Planning a Mortgage Exit Strategy: What Brokers Need to Know
It may seem odd to be planning a mortgage exit strategy before your clients have even signed on the dotted line for their new mortgage, but it’s actually good customer service. It’s also your opportunity to show them how an alternative mortgage can be a critical piece to their long-term financial success.
Start with a mortgage exit strategy
When you look at alternative mortgage options for your clients, you know it’s a short-term solution to their current financial needs. Alternative mortgage terms generally range from one to three years, versus the 5-year terms you’ll find at other large banks. Your hope is to see your clients move on to a more traditional mortgage option, with a lower rate, once their alternative mortgage term is up.
When you share the mortgage rate and lender information with them, be clear that this is not their long-term mortgage solution. Focus on the reasons they need an alternative mortgage now and discuss where they may be in a year or two. This will allow you to help them choose the correct term and features for their mortgage.
For example, will an open or closed term work better for their situation? This depends on whether they need time to rebuild their credit and when they expect to be able to qualify for a traditional mortgage. If they are unsure about when they may need to renew their mortgage, an open mortgage may be best, even though the rates are a bit higher over the short term.
Talk to your clients about the options available to them. Once you’ve helped them make the best mortgage decision for their current situation, you can more easily help them see what the future might hold.
Explain why an alternative mortgage works for them
If you’re considering an alternative mortgage for your clients, it’s likely they have challenges with credit or income verification, which makes it hard to qualify for a traditional mortgage. This is an excellent opportunity to talk to them about why their payments are more important than their mortgage rate. Explain how having an affordable payment is more important than a low rate that may have restrictive conditions attached.
You can also reassure your client that alternative mortgage products are a common option since new mortgage rules were released in 2018. Be sure to stress the temporary nature of these products—they are an excellent stepping stone to mortgages with lower rates and fewer conditions.
Stay in touch after financing
Because mortgages are usually long-term commitments, there is an opportunity for you to build client relationships that last for years. You can demonstrate that you are invested in their success by keeping on top of their progress and understanding their challenges.
Staying in touch with your clients after financing will allow you to better help them adjust their plans.
Staying in touch with your clients after financing will allow you to better help them adjust their plans. For example, if your client rehabilitates their credit faster than expected, they can always move out of their mortgage early. One way is by using our 3-2-1 payout. And of course, you have considered that when planning the mortgage exit strategy.
When the time comes to renew, you’ll have the information at hand to help them choose their next mortgage commitment. Being proactive saves time and reassures your clients that you understand their situation, and you become a trusted advisor who is helping them make good decisions. Be the kind of advisor that they want to refer to family and friends.
If you have questions about how our rates and mortgages can help your clients, contact us and talk to one of our underwriters or business development managers.