Why haven’t all your clients refinanced their mortgages?

By Roccy Defrancesco

The Wealth Preservation Institute


You don’t have to be a genius to know that mortgages are at historic lows and that many clients have not chosen to take the time to refinance.

I like to put out as many unique and sophisticated articles as I can, but sometimes the simple articles can be the best.

Mortgage rates are still at historic lows

As most advisors know, mortgage interest rates have been at historically low rates for quite some time. Even though that’s true, I’m amazed at how few people have refinanced their mortgages.

Why people are not refinancing their mortgages:
    1) Not paying attention to rates and that they are at historic lows
    2) No time to deal with it (a terrible excuse)
    3) Don’t think it will be too beneficial (wrong)
    4) Don’t think they’ll be able to qualify
    5) Financial planner has not suggested it
Real-world example

The following is for a client I’ve been dealing with over the last few months:

Age 41, current mortgage $735,000, old mortgage rate = 4.375 percent (five-year arm rate), old monthly payment = $3,969.

I recommended the client refinance into a new five-year arm (five-year fixed but amortized over 30 years). The new rate ended up being 3.125 percent with a new mortgage payment of $3,148. The difference is $3,969 - $3,148 = $821 a month.

This is $821 x 12 = $9,852 a year in savings.

What can the client do with the annual savings? Anything he wants. He could take a nice vacation, save for a kid’s college education, fund retirement plans, pay off other debts, etc.

Target affluent clients

Why didn’t the above client refinance earlier? Because he was too busy to think about it. Does this sound familiar? Just about every doctor you’ll run into will give you this same excuse. Being too busy is a terrible excuse for anyone and a great excuse for an advisor to be forceful with his/her insistence that a refinance take place.

Personal story

I had a brother-in-law who came to visit this Thanksgiving and because I knew I was going to write this article, I asked him about his mortgage. He indicated that he had $200,000 left on his mortgage and that the interest rate was 6 percent. When I asked him why he hadn’t refinanced, you know what he said?

Because he hadn’t really thought about it.

After telling him about my client who refinanced, he admitted that he should have refinanced some time ago and that he would look into refinancing when he got home (as he should).

You don’t have to be a genius to know that mortgages are at historic lows and that many clients have not chosen to take the time to refinance.

I would submit to you that if you provide a friendly reminder to your clients and keep on top of them until they determine if refinancing can save them money, your clients will be appreciative. And in doing so, you will strengthen your relationship with them (and hopefully they will look to you to help them build wealth with the money they are saving by refinancing).

Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.