Your Mortgage Is Not a Big Mac (or Why It Pays to Have a Personal Mortgage Advisor)

The typical way to order a Big Mac® looks something like this: step up to the counter, order your burger, pay and eat. Your order taker doesn’t ask whether you really need a Big Mac®. Nor does he question whether it’s the right burger given your unique dietary needs or taste preferences. And when you're done, he doesn’t give you a call to ask if you were happy with the burger, or let you know that the price just went down or that there’s a better Big Mac® on the market. It would probably seem strange if he did.

Unfortunately, many borrowers purchase a mortgage the same way they order a Big Mac®. Even worse, many loan officers are treating your mortgage transaction the same way. As a result, borrowers with plenty of equity are finding themselves up to their necks in debt and with few good options for relief. Quite often, their desperate circumstances could have been avoided had they been working with a seasoned mortgage advisor rather than a simple order taker when structuring their original mortgage.

The costs can be shocking. Consider the case of one recent client: Joe (not his real name) wanted to take advantage of today’s falling interest rates and consolidate some debt. In addition to his primary residence, he owned 2 rental properties, one of which he owned free and clear. His combined equity across the three properties was over $630,000. He was shocked to learn that due to tighter than ever lender guidelines and a lower than expected credit score, he was unable to qualify for a new first mortgage or home equity line of credit. He was a classic example of the old “house rich, cash poor” trap, and was stuck paying high interest payments on more than $50,000 in credit card balances.

Joe’s not the typical speculative investor who used 100% financing and overextended himself. He earns in excess of $100,000, bought his properties over several years and pays all his bills on time. He just failed to get the proper advice every borrower is entitled to when he structured his last mortgage.

A careful mortgage advisor would have pointed out the value of placing a home equity line of credit on his investment property. Having one would have given him the key to unlock over $300,000 worth of equity in an emergency. Unlocking it now will cost him hundreds in extra fees and interest in the form of a sub-prime loan he’ll take to access the cash.

So the next time your mortgage advisor asks “do you want fries with that?,” ask him what he means. You just might save yourself some serious heart burn.

(Big Mac® is a registered trademark of McDonald's Corporation.)