Take the self-discipline out of mortgage pay-downsConnie Endersreintroduce biweekly payment programs, traditional, secure loan products, reduce mortgage debt
It happened. The market is no longer an easy sell for mortgage
brokers. The heat is on, and lending practices are returning to
strict, traditional standards, shrinking the market of eligible
borrowers. My guess is that we're at that moment that separates the
men from the boys, or, in this case, the mortgage brokers from the
used car salesmen.
What will you do to attract new clients or reconnect with the
old? Maybe you should step back and take a good, hard look at all
you have to offer potential clients. Put yourself in their shoes
and ask yourself if you would choose your services and products
over the next guy's. Do you offer something that your competitor
down the street doesn't? If not, it's time to kick in that
creativity and think about ways you can set yourself apart from the
rest.
Perhaps it's time for a tried and true supplemental mortgage
product that's been available in the United States for 25-plus
years. As we are all aware, sales have slowed down a bit, due in
part to defaults in the sub-prime market and general decline in
real estate sales throughout the country. It's the perfect time to
reintroduce biweekly payment programs, as people are looking for
more traditional, secure loan products to reduce mortgage debt.
Chances are good that if you've been in the business since the
1980s, you've got a pretty good understanding of biweekly payment
programs. For those of you who aren't as familiar with the concept,
I'll give you a brief overview. The biweekly payment option hit the
United States from Canada in 1982. (That was perfect timing, as the
prime rate was averaging 14 percent.) It went over big. After all,
who wouldn't be attracted to a plan designed to pay off his
mortgage debt faster and reduce the amount of interest paid on his
home? The way this is accomplished is through combining the
principle of compounding interest with advanced technology. Half of
the regular monthly mortgage payment is debited on a biweekly basis
from the client's bank account. However, the biweekly company pays
the lender on a monthly basis, so due to the biweekly collection
schedule, an extra half payment is collected about every six months
and applied toward the outstanding balance (the equivalent of
making one extra payment per year). This payment method
successfully pays off the loan years in advance, saving thousands
of dollars in interest charges for the client.
See, it's very easy to understand how it works, but very
difficult for the average person to do on his own. Let's face it:
Not too many people have enough self-discipline to stick to an
accelerated mortgage prepayment schedule on their own. Most of us
have good intentions but not-so-great follow-through. It's like
starting an exercise program without using a gym or personal
trainer. You start out strong, but before you know it, you realize
it's been months since that last sit up. So we either buy "fat
clothes" and grab the remote or make the commitment to join a gym
and hire that personal trainer. The beauty of an automated biweekly
program lies in its automatic, painless savings. No amount of
self-discipline (or sit ups) is required on the homeowner's
part.
Enrolling in an independent biweekly plan is your clients'
financial gym and trainer rolled up in one. Think about how a
biweekly loan product could help close your loan sale. Wouldn't you
like to sit down with your client and show him how to save more
than $70,000 on a $250,000, 30-year mortgage? (Also, he would be
paying off the loan more than six years ahead of schedule!) No
longer do you have a potential client; you've got a sale and a very
satisfied customer--and I'm willing to bet plenty of referrals, as
well!
Something else to think about is that it doesn't matter how old
the mortgage is. Using a biweekly payment program will always save
time and money. Are you with me on this one? Talk about a great way
to reconnect with former clients! Oh, and did I mention these
programs work with virtually any loan product you offer?
So how about it? What's in your tool belt? Do you offer your
clients a biweekly program? If you don't, you might just want to
look into it. Put those smiles back on your clients' faces, let
them know you're on their side, and earn some additional revenue
while you're at it. You have nothing to lose by offering a biweekly
program and everything to gain. Don't you just love those win-win
situations?
Connie Enders is a marketing coordinator for Lancaster,
Pa.-based Tower Administrative
Services Inc. She may be reached at (800) 437-1670, ext. 242 or
e-mail
[email protected].
