This is a podcast of our KLIF morning show program from February 8, 2014. In it we discuss mortgage rates, lending for first time homeowners, and the housing market in general.

Kevin: Happy good afternoon to you at the TexasLending.com mortgage show, with Kevin Miller with Jeff Collins.

Jeff: Good afternoon!

Kevin: Special guest today, Chris Johnson. We’re going to be talking about your home loans today. We want to share with you everything that’s going on behind the scenes in the mortgage world. Whether it’s going to affect you now if you are trying to buy a home or maybe in the future. If you’re trying to refinance and try to save yourself some money, there are a lot of decisions that need to be made. These decisions can have a big impact on your life for you now and in the future. How many of you have gone into some things where you’ve made decisions, but those decisions, you didn’t think them out very well. Then down the road, it ended up having a larger impact on you. We want to make sure that you’re making the right decision. We want to give you as much philosophy and input as we can. So you can go forward in your world and at least know you have some people on your side here, in this station, and on the show. We are happy to share with you today all the things we can to make sure you have a smooth landing in any mortgage scenario you are getting yourself into. I’m Kevin Miller. I’m owner and CEO of TexasLending.com. We’ve been around for 13 years. We’re doing this radio show for 13 years. We’re actually kicking off our 14^th year of the show here in another month.

Jeff: We ought to have a party. We ought to have like a listener party thing going on. We’ll have balloons and streamers and, you know, balloons.

Kevin: Wow, balloons. Hey, you know what’s funny? We read a book last night. If You Give a Pig a Party. Right?

Jeff:  Uhuh.

Kevin: So my son and I were reading a book. It starts out, “If you give a pig a party, you have to buy it balloons.†Then it goes into this whole scenario where the pig starts having all kinds of scenarios where you have to take the pig to the fair, you have to go play hide and seek and you have to have streamers.

Jeff: Okay.

Kevin: At the end of the book, I don’t want to give it all away, but at the end of the book they come back home and they’re going to make some food. They’re going to go to bed and then they bring out some balloons and then they said that if you bring out some balloons, then they’re going to have to give her a party. So it goes full circle. It’s kind of like Groundhog Day for the pig party all day. So anyway.

Jeff: Wow. And you just brought that up again. We’re going to have a party with balloons!

Jeff: Yeah! So that’s like really impressive. Story time with Kevin!

Kevin: Yes!

Jeff: That was beautiful.

Kevin: I just tell you I don’t think I am a pig, but maybe I’ve just compared myself to one. But, more importantly, we want to talk about your home loan.

Jeff: Indeed.

Kevin: And we’re going to get into some philosophies for whether you should get a 30 year fixed or maybe a 15 year loan.

Jeff: Yeah.

Kevin: So, maybe you don’t know it, but 30 year mortgage is about 1% lower than the 30 year loan today and we’re going to talk about what impact that can have on you…

Jeff: You mean the 15 year?

Kevin: The 15 year is 1% lower than a 30 year and you can have a lot of savings. We’ll talk about that. Monthly savings, lifetime savings, and just the whole impact of having 15 years until you’re out of your mortgage versus 30. We’ll get into that in a little bit. There are some new changes that have come out on FHA. They’re going to have some possibilities for you, the consumer, in terms of your qualifications. And, if you have a question, and you want to get on the air, this is a show today where we’re going to make sure we get you on the air today and answer some very important questions for you. Call us at 888-787-5543. 888-787-5543. Or call our office. Ashley is here today. The fog is clearing. The sun is coming out. The snow has melted. Call our office today if you’re driving around and thinking about getting a home loan this week. We have some more cold weather coming. Call this weekend. Our people can start working on it today. Get you an application out. You can get back to us this weekend. We can be processing it during this week and if you trying to buy a home this year, we have taken a corporation from 80% refinance business just a year ago to over 75% of our businesses, home purchase business now. Both here and nationwide in our branches, we are doing a lot of home purchase activity right now. If you’re a realtor or builder, we’re getting the loans closed in ten days to three weeks, somewhere in that ballpark. 70% of our loans close in three weeks or less. Call us today. We want to get you on board with our fast-track program, which has taken a long time and many years to put this together. It’s taken us from the road of being a broker to a lender, to a someone that can make some decisions for you in getting your loan moved quickly. Call us at our office 972-387-4600.

And before we get kicking off with some dialogue, I do want to say the rates have come down a little bit since the middle of December. They’re down about a quarter percent from the middle of December. Your 30 year mortgages are just under 4.5%. Somewhere between 4.25% and 4.5%. And that’s going to really depend on your loan size, your equity’s position and your credit score. But the best scenario is you are paying your origination fee and have some equity in your home and with great credit, you’re going to find your way around 4.25 and four and three eights. If you have your APR on there at a quarter… at about 20 basis point. So, if your rate was 4.5, then your APR would be about 4.7. That’s your 30 year mortgage. Your 15 year mortgage you are down about 3.375, 3.25, in that ballpark, depending on if you are going to pay origination fees and points. If you want to do those things, we can also again do your loan without origination fees, and your rates are a little bit higher. So call us to find out your scenario. Just the best scenarios right now, and even better, the FHA mortgages—a lot of people are getting those at or just below 4% right now in the 30 year FHA mortgage if you are paying an origination fee and you have good credit. So, those APRs are much higher. We can get into these reasons later. But, hello gentlemen. That was a lot to get into for the start of the show. But how is your day going Mr. Collins?

Jeff: It’s going really well. Thank you, Kevin. I mean you brought up the thing about rates and I’d like to back up to it just a little bit. What makes it such a big deal? The whole rate scenario. I mean, you get phone calls, “Hey, what’s your rate? Hey what’s your rate? What’s your rate?†And it’s all great. I mean, we can answer the question. But what is it we really need to be educating the borrower about the rate?

Kevin: Well, you know what? Let’s talk to Chris. Chris Johnson’s here. He’s been working about 10 years now, right?

Chris: Nine and a half.

Kevin: Nine and a half years in our company.

Jeff: We can throw him a party, too!

Kevin: Well, yeah, we do.

Jeff: We’ll give him balloons and streamers.

Kevin: We have a lot of people at the ten year plateau this year.

Jeff: That’s fantastic.

Kevin: We don’t want it to be the plateau. We want it to be the kick ng off point for going forward into this home purchase market. Chris, people call all the time and say “What is my rate?†What do you tell them?

Chris: That’s a very hard question to start off with. “What is my rate?†is dependent on a lot of things. For example, how much equity do you have in your house? What kind of refinance do you plan on doing? Most importantly, what is your credit score? So a lot of times we’ll have a people call in and they want to know what the rate is. But again that’s a loaded question because I need to see the picture. It’s like going to the doctor’s office and you say “What’s my problem?†I have to diagnose everything first.

Kevin: Okay.

Chris: So when they call in here, that’s basically what I’m doing. I am diagnosing. “Ok, so this is what your credit score is, this is what your equity position is, this is what type of loan you’re doing.†Based off of that, then I can give you a rate. Not just a generic rate but a custom rate to what exactly you’re trying to do.

Kevin: And the other thing is that people don’t really realize is it’s not just one rate that people qualify for. If you want a 30 year mortgage, you may qualify for anywhere from 4.25 to 5%. You’re going to be in that ballpark and depends on what you need. If you don’t have a lot of closing cost to bring to the table, you might need to have a closing cost financed in your loan. And if you are driving around, you don’t do this stuff every day. I understand, that’s a lot of stuff. Your financing and the loan. So instead of having a loan of $100,000 you might have a loan of $103,000. That $3.000 that you’re going to finance, by making the loan bigger, might cost you a little bit of a higher rate over time. But if you don’t have that $3,000 in your pocket right now, that $3,000 might cost you 18 bucks a month in your payment. But $18 a month is less than $240 a year. It’s going to take you ten years to get that $3,000 out of your pocket. So, you know, you can finance things and if you’re a person that understands the need for cash, and most people do, because there is a lot of people out there that don’t have a lot of it. If you understand the need for cash, then financing closing cost and putting things out over time can help you a lot, depending on your position. So…

Jeff: Right.

Kevin: So, is Mr. Court going to join us at all today, Mr. Collins?

Jeff: No, Mr. Court is not. He is out.

Kevin: He decided he is not going to join us. Ok.

Jeff: Well, I told him to go home.

Kevin: Okay

Jeff: Yep.

Kevin: Well, you are his boss. So someone needs to tell him what to do.

Jeff: Well, no… [Laughing 14:34]

Kevin: Ok.

Jeff: You know, [unintelligible 14:40]

Kevin: Just trying to get you in trouble.

Jeff: We’ll talk more after the show. But no, no, no. No, absolutely not! So, no. It’s just going to be us three and I’m excited because Chris is going to be able to break down a 30 year mortgage, 15 year mortgage, if you’re in the 30, why would you want to entertain possibly a 15 year mortgage? And yes, it’s less time, of course, but what are the other benefits to go along with that? We’ll talk about that coming up. Plus, your opportunity to stump Kevin Miller. Are you smarter than a loan officer? My guess is, you probably are. You’ll get an opportunity to be able to win a gift card towards the end of this program, of course. But right now, we want to take your questions on air at 888-787-5543. Again, triple 8 -787-5543. No mortgage question is too outrageous for us or at least we hope they’re not.

Kevin: You know, we were talking with someone yesterday. I want to bring you some other ideas. We were talking with someone yesterday and he was in a situation not many people realize or not ever think about. So, if you’re driving around, there’s something in Texas you need to know about. This is just information for people. Someone called in and wanted to get the Jumbo Loan and they were trying to get the Jumbo Loan but he was getting in divorce. He wanted to get a Jumbo Loan so that he could pay off his wife in his divorce. So they’re putting this thing together and he’s trying to figure out. He pulls me aside one day and says: “Kevin, I need to know what to do because I have equity in my home but I don’t know the best way to go about this.â€

And I told him, one of the things that you need to know about in Texas is something called an Owelty Lien. O-W-E-L-T-Y. It’s like you owe you owe somebody. An Owelty lien. Owelty liens in Texas mainly—they come into play when there is some kind of judicial decision where, for example, in a divorce, where the judge would say: “This spouse owes this other spouse a couple of hundred thousand dollars,†because of the divorce. And so, what they end up doing, they end up putting a lien on the property and that lien on the property is now like a mechanic’s lien. Like if someone—let’s say a home builder or a re-modeler went in and put a lien on your property. They came in and said, “Okay, we did all this work in the property. We’re going to put a $100,000 or $200,000 lien in the property.†And then you have to pay them off. It’s like having a home built and the builder puts a lien on the property. You get money on it and you pay of the builder, right? There might not be a lien yet but you have to pay the builder for the house. So, the Owelty lien is basically a judge that comes out and says, “If you’re in the situation where there just might not be a spouse. There’s someone else who’s deserving or they want to put equity on that thing and, of course, it’s a homestead state and it can’t come from too many places. But that Owelty lien is a good situation for you to pay off that loan without it being a home equity loan.

And here’s the big part of it. Home equity loans in Texas limit us to 80% of the value of our property. If you’re trying to get cash out of your house and your home is worth, let’s say, $400,000, 80% of that is $320,000. That’s the most liens you can have on your propert, when you get a cash-out loan. Once the loan is closed, you might have a $100,000 you owe. You might get a couple hundred thousand dollars in cash. But you can’t take all you owe, anything you owe on that property over $320,000. So this person had a wife—has a wife that needs to get paid off, they’re getting divorced. I told him to talk to title attorney, real-estate attorney. And of course, his divorce attorney, and they’re going to award the wife a certain amount of money. They’re going to put an owelty lien on the property. He’s going to get a loan against the property, a Jumbo Loan, and he’s going to pay her off. Now he wants to sell this home in two or three years. And so he starts talking about 30 year mortgages. And I’m saying “If you’re going to sell the home in 2 or 3 years, then why would you get a 30 year mortgage? Why would you get yourself like a five year arm where the rate might be 1% better than it would be on a 30 year fixed? Because if you’re going to sell it in 2 or 3 years and you still have all this equity in the home, you shouldn’t have any problems selling it. But you don’t want to tie yourself up over the higher payment for 30 years. Because also, the 7 year arm on the Jumbo loan program.â€

We have these options here on TexasLending.com and we can even take some of your Jumbo Loans up to 90% of the value of the property and not many people have that option. So, if you are in that scenario where you want to have a loan to value of your home up to 90% on a Jumbo Loan, we are a lender that can offer that to you. If you have ever been in that situation, it doesn’t have to be just a Jumbo Loan, an owelty lien can be can be on a $150,000 loan but some people get stuck because they don’t have enough equity to get an equity loan to pay off their spouse. But one of the things they might be able to do is get an owelty lien because it’s not held to the cash-out rules of Texas. So they can even go up to 90% of the value of the house on some loans, pay off the spouse without it being considered a cash-out loan.

That’s a lot of information. If you’re not in the market and if you are not thinking about this stuff, just put it somewhere in the back of your head that you can call TexasLending.com for information in the future.

Jeff: That is a lot of information and it’s great that we are taking the time to be able to educate people because you may not be in that position right here, right now. But it doesn’t mean you won’t be later. I’m not talking about necessarily the divorce aspect. I’m just talking about the ability to tap into the equity of your home or the Jumbo Loan or whatever the case may be. So, I’m gonna—I think it’s phenomenal, thank you.

Kevin: Now, here’s the deal. One of the reasons I talked to you about that is we are going to segue into the next part of our show when we come back from the break. We’re going to talk about a 15 year mortgage. I just got done saying, if you’re not going to live there for 30 years, why would you get a 30 year mortgage? Or a 30 year fixed? Why not get something that’s going to be fixed for 5 or 7 years with a lower payment? So it’s a 30 year mortgage. 30 year amortization but it’s 5 years fixed with adjustable rates after that. That gives you the lowest payment for the next five years can save you thousands of dollars. Well, we’re going to come up with the idea of the question of a 15 year mortgage and how does that compare to a 30 year loan with a 5 year arm, a 30 year loan with 7 years fixed, or 5 years fixed, that becomes adjustable rate mortgage later? How does that 15 year come into play there? And when you are making decisions, a lot of people are counter intuitive about the decisions they make. We want to make sure that you’re making the right one so that you can make sound decisions. Let’s go to break, mister, and make sure we give out that number to Ashley. She’s sitting here now. She’s very pleasant.

Jeff: Absolutely. If you’d like to be able to call one of our loan officers right here, right now, it’s 972-387-4600. Again. 972-387-4600. You’ll be able to talk to a loan officer and in under 9 seconds is that the rule?

Kevin: The average pick up times is 9 seconds, yes.

Jeff: 9 seconds, that’s phenomenal. I mean, really. I can’t even get my wife to answer the phone that quickly.

Kevin: Well, most times these days, people are not picking up the phone. They’re letting it go to voice mail. Or companies, they just don’t have receptionists or see, we call them our customer service representatives. Our CSRs are phenomenal here. They’re very nice. They’re very cordial. They’re very sweet. They’ve been here for a while. And…

Jeff: And they’re pretty.

Kevin: And they help us out a lot.

Jeff: 972-387-4600

Kevin: Chris is pretty to you, Jeff.

Jeff: Yeah, we’re not even going to go there Kevin. I’ve told you about that. We’ve got more to come right here on News and Information 570KLIF.

Kevin: We are back in the TexasLending.com mortgage show and Chris Johnson was anticipating some good cowbell music, but you can start it off.

Jeff: But what happened to our music? Wait, wait, wait. Hold on. Where’s our music? Raul, on the other end.

Kevin: The computer fritzed out. We have no actual fritz.

Jeff: Okay, so Raul or Chris and Kevin and everybody…

Kevin: Let’s sing!

Jeff: No, no, no. Just imagine your favorite song in your head. Just go ahead and do it right now. Raul ready?

Kevin: Alright. Ready?

Jeff: There you go. Are you good?

Kevin: I got it. my favorite song.

Jeff: Start singing it while Chris hits the cowbell. You’ll see it goes with the song.

Kevin: Raul… Raul…

Jeff: Live it for the weekend! Yeah! Yeah!

Kevin: He kissed all the girls in school. Yeah, alright.

Jeff: Excellent. That was great. Thanks, Chris, for joining us here at TexasLending.com… That was very fulfilling.

[Laughing 26:32]

Kevin: I don’t know what it is about you. Some people are into toes. Jeff Collins is into cowbell. I mean, you are one excited dude when it comes to cowbell.

Jeff: I‘m excited. Period. But cowbell just happens to be a manifestation of that excitement.

Kevin: Okay, see, it’s just an extension, right?

Jeff: Well, it’s safe that way. There’s no breaking the law or anything with the cowbell.

Kevin: We have all lines open.

Jeff: We do. As a matter of fact. Give us a call right now at 888-787-5543. Again. 888-787-5543. Chris Johnson’s in the studio and I believe if you’ve got a couple of questions, we’re going to be able to quiz this guy. Really see if he knows what he’s talking about.

Kevin: Yeah, I want to talk about couple of other things before we to that because this is going to lead right into the question—information. It’s a great time to refinance right now because rates have come down. And there’s lot of funny business going on right now, and the stock market is down, but the rates are coming back a little bit. It’s a good time to get going. It’s still the beginning of the year when you have the least amount of escrows that have to go into your mortgage. If you want to refinance, and you’re thinking about it now, do call our office at 972-387-4600.

Jeff: Excellent. Good!

Kevin: Mr. Johnson, how are you today?

Chris: Doing well, doing well.

Kevin: Okay, so, you are now our radio expert. You’ve been on the radio now for 20 minutes.

Chris: And that makes you an expert, okay.

Kevin: Yes, and I appreciate this role…

Jeff: In this world, in this particular program.

Kevin: Hey, there are celebrities who haven’t done anything ever, except a picture taken of them wearing something silly. Now, everyone wants to be just like them.

Jeff: Right.

Kevin: So let’s talk about—what we were talking about earlier. There’s a 30 year loan. There’s the 5 year arm, the 7 year arm, there might be an option for you if you’re moving soon. How about someone who wants to stay in their home from here to the end of time? And they want to have a decision of taking a 30 year mortgage or 15 year mortgage. Where are the rates right now? Let’s start with that.

Chris:  Rates on a 30 year, we’ll start on that, are, like you said, around 4.5-ish. So, depending on points and what kind of fees you want, they can move up and down. But on the 15 year, they’re down to the 3s, so anywhere from a 3.25 and 3.75, again, depending on points and fees.

Kevin: So depending on how you put your loan together, and that’s why we talk a lot about this philosophy in this show, no one qualifies for a single rate. You qualify for a range of rates depending on whether you want to finance your closing cost or you want to pay your closing cost. And if you want to finance them, your rate would be higher, right? Beause we’ve got to pay for those closing costs in the rate.

Chris: Correct.

Kevin: And that’s why I cringe when I hear commercials of any lender that says: “We don’t have any closing cost!†Well, you do. You have them rolled into the interest rate. You have to pay for title insurance. You have to pay for the appraisal. These things have to be done. They have to be done on all loans. Every loan has to have a certain amount of diligence done on it and you need to have those things done. So, you might have a rate of 3.25. You might have a rate of three and three quarters. You can qualify for both, depending on whether you want the higher rate with low closing cost or the lower rate with higher closing cost. But what’s the differential? Now, if you said there’s a 30 year rate, let’s just say right now, someone has 0 points on the 30 year mortgage and it was 4.625. Let’s say that was the thing. They don’t want to pay any origination points but they might have some appraisal fee and maybe an underwriting fee and some title fees. Now, what would right beyond a 15 year?

Chris: On the 15 year, no points. Just standard rate, about a 3.625.

Kevin: So that’s just about 1% better?

Chris: Yeah. 1% better.

Kevin: So it’s about 1% better on the 15 year mortgage. So, for people driving around, it’s 1% better. Is that like 8% versus 7%? Does it mean the same thing, for example, in payment difference… I mean, think about this…

Chris: Correct.

Kevin: So I want to have a rate of 6 versus a rate of 5. That’s a 1% difference in interest rate. Is that differential in payment gonna be the same if my rate is between 4.625 and 3.625?

Chris: The difference between the two?

Kevin: What’s the payment difference right now between 4.625 and 3.625

Chris: On a 30 year?

Kevin: Between a 30 year and a 15 year.

Chris: Well on a 30 year, 4.625 is about $11-12,000 a month.

Kevin: On what again? Sorry.

Chris: That’s about $225,000. I mean, that’s common. So let’s say purchase price or sales price is 250. You finance 90%. That would put you on around 225. So if you finance $225,000, the rate’s 4.625. That gives you a principle interest payment of around 1150.

Kevin: So that’s principle plus interest. You still have taxes and insurance.

Chris: Still have taxes and insurance.

Kevin: About billion dollars a year?

Jeff: But that’s on a 30 year, right?

Chris: That’s on a 30 year. So on a 15 year, okay, so let’s say you do a 15 year and the rate’s 3.625, the principle and interest payment would be 1622.

Kevin: I want to point out something. We’re talking about maybe someone refinancing and staying in his home. But we’re going to talk about refinancing and buying a home. But what’s really interesting is you just said that a $225,000 loan, on a 30 year mortgage at 4.625 and the payment’s around what?

Chris: 1156 is a technical pick.

Kevin: 1156 is principle plus interest. You mean the rest of that payment is taxes that go to the government, right? The insurance to insure that property. How many of you can get—with a $250,000 house, you can get a 3500 square foot home with about four bedrooms in it. And you can do that versus going out renting, and look at that rent—you can get a 1000 square feet for 1150 a month. That’s crazy talk.

Chris: Right.

Kevin: But on the 15 year, the payment goes skyrocketing to what?

Chris: Skyrocketing is a…

Kevin: Relative term, right?

Chris: But yeah. 1622. It’s about $460 difference in the payment.

Kevin: So that $460 that is different in payment, that’s a lot more money per month. But you know what though?

Jeff: But you’re taking off 15 years of your mortgage. I mean, with the savings behind that…

Chris: So $460 does seem like a lot initially, but you have to ask yourself: “Okay, if I’m in a 30 year and I want to move into a 15 year, we’ll talk about the interest savings.†$460 is not really all that much money if we look at what are we spending if we are going out to eat for lunch? What do we spend on lattes and all these other things that we are doing?

Kevin: Cable.

Chris: Cable.

Jeff: I don’t mind when you are all talking about doing away with cable. And dinner, and all that other stuff. I got to keep cable. What about the lattes? Leave the lattes alone. Why does everybody gotta throw the lattes in with everything else?

Kevin: Okay, now we know where your special buttons are.

Jeff: I’m just saying. Next thing, we’re going to be talking about Red Bulls. Quit drinking Red Bulls.

Chris: So you can shave a couple a hundred dollars a month very easily, that you could apply then towards your mortgage. And then the interest savings is gonna be just a night and day difference between you in the 30 versus a 15 year.

Kevin: So here’s the deal. That $460 a month is going to go to its principle.

Chris: Yeah.

Kevin: You’re going to pay it off in 15 years instead of 30 years. It’s gonna pay it off in half the time with a payment which is about 35% higher, right? That’s about what you are doing. About 35% higher payment, but you’re going to pay it off in half the time. Now here’s the thing. There is going to be certain amount of interest savings. You’re not gonna have 30 years of payments, you’re only going to have 15, how much interest would you save by paying it off in 15 year versus 30.

Chris: Ok, so rough numbers on the 30 year, if you buy $250,000 house, you bring it 10%. So we’re going to use these numbers throughout the show today. You finance $225,000. Your finance charge or how much interest you are going to pay, is approximately $200,000. So if you do nothing for 30 years, and you pay your mortgage payment on time, every month, you’re going to spend about $200,000 in interest. Versus if you do a 15 year, okay, and you pay it on time for 15 years, you’re looking at $71,000 in interest.

Jeff: So, get out of here!

Kevin: How much is that in savings? A hundred and…

Chris: It’s a 130 approximately.

Jeff: 129.

Kevin: We just said, by doing a 15 year mortgage versus a 30 year mortgage, if you can digest the payment and get rid of the lattes, and those cable, and all that austerity that Chris wants to throw upon on our lives and cast upon us, always trying to control us, Chris Johnson. No, I’m only kidding.

Kevin: but you save a $130,000 over the term of the loan and that $130,000 of interest, how many lattes can you buy with that, Jeff Collins?

Jeff: Well, that would be a lot, but evidently I would have to wait 15 years before I get to have one.

Kevin: Are you saying that’s a lot of lattes?

Jeff: That’s a lot of lattes, Kevin. That’s what I am saying, Sir.

Chris: And that’s the thing, sometimes the people really kind of shy away from the 15 years because they don’t see the tangible benefit on it. But, within 15 years if we said, â€Hey, we’re going to give you a check of $130,000, everybody would jump over.†Let’s say somebody is 40 years old and they do a 15 year on their house. Within 15 years, they’re going to be done on their house, well, guess what? That’s the perfect time when kids start going to school, you have other things that pop-up, so now you don’t have that debt anymore.

Kevin: You have more equity in your home. But here’s the thing, this is a good idea for a lot of people, but for some of you, here’s the deal. Here is what some of you do. You say this, “I want to move in five years, so I want to get a 15 year mortgage instead of a 30 year mortgage.†Now we talked about that earlier where I said this person was going to leave in three years. They want to split their home up for sale in another year, if it take another year to sell it, so be it. But I said don’t do a 30 year mortgage, do 5 year adjustable. This one’s fixed for 5 years and then it becomes adjustable. Or 7 year arm, which comes for 7 years and then it becomes adjustable. That way, you have 7 years to sell that house, have a much lower interest payment. But here’s the deal. If you’reonly going to live in the house for three year five, or seven years, why would you take that extra payment that Chris is talking about and have all that money come out of your pocket? You’re going to move in a few years, but you’re not gonna save – you are going to save a little bit of interest over that time. but you’re not really going to be making the most savings because you’re only going to be in that home for 7 years, not for 30 years.

So you’re going to see all your savings at a $130,000 of interest savings. You’re going to see that mainly over the term of living there for all that period. If you’re moving in 5 years, don’t get a 15 year mortgage. I wouldn’t really suggest it unless you have a lot of cash. And the reason is—I’m saying this from the understanding that most people who talk with us don’t have a lot of extra cash flow. So, this is for the person who is going to stay in their home. You plan out living there for 15 years. you plan on paying off that home. You plan on getting the thing paid off early. You have the extra cash flow to do it. You don’t need all that extra $400 a month to pay for the things. Some of us need to pay for school for our kids! Some of us need to pay for gas. Some of us need to pay for food. I mean, we know what’s out there. Everyone who buys a home, they have a lot of things on their mind, and if you have the wherewithal to be able to sustain the higher payment, a 15 year might be an option for you. But you need to know the options. Chris just said it. You can save $130,000 by taking a 15 year mortgage right now out of a $225,000 loan. The difference between the terms of the loans can save you a $130,000 of interest.

Jeff: So, with  all these numbers are going to be different depending on what it is that you owe and where you are within that current mortgage. So the best way for you to get that really figured out, is to go ahead and call in now. Talk to one of our loan officers at 972-387-4600. You have a look on your face. Do I owe you a quarter?

Kevin: No, you don’t owe me a quarter.

Jeff: Did I interrupt you?

Kevin: No, you don’t. No, we have a half of a Batman carcass here….

Jeff: It’s not a carcass. It’s a bank. It’s a Batman bank.

Kevin: Oh, it’s a piggy bank. A Batman bank. Well, you know, it’s only half of a batman so it’s a—I don’t know, it’s a half of batman bank, and if we talk over each other then we have to put a quarter in it.

Jeff: Right.

Kevin: So you didn’t do that. I was just going to go down the line for thinking that—listen, there is no loan out there that a mortgage company can push upon you. There is only loans that make sense to you. And, you are at home or driving around, we’re giving you ideas. We’re giving you options. You need to be educated, because the schools aren’t doing it, right? TV is not doing it, your boss isn’t doing it at work. Your dog isn’t doing it at home. So you need to be educated about the mortgage process. You need to be educated about your mortgage options. You have an option of taking a 15 year. Your payments are going to be a little be higher. Your savings are gonna be significant in terms of the loan. But it’s great for people who stand—that live in their home for a long time. Who expect to pay it off and stay there for now and just have that home paid off one day. If you’re not planning to stay at home for forever, if you are gonna move from there in 5 years, I suggest that you might look at a 30 year loan or a loan that’ gonna be a 7 year arm. If you’re just going to live there for 5 years, you want to make sure that it’s fixed for the term amount that you’re going to be staying in the home.

Jeff: Right.

Kevin: So there are options for different people and different situations. Mr. Johnson, what other situations have you seen out there?

Chris: Well, also, real quick, on the 15 year, so what I’ve been trying to really highlight to my borrowers, my clients, is even if you going to buy a house, and again you may not stay in it for forever, but usually there’s a breakeven period, or there is, you know, a tolerance phase. Let’s say you only stay in it for 7 years. Well, you’ve paid off half of the house within 7 years. So then when it comes time to sell, you have that much more equity in your house. You know, the DFW area we saw low values are starting to come back up right now. So let’s say you bought a $200,000 house and nothing happened value-wise. So, within seven years, you owe half. When it comes to pay 6% realtor fees, you have to pay closing costs for the buyers. You have that equity built up now, where instead of you having to have come to the table, with money to sell your house, you’re actually going to get money back. So on purchases, a 15 year still does make sense, depending on the situation. Another thing a 15 year is going to do, if you don’t bring a 20% down payment, usually you have to have what’s called a mortgage insurance on the house. But if you advertise it for 15 years, the mortgage insurance in the investors, they’re going to give a lower premium because of that. So you get to save money there as well.

Kevin: You get a lower premium on a PMI, you get a lower interest rate and it might make the difference in payment even better if you’re going to put a lowdown payment down. It makes a lot of sense. You can call our office at 972-387-4600. 972-387-4600. We wish that you do that. We have loan officers that are here for this cool afternoon. It’s been a crazy week with the ice and the snow and the cold. So get your loan going now so that you can enjoy the nice weather that’s coming next weekend. Start it now, while it’s cold outside. Get your loan application in, in the heart of the winter here and we will work on that loan for you starting right now and get that thing in the processing early in the week. We got to take a break.

Jeff: Yes, we do.

Kevin: When we come back, I am going to go to the biggest soccer match that’s ever happened today at 1:50 in the afternoon,

Jeff: The Dallas Stars? Oh, soccer…

Kevin: On the streets of—yes.

Jeff: Dallas Sidekicks!

Kevin: Yes, on McClovan Avenue, a mile and a half from here. That’s my son’s game. It’s the huge 6 year old soccer game.

Jeff: I love watching that type of soccer game because that really is just watching a bunch of kids.

Kevin: It’s cutthroat…

Jeff: They just follow the ball. It’s a big huge group but they’re just all over the field. I love it.

Kevin: It’s great. It’s an ever-moving scrum. It’s like watching one of those tumbling weeds—you know, one of those dust devils that just kind of spin around…

Jeff: A dust bunny.

Kevin: Yeah, whatever. Anyway.

Jeff: You get a lot of those Kevin?

Kevin: I don’t know, all I know is, I am getting out of here you guys get to carry this to the end of the show.

Jeff: Excellent.

Kevin: Call our office today, everyone! 972-387-4600. All lines open, 888-787-5543. Jeff, take us to break.

Jeff: Absolutely! More to come with Chris Johnson. We are going to continue talking about the 30 year to 15 year conversion plus your opportunity. So, you know, Kevin is leaving. Chris, somebody needs to call you and try to stump you, be able to get a gift card out of their skills. It’s going to be a lot of fun. Go ahead give us a call now, at 888-787-5543. If you’d like to be able to get a gift card to—what are we doing, Chilli’s? What do we have?

Kevin: Chilli’s.

Jeff: Chilli’s, is that 50?

Kevin: 50.

Jeff: $50 gift card to Chilli’s.

Kevin: Yes.

Jeff: All you have to do is call in and stomp Chris Johnson.

Kevin: What’s going to happen is I’m going to leave and call.

Jeff: Okay. Well, we’ll know it’s going to be you. 888-787-5543. More to come! News and Information 570-KLIF!

Jeff: Welcome back to the show. I’m Jeff Collins, and in the studio with me is Chris Johnson. Chris Johnson’s just sort of been practicing on how to hit the cowbell. You have to do it a little more towards the center. Hit it a little harder. Don’t hit my finger. There you go! Excellent, good for you. Good for you.

Chris: I have excellent cowbell skills, huh?

Jeff: Yeah, that was very nice. Not bad for a beginner. Listen Chris, thanks so much for being able to help…

Chris: Absolutely.

Jeff:  … make sense of the whole 30 year to 15 year, whether it would be a refinance, or whether it would be an actual purchase or things of that nature because we really are talking about savings of thousands upon thousands of dollars, right?

Chris: Hundreds of thousands of dollars, depending again on the loan amount and so forth. And that’s definitely something that can help people reach what I like to call financial peacefulness. You know, a lot of times you hear financial freedom.

Jeff: Right.

Chris: You’re never really are going to be free from all your debts and stuff but at least you can be at peace with what you have. And by doing a 15 year, getting your house paid off and saving hundreds of thousands of dollars can put you in that direction.

Jeff: That is absolutely wonderful. Of course, we realize, that the numbers that we used here, were all off the $250,000 mark. Is that correct?

Chris: Right.

Jeff: So that—by default, that means that everybody else who doesn’t have a $250,000 home, their numbers are going to be different so the best way that you can make sense out of all of it, is for them to call in and, they can ask to speak with you. We have other loan officers available to really be able to help make sense out of all of this. All you have to do is call our office right now at 972-387-4600. Again. 972-387-4600. Will get you to a loan officer, and in under 9 seconds, you’d be able to make sense of what is going to be best for you. Hey, you want to take a call with me? Let’s go! Wouldn’t that be fun?

Alright, Keith from Dallas, converting a loan. Keith, welcome to the show! How can we help you?

Keith: Yes. I was calling to see if it would make sense for me to possibly convert from a 30 year note to a 15 year note on my current loan. Of course, it’s not at the 250,000 value to jump in and kind of reference me to a month’s worth probably of about a $110,000, something like that. Is that still, you know, still—I guess it doesn’t matter if we’re talking about different ranges on the process. It’s still relative as far as if you want to convert from 30 to 15 right?

Chris: Yeah, it can still definitely benefit you Keith. What’s your interest rate right now on your house?

Keith: It’s a variable rate. It’s what I’ve got. And so, I think the last time I checked it was somewhere around—between 4.5% and 5%, something like that.

Chris: Okay, let me ask you this. How long have you been in your house for?

Keith: I’ve been in the house actually for—since 1997.

Chris: Okay, how long have you been in this current loan that you’re in? This adjustable?

Keith: Since about 2002, I believe.

Johnson. Okay, so 12 years. And then, your future, where do you see yourself in 5, 7 years with this loan?

Keith: I see—keeping the home…. Whether I keep it down the road, it’s possibly a rental property, that’s an option I’m thinking about.

Chris: Okay.

Keith: So, that’s kind of… in one way or the other I plan on keeping it.

Chris: Gotcha. Well, the thing about it, in your situation, you’ve got an adjustable rate. Like right now, if it’s 4.5, that’s pretty good. If it was fixed, I might lean towards telling you might just want to sit tight where you’re at, since you are already 12 years into it, you only have 18 years left. But the thing about it is,  it’s an adjustable it’s going either going to go up or going to go down. Right now, it’s down, because rates are low, but once rates start to go up, that adjustable is going to go up. So if we can put you into a fixed down on to the 3% range, again, depending on the credit and equity and all that in house, that would be something that would be a benefit to you. Again, it might not be tangible immediately, because your rate is still pretty low, but, in three years, let’s say rates go up to 8%, that adjustable is going to shoot up. So you’re locked in at a low interest rate.

Keith: Mhm. I also want to mention that I have bi-weekly payments on this loan. So that’s kind of a benefit I guess, too.

Chris: Yeah. A bi-weekly usually cuts off anywhere form maybe 8-10 years or however the amortization works out. So, I mean, again, you’re going to be kind of on the borderline. I’d have to run everything…

Keith: Sure.

Chris: And then we can compare how much interest you have left versus what it’s going to do on a 15 year and then we could take it from there.

Jeff: Hey, Keith? That’s a great question, Sir. And if you don’t mind, listen. If it’s ok with you, how about you leave your number with Raul over there at KLIF and then he’ll send us that number and then we’ll have Chris give you a call and he’ll be able to run those numbers for you and really see if it’s going to be a good deal for you. Does that sound like a game plan?

Keith: Yeah, thank you!

Jeff: You’re more than welcome. Okay, so stay on line! Don’t hang up. Raul will be with you here in just a moment. You got time for another call, Chris?

Chris: Yeah, go ahead!

Jeff: Excellent! We’ve got Lynn from Dallas. Looks like a 20 year loan perhaps, I mean that’s what it says right there.

Lynn: Yes.

Jeff: Yeah. Hello.

Lynn: How are you today?

Jeff: Good, Lynn, how are you?

Lynn: Good, thank you. I’m sort of perplexed. Why is it that a 20 year loan is closer to 15 in term, but yet, the rate seems to be much closer to 30 year rates?

Chris: That’s a very good question and the answer is I have no idea. In that, a lot of times…

[Laughing 51:09]

Jeff: That is awesome!

Chris: Well, this is how the 20 year works. 20 years is kind of a no man’s land, okay? So, if you’re going to bite the bullet and increase your house payment, Lynn, usually you just need to opt for the 15, ok? So again, usually I don’t push the 20 years, but the reason why the 20 year’s rates are closer to the 30 year is that the higher you amortize your house, okay? So, if you go from a 15 to 20, or a 20 to a 30, that’s considered a higher-risk loan. So, that’s why the interest rate from a 20 to a 30 is kind of the same. When you do a 15 year, you’re basically telling the bank:  “Hey, I’m serious about this investment. I’m going to get this paid off,†and that’s the reason why you’re going to get the lower interest rate. So, again, usually a 20 years is kind of a no-man’s land. I usually kind of steer away from them. In some instances they work, but for the most part I’d say either go for the 15 year or just save the savings and go for the 30 year.

Lynn: it just seems to me that it’s sort of crazy that they’re closer term-wise to 15 and yet they charge you pretty much the 30 year.

Chris: They just, again—it’s all about the risk tolerance. So the higher the risk is for the investor or for the banker, whoever, the higher the rate’s going to be. So I guess, they just, for whatever —and that’s the part I don’t know, I guess that it’s just that they deem a 20 year isn’t as nice to them as a 15 year and that’s why the rate is going to be closer to the 30 year aspect than the 15 year.

Lynn: Okay.

Jeff: Hey Lynn, what type of loan are you in right now ma’am?

Lynn: I have a 15 year.

Jeff: Okay, and you’re happy with it?

Lynn: 2.8%

Jeff: Wow.

Chris: I would be happy with that. That’s pretty low.

Jeff: Absolutely! Now, other question. Do you drink lattes Lynn? Where you listening earlier about the whole “we have to give up lattes in other to do a 15 year�

Lynn: Well, I’ve heard that concept. Sure.

Jeff: Yeah.

Lynn: But…

Jeff: But do you still drink lattes, Lynn?

Lynn: Not really.

Lynn: It’s not too much of a sacrifice

Jeff: Okay. I’m looking for somebody who is in the 15 year—Lynn, thank you very much for your call. I mean, it’s fantastic. I’m looking for somebody who is actually in a 15 year, who’s still able to drink lattes. That’s what I am looking for, Chris. Because you took the lattes totally off the table for me.

Chris: I apologize. I’m in 15 year currently, and at times, I may drink a latte, I’d really like to make them at home but it’s not just the late. It’s whatever it is that’s in excess, that if you really want to, if you buckle down, you can exponentially increase equity in your house.

Jeff: Right.

Jeff: You’re kind of looking at a 401k. So, the employer takes out money out of your paycheck each month, okay? Well, doing the 15 year is kind of like 401k with a garage. Because in 15 years you’re going to have a nice little nest egg. You’re going to have all this equity in your house! You know, you have money in the ground. And usually having money in the ground is a lot more of a safe vehicle than stocks or whatever because they fluctuate a lot more than usually the value of the house is going to.

Jeff: Very well said. Absolutely. Listen, we’ve got a little bit of time left and I do want to be able to give a $50 Chilli’s gift card, alright? I mean who doesn’t love Chilli’s, especially $50 worth? Courtesy of TexasLending.com. All you have to do is call in and he’re how we’re going to do this thing, okay? You can ask Chris Johnson any question. It doesn’t have to be mortgage related whatsoever. Okay? But there has to be an answer. A valid answer. And if Chris gets it wrong, you get yourself a $50 Chilli’s gift card. If Chris gets it right. We’re going to let you ask another question until he gets it wrong. So, basically, the first one to call in is walking away with $50 Chilli’s gift card. All you have to do is call us at 888-787-5543. Again, 888-787-5543. There is still time to get you in here. Chris, in the meantime, have we left any stone unturned regarding a 30 year to a 15 year? Is there anything else that you have to be able to bring to the table?

Chris: I mean, for the most part I think we covered it. We really highlighted the amount that you’re gonna be saving in interest. And that’s really the big picture on this. I mean, hundreds of thousands of dollars is a lot of money.

Jeff: Right.

Chris: It’s not very tangible maybe on a month-to-month basis. But over 10, 15 years, it’s an exponential savings that you’re going to be able to realize with A, your house being paid off, or B, you having a lot of equity when it comes time for kids’ tuition, or it comes the time to do home improvements, or whatever it is that you need equity out of your house for. You’ll have that much more by doing the 15 years.

Jeff: So then people do 30 year because the actual mortgage payment is less than a 15 year.

Chris: Correct.

Jeff: They look at that as being a savings over a period of time. The problem though is that people aren’t really saving the difference, right? I mean, they’re not really setting that back into a checking account, they’re not really—or savings account or on annuity or in anything of that nature. Right? I mean they’re spending it!

Chris: That’s exactly the latte stuff. It’s like, they have this extra money. I have an extra $2-300, but I’m not really putting it towards savings. I’m buying this. Or I’m buying that. The 15 year forces you to save your money.

Jeff: Excellent. Alright, here we go, are you ready? Okay?

Chris: Yep. Go ahead.

Jeff: Jody, we are going to unleash Jody from McKinney. She’s gonna stump you. Go ahead Jody, what do you got?

Jody: Well, I have a non-serious thing, which is the question. I guess I’ll just get that out of the way, and then I have a kind of a serious question after that. The whole, if I understandfrom a second ago, ask you any question that has a valid answer and stump you.

Chris: Right.

Jody: Oh, obviously, I’ll give you an A, B, C choice. How old am I? Am I A, 34? B, 39? Or C, 40?

Jeff: Well, hold on just a second.

Chris: Hold on. Let’s write that down again. A is what?

Jody: 34

Chris: 34, okay.

Jody: 39

Chris: Jody, let me ask you how do you spell your name?

Jody: J-O-D-Y

Chris: Y or I?

Jody: Y

Jeff: Okay, now I am curious. Why did you ask that?

Chris: I think it just depends how it’s spelled, we could tell. I would go with B, he is 39.

Jody: It would be the latter, who won the ’85 Super Bowl?

Jeff: Well, see, we might have had a better chance with that because we could’ve Googled that one real quick while you’re on the air.

Chris: But it was the Bears that won the Super bowl in ’85, I believe, but since…

Jody: It was. Yes.

Jeff: Get out of here! Check you out! He knows that!

Chris: Yeah, he knows that, he is either 39 or 40.

Jeff: I’m gonna say 40. You’re saying 39. Okay, what is it? Who are you? I mean, 39, or 40?

Jody: It’s 39.

Chris: See?

Jeff: Oh, okay. Now you have to ask him another question. Make it quick, we’re running out of time!

Jody: Oh, my gosh! I don’t know, what kind of fuel mileage am I getting right now? I don’t know

Jeff: That’s awesome!

Chris: You’re living in McKinney, and so you drive a truck, and so you probably get about 12 miles a gallon.

Jody: Yeah, it’s showing seventeen and a half. I’m getting pretty good.

Jeff: Wow. Okay, so then….

Jody: Okay, but I do have a serious question. I mean, if you want to send me the gift card, that’s awesome.

Jeff: Yeah, we will.

Jody: But I do have a question. So, what’s concerning me about some of the things you’ve been saying about the 15 year mortgage and saving on the lattes or what have you—whatever. The thing that concerns me about that comment, I mean, I want to give you an opportunity to explain that a little bit better, is that, we try to manage the mortgage situation by those sorts of people that, you know—they’re skimping by, yet they want to try something cut something out of their life that they‘re used to spend a couple of hundreds dollars on mortgage, which is a noble effort. But when you think about it long term, most people don’t do that, and they end up spending more money that they can afford to. And so, when you say stuff like that it kind of bothers me a bit when I hear mortgage companies talking about something like that.

Chris: Well, a 15 year—that’s not what got the country in trouble. What got the country in trouble were people that got now business buying homes getting qualified for them. So, by doing a 15 year, you have to go through certain checks and balances, debt income ratio, your credit has to be pretty good, so it’s not just anyone that gets dumped into the 15 year. That’s not something that mortgage companies look to do. It’s something that benefits the client themselves.

Jeff: I think the goal here, if I may, because we’re running out of time, okay? And I don’t want to cut you off, I really don’t, I want to show you all the respect because that’s a great question. The 15 year is for those who were make sense.

Chris: It’s for financial—usually people that are trying to better themselves in a financial savvy individuals. 15 years is not for everybody. And by no means the defaults, the foreclosures, I guarantee you that that doesn’t happen on a 15 year. Most of those, 90% of them, take place on someone that was overextended, bought too much of a house, and financed it for a 30 years.

Jeff: Alright! Thank you very much, Jody. Stay on the line, okay? Because Raul, on the other end, is going to get your mailing information and we’re gonna send you your $50 gift card to Chilli’s, courtesy of TexasLending.com. Chris Johnson, fantastic job! We appreciate you! More to come, next time, next Saturday, same station, same location, make sure you join us! TexasLending.com, right here on News and Information 570-KLIF.

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