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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 48 August 2024 F E A T U R E S T O R Y Every period of life calls for different expenses—whether it be paying for a wedding, hospital bills from a newborn, college, or retirement—and each can come with a hefty price tag, which can be even more difficult for clients to navigate. But what can help them is at least knowing their options—which can all start with leveraging the untapped potential of home equity options. Let us say you bought a home in 2021 for $280,000. You put 20% down, leaving you with a mortgage of $224,000. With a cash out refinance, you would be able to replace your old mortgage with a new one in an amount greater than $224,000—this is usually possible because property value appreciates over time, and you are also paying down the unpaid principal balance with each pay- ment. The $224,000 of the new mortgage would pay off the old one—and the difference would be yours in cash. This is a good option for customers wanting to consolidate high-interest debt or finance home improvements. But LOs should ensure that they educate their customers on potential downsides too: obviously, it entails taking on a greater debt load and putting their home up as collateral, which may not be the best choice for all customers. Building Client Trust T his one is just an unqualified win. As home equity grows, homeowners are often eligible to remove private mortgage insurance (PMI) from their mortgage payments—but it is not a widely known point and customers are not often aware of when they become eligible and how to apply for removal. LOs looking to build some credibility and trust with their clients can proactive- ly let their clients know when they are eligible to remove their PMI. This often saves them hundreds of dollars and leads to a better relationship between the LO and their customer. The "Home Equity Credit Card" H ome equity products comprise home equity lines of credit (HELOCs) and home equity loans. The former amounts to a credit card tied to your customer's home equity. Not liter- ally, of course—but it functions in much the same way—a replenishable loan that your customer can borrow from and pay back as needed, and usually with a much better rate than they would get from a credit card company. Home equity loans are more straight- forward. It is much the same principle, but instead of a revolving amount of credit they simply get the loaned money as a lump sum. These are good options for cash-poor customers that still want to make essen- tial renovations—particularly those who bought during times of low-interest and want to protect their investment through home improvements that they cannot currently afford. Preventive Financial Care of the Annual Home Equity Check-Up T his last one is more of a recommen- dation than a product you can offer. Just as preventive healthcare is the best healthcare, so is preventive financial care the best. LOs should be inviting their customers into their office at regular in- tervals to do a "home equity checkup"— letting clients know how much equity they have, what they can do with it, and all the previous advantages and disad- vantages we've gone over in this article. Becoming a Financial Guide E very period of life calls for different expenses—whether it be paying for a wedding, hospital bills from a newborn, college, or retirement—and each can come with a hefty price tag, which can be even more difficult for clients to navigate. But what can help them is at least know- ing their options—which can all start with leveraging the untapped potential of home equity options. And that is exactly where LOs can guide the conversation and educate clients—acting not just as a LO, but a long-term advisor for clients and the financial guide to be right by their side at every turn and every milestone. All LOs can do, and all they should do, is be pre- pared to put the options in front of their customers—as clearly and transparently as possible—and from there, let them decide what best fits their financial goals and life's objectives.