when using our custom 7-step process to making SMART financing decisions when getting a mortgage.  Blog image

What makes this thinking and planning process so unique is that we transform each critical step in obtaining the right mortgage into a powerful financial planning question for our clients that help them really understand their choices and decisions as they relate to their overall financial goals.

The first step is PRODUCT.  Put simply, people must first determine what type of loan they need to meet their goals.  What this step really involves is answering the question, “How do I manage risk?”

A fixed-rate mortgage comes with less risk than an adjustable rate mortgage.   That seems obvious to most.  But what about a loan product that is fixed for the first five years, and then converts to an adjustable rate mortgage (ARM) in year six? What about a 15-year fixed rate product compared to a 30-year fixed rate product?

It comes as a surprise to many when I explain that a 30-year fixed rate mortgage comes with a price.  While you’ve ensured the lowest risk possible, having a bank guarantee you an interest rate and payment that never changes for 30 years, means you are paying a premium on the rate up front.

When it comes to risk, though, some people just can’t sleep at night knowing their rate might change four or even six years from now.  This is fine.  It’s great to know your risk tolerance!

But what if your last child is about to graduate from high school in two more years, and you and your spouse have every intention to sell your house and downsize to a nice condo on the river?  Would it make sense to take on a bit more potential “risk” with a 5-year fixed rate mortgage that is much cheaper than a 30-year fixed rate mortgage?

These are important talking points during our custom BorrowSMART Consultation™.  Our clients quickly realize that we act much more like financial planners that just happen to specialize in mortgages and liability management!

It’s all about helping our clients enjoy greater clarity, confidence, and peace of mind when it comes to their money, mortgages, and financial future.

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About Trevor Hammond

As a veteran of the mortgage industry, Trevor Hammond is the co-author of "Borrow Smart, Retire Rich," a Certified Mortgage Adviser and a founding Faculty Member and Contributor to the National Institute of Financial Education (www.niofe.org). And he has provided thousands of homeowners with the clarity and confidence to make smarter decisions when it comes to their mortgages and money. In 2013 he launched an entirely new kind of mortgage company: Aspire Mortgage Group, which is committed to educating and empowering homeowners to increase savings, eliminate bad debt, and safely increase net worth. The specialized group of mortgage professionals at Aspire Mortgage Group have redefined what homeowners should expect from a mortgage company. To learn more about Trevor Hammond and our team of mortgage advisors please visit our website at www.aspiremortgagegroup.com or email Trevor directly: trevor.hammond@sierrapacificmortgage.com. Aspire Mortgage is a Sierra Pacific Mortgage Partner.
This entry was posted in Blind Spot 1: Developing a Plan, Uncategorized. Bookmark the permalink.

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