What is a Mortgage? (Probably more than what you think)

Time to break things way down.  Let’s deconstruct what exactly it is we’re dealing with here in the mortgage industry.  I’ve been in the mortgage loan game since 2003 and it never ceases to thrill me when we close and fund another one!  Why you ask?  Because the great thing about making a mortgage not matter how much silly drudgery goes into the journey, the reason we do it is because it is improving someone’s situation.  They are either acquiring a home for themselves or their family, they are acquiring an investment that will contribute to their net worth and retirement planning somehow, or they are making a refinance that improves their leverage somehow-  making the real estate MORE powerful, MORE valuable.  I’m always blown away by the sheer dollar amounts in a mortgage-  any mortgage.  ONE HUNDRED AND FIFTY THOUSAND DOLLARS….. FIVE HUNDRED THOUSAND DOLLARS…. more money than most of us ever see in one place, and me and the team get to shoot these dollar figures seemingly out of a cannon on the specified day.

Lately though, I’ve been thinking about mortgages a little differently.  I decided to change the way I looked at it.  I learned recently a LAW that states:  “when you change the way you look at things, the things you look at change”.  It occurred to me that maybe{C} mortgages weren’t really dollars, but simply another kind of currency that happens to be DEFINED in dollars.  When you look at it this way it’s pretty exciting what starts to happen.

First of all-  mortgages don’t exist without real property.  So we CANNOT separate the value of a mortgage from the value of the real estate it is attached to.  (You can make this conclusion without my “different currency” concept- but for me it was this thought that led me to the rest).

So a mortgage is a single financial instrument defined by US American dollars used to acquire residential real estate.  The cost of this instrument is created by the combination of cost of FNMA Mortgage bonds and the borrower’s ability to prove their creditworthiness.  The more acceptable proof a borrower can bring to us, the more aggressive the lender can be with extending the credit.

In America, the interest paid on a primary residence has income tax benefits as well.  So NOW we know that a mortgage is more than simply the face value of the cost of that money over time.  The mortgage is a unique currency where the cost is a combination of the rate, amortization schedule, and acquisition fees MINUS the return benefits of change in value of the real property and the tax benefits OVER A GIVEN HOLDING PERIOD.   You thought your mortgage was just a poker chip-  but I’m here to tell you that it’s actually only 5 sides of your dungeons and dragons 20 sided real estate die.

Do you still want to let some call center internet lender handle your mortgage transaction?  If you do, then Godspeed to you on your thrilling journey to the middle.

If you’d rather step back and make a DEEP DIVE into what a mortgage is, and how some strategic choices can make all the other aspects of the 20 sided die load up to your advantage, then by ALL MEANS drop me a line!  We will create some reports that show you ALL the costs and ALL the benefits of this Real Estate puzzle together, and figure out where your TRUE efficiencies lie.

EXAMPLE OF A borrowSMART analysis report >> HERE


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