Tag: mortgage

Is a Fixed-Rate or Adjustable-Rate Mortgage Right for You?

Posted on by First Western Trust Bank

Choosing the right mortgage is one of the most important financial decisions you’ll make when buying a home. Two of the most common mortgage types are fixed-rate and adjustable-rate mortgages (ARMs). Each offers distinct advantages and potential risks, making it essential to understand how they work to select the best fit for your financial situation and long-term goals. 

Understanding Fixed-Rate Mortgages 

A fixed-rate mortgage features an interest rate that remains constant over the life of the loan. This means your monthly principal and interest payments will never change, providing a sense of stability and predictability. This loan type is often favored by homeowners planning to stay in their home for many years, as it allows for consistent budgeting without surprises from fluctuating interest rates. 

Fixed-rate mortgages come in various term lengths, with the 15-year and 30-year loans being the most popular. While the 15-year fixed-rate mortgage typically carries a lower interest rate and allows you to build equity faster, it comes with higher monthly payments. The 30-year fixed loan offers lower monthly payments but more interest paid over time. 

The primary benefit of a fixed-rate mortgage is the security it offers against rising interest rates. In a rising rate environment, homeowners with fixed loans are protected from increased payments. This can make long-term financial planning easier, especially for those with fixed or predictable incomes. 

What Are Adjustable-Rate Mortgages (ARMs)? 

Adjustable-rate mortgages start with a fixed interest rate for an initial period — commonly 3, 5, 7, or 10 years — after which the rate adjusts periodically based on a benchmark index plus a margin. These adjustments occur annually or semi-annually depending on the loan terms. 

The key appeal of ARMs is the typically lower initial interest rate compared to fixed-rate mortgages, which can result in lower monthly payments early on. For borrowers who expect to move, refinance, or see a significant increase in income within the initial fixed period, ARMs can offer substantial savings. 

However, the trade-off is the uncertainty of future payments. Once the fixed period ends, your interest rate and payments may increase or decrease depending on market conditions. If rates rise significantly, monthly payments can become substantially higher, potentially impacting your budget. 

Comparing Fixed-Rate and Adjustable-Rate Mortgages 

When deciding between fixed and adjustable rates, consider your personal financial goals, risk tolerance, and how long you plan to stay in the home. 

  • Stability vs. Flexibility: Fixed-rate mortgages provide payment stability and predictable budgeting. ARMs offer lower initial payments and can be more flexible, but come with uncertainty about future rates. 
  • Duration of Homeownership: If you plan to own your home long-term, a fixed-rate loan may provide greater peace of mind. If you anticipate moving within a few years, an ARM’s lower initial rate may save you money. 
  • Market Conditions: In a low-interest-rate environment, locking in a fixed rate may be beneficial. When rates are higher but expected to decline, an ARM might be advantageous. 
  • Income and Budget: Stable or fixed income borrowers often prefer fixed-rate loans for consistent payments. Borrowers with variable income or expecting future earnings growth might choose an ARM to capitalize on lower initial costs. 

How First Western Trust Mortgage Can Help 

Navigating mortgage options can be complex, particularly when balancing short-term affordability with long-term financial strategy. At First Western Trust, we work closely with each client to understand their unique circumstances and goals. We provide clear explanations of mortgage products and their potential impact on your financial future. 

Whether you are leaning toward the stability of a fixed-rate mortgage or the flexibility of an adjustable-rate mortgage, we can guide you through the process, ensuring you choose the right solution. Our team leverages deep industry knowledge and a commitment to personalized service to support your home financing journey. 

Final Thoughts 

Choosing between a fixed-rate and adjustable-rate mortgage requires careful consideration of your financial situation, goals, and market factors. Fixed-rate mortgages offer predictability and protection against rising interest rates, while ARMs provide potential savings and flexibility but carry more risk. 

Understanding these differences and how they relate to your needs will empower you to make an informed decision. Partnering with an experienced lender like First Western Trust Mortgage ensures you receive the guidance and support necessary to select a mortgage that fits your lifestyle and financial plans. 

Disclaimer: Personal banking services offered through First Western Trust Bank, Member FDIC  

First Western Trust is an Equal Housing Lender, NMLS #477166 

This content is for informational purposes only and does not constitute legal or tax advice. Please consult your legal or tax advisor for specific guidance tailored to your situation. First Western Trust Bank cannot provide tax advice. Please consult your tax advisor for guidance on how the information contained within may apply to your specific situation.  

Building an ADU for Aging Parents: Comfort, Care, and Independence

Posted on by First Western Trust Bank

As more families seek practical solutions to support aging parents, building an Accessory Dwelling Unit (ADU) has emerged as an increasingly popular option. An ADU is a secondary housing unit on a single-family property — often a converted garage, basement, or a small separate structure. For families, an ADU can provide a comfortable, private space for elderly parents while keeping them close to loved ones. This arrangement offers a unique balance between independence and care, making it a thoughtful alternative to traditional eldercare facilities. 

Why Consider an ADU for Aging Parents? 

Rising costs of assisted living and in-home care have made many families reconsider how best to support their elderly loved ones. An ADU enables parents to retain a degree of autonomy, reducing the emotional challenges that come with relocating to a care facility or moving in with family members in shared spaces. It also allows adult children to be nearby for support, offering peace of mind and easier access to care without sacrificing privacy. 

The proximity encourages family connection and helps foster a comfortable living environment tailored to the parent’s needs. Additionally, an ADU can increase property value and offer future flexibility — for example, as a rental unit or guest house — making it a sound investment for the long term. 

Zoning and Permitting Considerations 

Before starting construction, it’s essential to understand local zoning laws and permitting requirements. Regulations vary widely by city and county, with some areas having strict size limits, design standards, and occupancy rules for ADUs. Many municipalities have recently relaxed restrictions to encourage ADU development, but due diligence is key to ensuring your project is compliant. 

It’s advisable to consult with local planning departments or hire professionals familiar with your jurisdiction’s ADU regulations. Understanding setback requirements, parking rules, and allowable square footage can save time and costs during the permitting process. 

Construction Costs and Design Options 

The cost of building an ADU depends on factors like size, location, design complexity, and materials. On average, constructing a detached ADU can range from $100,000 to $300,000 or more, while converting existing spaces such as garages or basements can be more affordable alternatives. 

Design choices should focus on accessibility and safety to meet aging parents’ needs. Features such as single-level layouts, wider doorways, no-step entrances, grab bars, and non-slip flooring improve comfort and reduce fall risks. Incorporating energy-efficient appliances and fixtures can also lower utility costs and increase sustainability. 

Many families choose a custom design tailored to their loved one’s preferences and medical needs, while others opt for modular or prefab ADUs that offer quicker construction timelines and potentially lower costs. 

Financing Your ADU Project 

Financing an ADU can be a significant concern, but several options are available. Traditional mortgage loans may allow homeowners to include an ADU construction or renovation as part of a home equity line of credit (HELOC) or a cash-out refinance. Some lenders offer specialized loans designed for ADU construction, recognizing the growing demand for these projects. 

Working with a bank or financial institution experienced in flexible lending options can help you find the right solution that fits your budget and long-term financial goals. Some programs also offer favorable terms for energy-efficient or accessible design improvements. 

Emotional and Financial Benefits 

Beyond practicality, building an ADU fosters emotional well-being for both aging parents and their families. Parents maintain independence and dignity, living in their own space, while children benefit from the reassurance that help is close by. This arrangement can reduce caregiver stress and improve quality of life across generations. 

Financially, an ADU can offset some elder care expenses by reducing the need for costly assisted living or round-the-clock in-home care. Additionally, the added living space increases property value and creates a potential rental income source if parents no longer require the unit. 

Long-Term Planning and Quality of Life 

Building an ADU is more than just adding a physical structure — it’s about creating a sustainable, compassionate living solution that supports aging with grace and dignity. Families should consider future needs and possible changes in health status, designing a space that can adapt to evolving requirements. 

Consulting with healthcare professionals, financial advisors, and housing experts ensures a comprehensive approach that balances comfort, care, and independence. Taking the time to plan carefully results in a home environment that enriches relationships and provides security for years to come. 

Partnering with First Western Trust Mortgage

For families considering an ADU, First Western Trust offers personalized financial guidance and lending solutions tailored to these unique projects. With experience serving clients who have complex financial situations and a commitment to thoughtful planning, First Western Trust can help you navigate financing options that make building an ADU feasible and affordable. 

Whether exploring home equity financing or specialized loans for ADU construction, partnering with a trusted bank provides the expertise and support to bring your vision to life — ensuring your parents enjoy comfort, connection, and independence in their golden years. 

9 Common Mortgage Mistakes and How to Avoid Them

Posted on by First Western Trust Bank

Buying a home or refinancing your mortgage is one of the most significant financial decisions you’ll make. Yet, it’s easy to stumble into pitfalls that can cost you time, money, and peace of mind. Here are 10 common mortgage mistakes—and how you can avoid them with confidence.

1. Skipping Professional Guidance

The Mistake: Navigating the mortgage process alone can lead to oversights or misunderstandings.
The Fix: Work with a trusted lender or mortgage advisor who can guide you through the complexities and answer your questions.

2. Overlooking Total Loan Costs

The Mistake: Focusing solely on the interest rate and ignoring other costs like closing fees, points, and mortgage insurance.
The Fix: Compare the annual percentage rate (APR), which factors in both the interest rate and fees, to get a more accurate picture of your loan’s cost.

3. Misunderstanding Loan Terms

The Mistake: Borrowers often don’t fully grasp whether their loan is fixed-rate or adjustable, or how an ARM might reset.
The Fix: Ask your lender for a detailed explanation of your loan’s terms, especially how payments may change over time.

4. Ignoring Your Credit Score

The Mistake: Applying for a mortgage with a low credit score can result in higher interest rates or even loan denial.
The Fix: Review your credit report before applying and work to improve your score by paying down debts and disputing any inaccuracies.

5. Taking on Too Much Debt Before Closing

The Mistake: Opening new credit cards or financing large purchases while your loan is in process can disrupt your debt-to-income (DTI) ratio.
The Fix: Avoid significant financial changes or new debts until after your loan has closed.

6. Skipping Pre-Approval

The Mistake: House-hunting without knowing what you can afford can lead to disappointment or overcommitting financially.
The Fix: Get pre-approved for a mortgage to understand your budget and make offers with confidence.

7. Not Factoring in All Homeownership Costs

The Mistake: Many buyers only consider their monthly mortgage payment, overlooking taxes, insurance, maintenance, and HOA fees.
The Fix: Use a mortgage calculator that includes these costs to determine your true monthly obligations.

8. Failing to Lock in Your Rate

The Mistake: Waiting too long to lock your interest rate can backfire if rates suddenly rise.
The Fix: Work with your lender to lock in a favorable rate when the market conditions are advantageous.

9. Overextending Your Budget

The Mistake: Stretching to afford the maximum loan amount approved by your lender can leave little room for unexpected expenses.
The Fix: Choose a loan amount that fits comfortably within your budget and leaves room for savings.

How to Avoid These Mistakes with Confidence

Making informed decisions during the mortgage process doesn’t have to be overwhelming. Here’s how to ensure you stay on track:

  • Ask Questions: Don’t hesitate to ask for clarification on anything you don’t understand.
  • Do Your Homework: Research different loan types, rates, and terms before committing.
  • Stay Organized: Keep track of deadlines and required documents to avoid delays.

How First Western Trust Can Help

At First Western Trust, we know the mortgage process can feel complex. That’s why we offer personalized support to help you navigate every step with confidence. Our experienced team works closely with you to:

  • Explain loan options and terms in plain language.
  • Help you compare rates and costs to find the best fit.
  • Guide you through pre-approval and rate lock decisions.
  • Provide expert advice to avoid common pitfalls.

With our proactive approach, you can trust that no detail will be overlooked, helping you secure a mortgage that aligns with your goals and financial well-being.

Final Thoughts

Avoiding common mortgage mistakes starts with being informed and working with the right partner. By steering clear of these pitfalls, you can simplify the process, save money, and approach homeownership with confidence.

Ready to take the next step? Contact us today for expert guidance and tailored mortgage solutions that put your goals first.

Adjustable-Rate Mortgages: The Popular Choice in the Mortgage Industry

Posted on by First Western Trust Bank

As the housing market continues to remain strong, more and more people are turning to adjustable rate mortgages (ARMs) as their preferred option for financing their homes. Despite other mortgage options seeing a decline, ARMs have experienced a surge in popularity over the past year. So why exactly are adjustable rate mortgages gaining favor among homebuyers? Let’s take a closer look.

What is an Adjustable Rate Mortgage?

An adjustable-rate mortgage, also known as a variable-rate mortgage, is a type of home loan where the interest rate can fluctuate over time based on market conditions. Unlike fixed-rate mortgages, which have a set interest rate for the entire duration of the loan, ARMs typically have an initial fixed period (usually 5-10 years) and then adjust annually based on an index. This means that borrowers can take advantage of lower interest rates if they occur, but they also run the risk of their payments increasing if rates rise.

The Appeal of ARMs

So why are more people choosing adjustable-rate mortgages over other mortgage options? One reason is the initial lower interest rates offered by ARMs. During the fixed period, the interest rate on an ARM can be significantly lower than that of a fixed-rate mortgage. This can lead to lower monthly payments and make homeownership more affordable for some buyers. Another reason for the popularity of ARMs is due to rising home prices. With housing prices increasing, homebuyers may be looking for ways to save money in order to afford their dream homes, making ARMs an attractive option.

The Risks of ARMs

While there are certainly benefits to choosing an adjustable-rate mortgage, it’s important for homebuyers to understand the risks involved. As mentioned earlier, the interest rate on an ARM can increase after the initial fixed period ends. This means that borrowers may end up paying more in interest over time if rates go up. Additionally, ARMs typically have caps on how much the interest rate can increase each year and over the life of the loan. However, these caps may not protect borrowers completely from significant increases in payments. It’s crucial for potential homeowners to carefully consider their financial situation and future plans before opting for an ARM.

First Western Trust Mortgage’s Perspective

As a leading provider of mortgage loans, First Western Trust has witnessed the rise in popularity of adjustable-rate mortgages firsthand. The company understands that every individual’s financial situation is unique and offers personalized guidance to help clients determine the best mortgage option for them.

In addition to ARMs, First Western Trust also offers fixed-rate mortgages, jumbo loans, and other financing solutions to meet the diverse needs of homebuyers. With over 15 years of experience in the industry and a team of knowledgeable professionals, First Western Trust is committed to helping clients achieve their homeownership goals.

Conclusion

The surge in popularity of adjustable rate mortgages in the past year can be attributed to various factors such as initial lower interest rates and rising home prices. While ARMs may provide some financial benefits, it’s important for homebuyers to carefully weigh the risks involved before making a decision. With personalized guidance and a range of mortgage options available, First Western Trust is dedicated to assisting individuals in achieving their homeownership dreams.

If you’re considering purchasing a new home or refinancing your current mortgage, make sure to consult with First Western Trust for expert advice and tailored solutions. Your dream home may be more attainable than you think with an adjustable-rate mortgage from First Western Trust.

What You Should Know As A First Time Home Buyer

Posted on by First Western Trust Bank

Buying your first home involves more than just purchasing a place to live; it’s a significant step toward long-term financial stability. While being a first-time homebuyer can be exciting, the process can also be overwhelming for many people. Here’s everything you need to know about the importance of buying a home, how to purchase a home that maximizes your chances of financial success, and other first-time home buying do’s and don’ts. 

Getting Ready For Buying A Home

Buying a home for the first time can be overwhelming. Here are our top tips to help smooth the process — from saving for your first home to getting ready for your move-in date.

  • Start saving now. Even the lowest down-payment programs require you to pay at least 3% of the home value, not including moving or closing costs. This amount may seem small, but saving for a down payment can be a long process, so it’s best to start early.
  • Get pre-approved. A pre-approval letter gives you a better idea of how much you can afford by pre-approving you for a specific loan amount. Getting this pre-approval can save you time and ensure you have realistic expectations as you begin house hunting.
  • Ensure your credit score is high enough. You’ll need a credit score above a certain threshold to qualify for a particular loan amount. If your score is too low, consider boosting it to position you for loan approval and enable reduced interest rates.
  • Inspect the neighborhood with an eye to the future. Review neighborhoods and nearby amenities and ensure the local area will meet your current and future needs.

Know Your Mortgage Types

In addition to preparing for purchasing a home, first-time buyers also need to understand the complexities behind taking out and paying a mortgage. Finding the right home loan is important, and there are many options, including loans that:

  • Come in various terms, including 15-year and 30-year loans.
  • Have variable or fixed interest rates, enabling you to judge the circumstances of the moment before taking out a loan.
  • Are based on your eligibility with a certain membership group, like being a veteran. Sometimes, you may also qualify for a reduced interest-rate loan based on where you live or your profession.

To select a loan that fits your needs, you’ll need to understand the difference between the types of loans available and identify the one that will get you the best results for your economic situation. 

Key Budgeting Tips For First-Time Homebuyers

Buying a home requires you to consider several key budgeting aspects. Understanding these principles will ensure you can continue to afford your home’s mortgage, taxes, and upkeep. Here’s what you should consider when budgeting for a new home:

  • It’s not just the mortgage. When calculating what you can afford, remember that your mortgage payment isn’t the only payment you will make. You will also have property taxes, homeowners insurance, and more. Furthermore, there will be moving costs and inevitable repair costs. As such, you need to budget conservatively. 
  • Don’t just take out the maximum loan. Just because you qualify for a loan doesn’t mean you should take out the entire amount you qualify for. Doing so may saddle you with more debt than you can manage, leaving you in a position where you may need to catch up on your payments.
  • Build that buffer. Conservative budgeting also means that you start saving even more. Yes, you need to save for a down payment. However, you also need to create a budget reserve for major or minor repairs in case of catastrophic damage to your home due to wear and tear or an accident.
  • Remember the tax advantages and other cost reduction techniques. It is entirely understandable to be worried about the costs of homeownership. However, you should also consider the tax advantages of owning a home. Mortgage interest, insurance premiums, and property tax payments can be written off, reducing your overall tax burden. Furthermore, some investments — like an alarm system — can reduce the price of your homeowner’s insurance. Consult with a tax professional to understand how homeownership may impact your tax situation positively. 

Get Professional Support When Buying Your First Home

Buying a home for the first time is a significant responsibility, and the economic considerations that must be made cannot be understated. By following the tips above, you will be well on your way to purchasing your dream home and positioning yourself for future financial success.

If you are looking for a home to buy, remember it’s about more than just finding an excellent neighborhood, good schools, and kitchen layout. Your home is essential for generating wealth and preparing for your long-term financial future. There are certain things to know when you buy your first home, and at First Western Trust, we’re here to help. We have knowledgeable staff who can help you find the right mortgage lender, structure your loan appropriately, and ensure you are ready to make this major purchase.

The Benefits of a Mortgage Recast

Posted on by First Western Trust Bank

Homeowners understand that their monthly mortgage payment is based on the initial down payment and the loan term. Many homeowners who acquired a mortgage with high-interest rates often seek to refinance when interest rates drop. Others attempt to pay off their mortgage quicker by paying more toward the principal each month. Both options are viable solutions for reducing the amount of the monthly payment. A third option is a mortgage recast, which is a particularly beneficial solution when interest rates are high.

What is a Mortgage Recast?

Put simply, a recast mortgage is a mortgage that has been recalculated to reduce the monthly premium. When recasting mortgages, a lender will calculate a homeowner’s new monthly payment based on the outstanding balance and the number of years remaining on the mortgage.

A mortgage recast should not be confused with a mortgage refinance. Refinancing a mortgage means creating a new loan with a new interest rate, a new term, or both. But refinancing isn’t always a possibility when interest rates remain high. Additionally, many lenders charge closing costs for a refinance.

With a recast mortgage, a new loan is not created, and the interest rate on the loan does not change. Instead, the monthly payment is recalculated, and the remaining loan term and any equity in the home also remain unaffected.

Benefits of a Mortgage Recast

The primary benefit of a recast mortgage is, of course, lower monthly mortgage premiums. But there are many additional benefits to recasting mortgages, including:

No Credit Check or Lengthy Paperwork Processing

When a homeowner refinances a mortgage, a lender will perform a credit check. Typically, additional paperwork is required that is almost on par with the paperwork necessary for a standard mortgage. And while many lenders have facilitated the process, it can still take time for everything to be fully processed. However, there is no credit check requirement with a mortgage recast, and the process can be completed much faster.

No Closing Costs

Another significant benefit of recasting a mortgage is no closing costs. There may still be a fee for a mortgage recast, but it is far less than the closing costs for a refinanced mortgage. Depending on the lender, the fee may be only a few hundred dollars. 

Less Money Paid Towards Interest

A mortgage recast means not only lower monthly payments but also less interest paid as well. Mortgage recasting reduces the actual interest paid over the life of the loan, which decreases the total amount of the loan overall.

The Loan Term Remains the Same

When refinancing a loan, it is common to increase the loan term. For example, a homeowner who has already paid a loan for five years on a 30-year loan and then decided to refinance will likely start over with a new 30-year loan term.

Things to Know Before Recasting a Mortgage

While the benefits of a recast mortgage certainly seem great, there are some things to be aware of before homeowners opt for this solution.

The Interest Rate Remains the Same

Homeowners seeking to take advantage of lower interest rates when they have a mortgage with high interest cannot do so with a mortgage recast. The interest rate remains the same. However, recasting a mortgage can be a great option if interest rates are still high or have risen even higher than the homeowner’s current rate. It might also be prudent to look at other non-traditional mortgage options designed to fit the needs of homeowners focused on wealth planning.

Cannot Access Home Equity

When a homeowner refinances, they often can refinance the loan for a larger amount — essentially tapping into their equity to receive extra cash. Refinancing the loan for a larger loan is not an option when recasting a mortgage. 

Not Available with All Lenders

Not all lenders offer a mortgage recast option. Additionally, not all types of loans are eligible, and there may be restrictions depending on the current state of the mortgage.

Final Thoughts

A mortgage recast might be a better option for some. One of the best ways to determine if recasting a mortgage is the smart thing to do is to figure out the ultimate purpose of your current loan. Are you simply seeking to lower your monthly payment? Or do you have plans to access some of your home equity? Do you want to use the savings from a mortgage recast to improve your future wealth planning potential, or do you wish to take advantage of a much lower interest rate?
Homeowners that want to know how to recast a mortgage and whether it is a good option for them can contact First Western Trust to learn more. First Western Trust specializes in providing customized mortgages and understands the unique financial situations of its clients. With several lending options and a highly experienced team of professionals, First Western Trust is ideally suited to help with a mortgage recast and other home lending needs.

Home Refinancing Strategies in High-Interest Rate Environments

Posted on by First Western Trust Bank

Interest rates remain high for fixed-rate loan mortgages. These market trends could lead to significant increases in monthly payments and debt-to-income ratios for future borrowers. During such times, homeowners looking to refinance a mortgage might benefit from seeking alternative options to traditional fixed-rate mortgages. Through collaboration with a seasoned financial institute, it is possible for homeowners to find lower rates while most of the market deals with a high-interest rate environment. 

However, some transitory refinancing solutions or mortgage products may lead to costly expenses in the long term. Therefore, homeowners must understand each available solution before signing on the dotted line. Buyers can tap into several mortgage refinancing alternatives to minimize the toll of high-interest rates. 

Apply for Adjustable-Rate Mortgages (ARMs)

ARMs are essentially mortgage arrangements that gradually deviate from a fixed interest rate in home loan refinancing. ARMs begin with a fixed interest rate and adjust across a six-month or annual period. While ARMs once had fixed-rate periods of less than three years, these have increased recently to provide improved financing stability.  

For example, a mortgage provider might offer a 7/1 ARM arrangement. Under this agreement, the borrower services a fixed rate for the first seven years and an adjusted final term. In a 3/3 ARM, homeowners service a fixed loan for the first three years and an adjustment for the remaining three years. 

Lending institutions can help guide homeowners through various ARM options based on their needs and priorities. While ARMS offer lower initial payments, it is essential to note that future adjustable interest rates can spike based on market and economic changes. 

Homeowners should check with their lenders regarding exact ARM practices, as some policies offer cutoff amounts that protect against significant interest increases. Also, it is important for borrowers to make the necessary financial plans for servicing higher-adjusted loans that may occur in ARM arrangements. 

Discuss Loan Assumption Options

Buyers who can afford higher cash down payments may consider taking over the remainder of a fixed mortgage term from current homeowners to avoid high-interest market rates. The process, known as loan assumption, allows buyers to take over a property owner’s original term conditions in home loan refinancing. 

However, loan assumptions usually involve substantial paperwork to address various changes that originate from the start of the loan. A trusted lender can help sort through the details, such as accounting for the difference between sales pricing and outstanding loan balances. 

Leverage Home Equity Line of Credit (HELOC) 

A HELOC is an effective method of refinancing home payments during high-interest periods. The revolving loan type allows borrowers to secure a loan against up to 85%–90% of their home equity. According to the Consumer Financial Protection Bureau (CFPB), nearly a million consumers borrowed against home equity in Q2 2022. 

A HELOC offers an adjustable interest rate, where borrowers can tap into the funds via a line of credit for an agreed draw period. HELOC draw periods usually span 5–10 years and depend on financial assessments conducted by the lender, which may include a homeowner’s creditworthiness and the home equity value of a property. 

The HELOC process lets homeowners leverage their equity without replacing current low-interest mortgages with higher-interest cash-out refinances. While HELOCs can help homeowners leverage their equity in high-interest environments, these lines of credit carry some risks. 

It is important to discuss other potential risks and fine print associated with the loan type with a trusted lender before proceeding with the arrangement. For example, since HELOC relies on home equity, borrowers face the danger of foreclosure if they fail to repay the loan based on agreed-upon terms. Also, buyers may feel tempted to borrow additional funds from their HELOC for personal spending, resulting in debts and financial challenges down the road. 

Consider Temporary Interest Rate Buy-Downs

Financial institutions may recommend a temporary buy-down for home loan refinancing in high-interest environments. A temporary buy-down usually involves an additional initial payment in exchange for lower interest rates down the mortgage life cycle. Lenders may extend the discounted interest rate for a few years before reverting to the original values. 

For example, a borrower might request a buy-down at 3.5% for the first two years of a 15-year mortgage loan with a 5% interest. When opting for a buy-down, it is essential to consider factors like the total upfront cost and buy-down period to determine the best long-term outcome. 

Broaden Refinancing Options

Owners may go beyond mortgage refinance options in home loan refinancing by exploring different sales transactions. For example, individuals may consider contract-for-deed arrangements and private mortgages, where sellers and buyers negotiate the interest rates and related terms between each other for a property transaction. These privately settled arrangements may also include late payment provisions and penalty arrangements. 

Engaging in these unconventional financing options requires close attention to the legal agreements to avoid balloon payments and other factors that could result in high-interest rates in the long run. 

Final Thoughts

First Western Trust offers mortgage services for optimized outcomes across different settings, including high interest rate environments. The experienced team applies years of expertise to personalize banking services and diversify investment portfolios for enhanced wealth planning and strategic methods to refinance home loans. Those who partner with us have access to maintaining a loan within our portfolio loan program. Being a part of our program allows us to underwrite cash flow and be more creative than most brokers which can make a significant difference in helping you obtain the right loan to meet your needs.
Reach out to First Western Trust’s mortgage team to discover the most suitable strategies to refinance your home today.

How First Western Trust Can Help You Find the Right Home Loan

Posted on by First Western Trust Bank

Even in the best of circumstances, finding the right mortgage loan can be an extremely complicated and daunting process. Fortunately, at First Western Trust, we’re here to help. With decades of experience with high-net-worth individuals and a genuine understanding of a family’s financial needs in a constantly changing market. 

Experience With High-Net-Worth Individuals

At First Western Trust, we’re proud to offer a vast array of mortgages for all clients. We have years of experience and have successfully completed mortgages in all fifty states, giving us some of the broadest perspectives on the market today. No matter our client’s financial situation, we’re here to help ensure they get the mortgage product they need, and we guarantee that we offer superior service to every one of our clients.

However, we also understand that high-net-worth individuals have specific requirements and need concierge-level services for managing their portfolios. This high level of needs demands that high-net-worth families partner with a bank that knows how purchasing a home will impact their portfolio. 

For example, a high-net-worth individual may need a jumbo loan to finance their property since it is valued too high for a conventional conforming loan. At the same time, a family may buy a larger home for a growing family. They may also buy a vacation home to spend a summer at or be looking to downsize towards retirement.

For any reason, a person obtains such a mortgage, mortgages for high-net-worth individuals are always more complex than mortgages than average home loans. A high-net-worth family may need to consider various implications of their loans, including how such a mortgage will impact their overall banking services or when it may be appropriate to begin working with a private bank to handle their financial needs.

Types of Loans Offered

Our mortgage consulting team works closely with high-net-worth clients to ensure we find the right solution for their needs. Furthermore, we work closely with our clients at all steps of the mortgage planning process, ensuring they are comfortable with the various financial solutions provided. 

At First Western Trust, we offer many loan types and services. We offer jumbo loans, conventional loans, loans for second homes, portfolio loans, investment property loans, and deed-restricted loans.

This vast array of loan types can be overwhelming, and even the most financially astute of clients may need assistance differentiating the best product for their needs. Not knowing how to identify the right loan is entirely understandable, as mortgages for high-net-worth individuals may have various financial implications, including:

  • How a mortgage will impact tax planning
  • The need to fold in a mortgage with overall estate planning
  • The need to balance repayment of a mortgage loan with investing in the stock market, businesses, and repayment of other debt

High-net-worth individuals need to work with a bank like First Western Trust. At First Western Trust, we have experience working with clients with extremely specific and complex needs. We understand the intricacies and implications these products can have on a portfolio. By working with our clients, we can help them identify which loan best suits their needs and ensure they get a more valuable product than one found at any other national chain of banks. 

More to the point, we also know that our clients demand the highest level of service and as much time as possible to consider a loan’s implications on a portfolio. That’s why we ensure that we provide our clients with as much detail as possible. We always give all closing figures at least 72 hours in advance. Doing so enables our high-net-worth clients to be as prepared as possible for closing. 

Final Thoughts

Jumbo loans, mortgages for second homes, investment property loans and more are major loans that can have a massive impact on the financial future of high-net-worth individuals and their ability to plan their finances for years to come. That’s why a bank with no experience in this area can’t just handle mortgages for high-net-worth individuals.
First Western Trust has years of experience working with high-net-worth mortgage lenders and ensuring that any home loan ultimately fits with the financial future of these individuals. We’re here to fulfill our customers’ mortgage needs and help them get whatever mortgage loan will fulfill their financial planning requirements. Contact a Mortgage Loan Officer today for more information on how we can help you get the mortgage loan that fits your financial future.