Archive for the ‘In the Mind of Mike’ Category

Security VS Risk

We are all wired with the drive of two opposing needs in our lives: The need for certainty and the desire for risk. Although each of us may feel the drive of one to be stronger than the other, in a marriage there is often one partner who is more of a risk-taker and one whose drive for security is their dominant need. How do we develop a balance where both partners’ needs in the relationship are recognized and fulfilled?

I often meet with couples who live each day in constant turmoil over their inability to come to terms with their opposing needs. For example, while one pursues their dream of being self employed, the other deeply longs for the stability of a consistent paycheck and cash in the bank. This is frequently the primary conflict in a relationship with each person fighting for their core beliefs. Since neither can control the way they are innately wired, this battle often leads to relational destruction.

The human need for certainty is one that can never be ignored. Those who have this as their primary need will have a difficult time experiencing internal peace until this need is met in their finances. Although sometimes this can be challenging, it is often as easy as making a few key decisions that will lead to the fulfillment of such desire.

When advising couples who face this relational battle, I suggest the following to help find common ground:

1. Establish a budget and live within it-This will help provide security that cash will be available to meet the needs of the family, as well as the comfort of knowing that the spending will be controlled.

2. MAKE SURE you have a cash reserve-This is especially true if there is a self employed income earner in the household with unpredictable levels from one month to another. When there is a cash reserve, money is available to balance the lean months and it can be replenished in the higher income earning months.

3. Eliminate all consumer debts and free up the burden of monthly expenses-Eliminating consumer debt frees up cash flow. The extra cash flow can increase savings and thereby increase financial security.

4. Always accommodate the needs of the more conservative partner-The needs of a risk-taker as well as a certainty driven person can only be met simultaneously if the financial security is in place for the more conservative partner.

As a part of the services we provide, we advise clients on steps to help fulfill the need for financial security. There are often opportunities to reallocate how the assets and liabilities are held to expedite the process. Otherwise, the solution lies in establishing a plan and a budget that will accomplish the goal over time. For some, the results are fast and easy. For others, it will be a process that will require patience and determination. Call or e-mail me to discuss your individual situation in greater detail, and to see the tools we have available to assist you.

For the past twelve months, I have been warning my clients of potential upward movements in mortgage rates. However, despite industry predictions, several days in June of 2010 saw mortgage rates that matched the historic lows seen in 2009. For those thinking of buying or selling a home, and for the many that have not yet refinanced their home loans, this presents an unprecedented opportunity.

Mortgage rates have benefitted lately from the situation in Europe, as global investors have sought the safe haven of our US Bonds. However, as the Euro’s freefall is finally showing some signs of stabilization, traders and investors may begin to sell their US investments and move their money back into the European markets. This could reverse the trend and cause home loan rates to move higher. With that in mind, it is time to consider whether you should be making any changes to your mortgage plan.

Confused about rates? Call 801-501-7950

Should I Consider a Refinance?
Given the current state of the market, if you have a 30 year fixed rate that is higher than 5%, or a 15 year rate greater than 4.5%, there is a high probability that you can improve the cost of your home loan. Also, if you have an adjustable interest rate of any kind, it is worth considering securing a fixed rate to eliminate your interest rate exposure. With mortgage rates at historic lows, there is only room for significant changes in one direction: up.

What are the Fees to Refinance?
In most cases, the type of mortgage that I suggest to my clients considering a refinance is one that does not have fees that are charged to the homeowner. Rather than paying the fees associated with a mortgage, or adding the cost of the home loan into your principal balance, a no-fee loan has a slightly higher interest rate. This is ideal for homeowners who are not certain they will be in their home long term, or for borrowers who are likely to refinance their home again in the next 10-12 years. If the plan is to keep the home and the mortgage for at least 12 years, then I may suggest paying fees to achieve the lower rate. As part of our mortgage review process, we evaluate the options and determine which is most appropriate for our clients. A mortgage is a very personal decision. If your mortgage advisor does not fully understand your long term goals, he or she is not able to ensure the best loan strategy that will help you accomplish your plans.

What is the First Step?
My team offers a free mortgage analysis. The process begins with a fifteen minute phone call where we gather the information needed to prepare our recommendations. In many cases, we find people who are already in the best mortgage strategy available. If that is the case, we will put you on our rate watch and will continually monitor your interest rate against the market and proactively contact you if an opportunity arises to improve your situation. Regardless, every homeowner who has a mortgage should take the time to have a free evaluation to ensure their loan is properly structured. Call 801.501.7950 or email me to arrange a time that we can discuss your review.

30 year fixed rate chart

I am often asked when a homeowner should put the focus of paying off their mortgage. Although the answer to this question is specific to each homeowner, my general recommendation lies within a 4-step plan that I use to advise each of my clients.

Each step is numbered based upon the priority. In other words, step one should be on track before moving on to step two, and so on. The problem is that many homeowners jump ahead before the prior step are mastered. This typically leads to living paycheck to paycheck, getting stuck in the consumer debt rut, or reaching retirement to find that you are equity rich and cash poor. By following the steps below, you can help ensure you reach retirement having achieved the long-term goals you desire.

Read the rest of this entry »

I look forward to your feedback. Feel free to email me at mike@citycreekmortgage.com

Who says recessions are all bad? From my chair, I have noticed a silver lining through the pain and heartache people are experiencing. In the midst of the financial chaos, many are finding a new beginning. Could it be that people are realizing there are financial habits in their lives that have been destructive and need to change? Somehow, there seems to be peace and healing going on in the lives of many families as they face the realities of years of over indulgence and financial leveraging.

Read the rest of this entry »