Business & Finance Renting & Real Estate

Loan Officers - Something To Really Think About Before Selling The Option Arm

Here's a question for you: Why would anyone pay the minimum payment with the Pay Option Arm, doesn't it defeat the purpose of paying of the mortgage? Here are my thoughts about this question.
Wait, before I do, let me set it up.
Think about it, how many credit reports do you see with debt on them? Probably quite a bit.
How many credit reports do you see without debt? Not too many.
So, is it logical to conclude most people have debt? Is it logical to conclude most people aren't paying off their debt on a monthly basis? My question is, why don't they pay off their debt on a monthly basis? Logic would say because they don't have the money to do so.
Logic would say if they didn't have to have the debt, they wouldn't.
Logic would say that if they had more $$, they would pay off the debt.
(Folks, this ain't rocket science) So, now let's talk about the mortgage and minimum payment.
Most people want to pay off their house, right? Why? To own it; to help their financial situation.
Actually, if people really DID think this way, they would understand their financial situation is better off by NOT paying down on the house and applying money to other places to increase their financial situation (i.
cars, credit cards or investments).
Do people own their cars or credit cards or do the credit cards own them? Get my point? If you have debt on your car or credit cards, you do not own them..
Here's the big kicker about that minimum payment thing..
it's an OPTION.
People love options.
It's like the upgrade of the car they want without paying a premium.
Heck, you can also say they get the options and a premium is given to them for doing so.
(there's a statement I'll let you stew on for a while) Don't misconstrue what I'm saying.
The POA should NOT be sold to people in financial trouble.
It should NOT be sold to people who can only afford the minimum payment.
It should NOT be sold to people with less than 20% equity.
It SHOULD be sold to folks that understand the minimum payment is an OPTION and if they don't have a plan to improve their overall financial lifestyle with the money they free up, then the Option Arm IS NOT FOR THEM! I don't know how much clearer I can say it.
Yes, I understand that most Loan Officers and Mortgage Folks are not licensed to give financial advice, but we have an OBLIGATION to at least inform our clients the benefits and pitfalls for paying or not paying the minimum payment.
Just stop and really think about it folks.

Leave a reply