Category: Mortgage

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.

Whether you’re buying your first property or your fifth, a mortgage is a significant financial responsibility. Fortunately, it’s not particularly complicated. There are really only three major components of a mortgage that you need to compare when selecting which one is right for you:

• Term: the length of time over which you’ll be paying off the loan
• Amount: the total amount of the loan
• Interest rate: the interest charged on the loan

Interest rates on mortgages are amortized over the full term of the loan so that you pay the same amount every month, but that amount can vary if your interest rate changes. The interest on your loan will either be a fixed rate or a variable rate, each with its own pros and cons.

Advantages of Fixed Rate Mortgages

The main advantage of a fixed-rate loan is predictability. You’ll “lock in” a rate when you sign the paperwork on your loan, and that rate will apply for the rest of the loan’s term, regardless of external market forces. As a result, you’ll pay the same predictable monthly payment for the next 15 to 30 years.

The total amount of interest paid will depend on the principal and term of the loan. For example:

• On a $1 million loan at an interest rate of 3.5% over 30 years, you’ll pay a total of $616,560 in interest.
• On a $1 million loan at an interest rate of 3.5% over 15 years, you’ll pay a total of $286,788 in interest.

We’ve written in more depth about the pros and cons of 15- and 30-year mortgages here, but in either case, a fixed-rate loan means that your rate of interest and monthly payments won’t change.

Pros and Cons of Adjustable-Rate Mortgages

An adjustable rate mortgage (ARM) is considerably more complicated. The basic structure is that your interest rate will be fixed for a set amount of time at the beginning of the loan, usually at a rate much lower than the fixed rate you’d typically receive. After that period, your interest rate will change on a regular basis until the end of the loan. Some important terminology includes:

• Adjustment frequency: how often your interest rate is adjusted through the lifetime of the loan
• Adjustment index: your interest rate will typically be tied to an independent benchmark like the rate on Treasury bills, the Secured Overnight Financing Rate (SOFR), the Cost of Funds Index (COFI), or the London Interbank Offered Rate (LIBOR)
• Margin: on top of the adjustment index, you’ll pay a few extra percentage points. This might be expressed as “SOFR plus 2%” — if the SOFR is 0.5%, you’d pay 2.5% on your loan.
• Cap: typically, your bank will offer a cap on the amount that your interest rate can rise in a given adjustment period.

Some loans will offer a cap on monthly payments instead, but any unpaid interest in this case is added to the principal of the loan, potentially leading to a loan on which you owe more than you initially borrowed.

• Ceiling: the highest number that your interest rate can reach during the lifetime of the loan.

During the initial fixed period, an ARM is typically much cheaper than a fixed-rate mortgage, allowing you to qualify for a larger loan. In an environment where interest rates are likely to fall, you might even benefit from lower monthly payments later in the loan. 

That same volatility can work against you, though. If rates climb, your monthly payment could skyrocket in just a few years. The Consumer Financial Protection Bureau has taken steps to prevent predatory loans that might result in astronomical increases in monthly payment, but there’s still an inherent risk.

Is an Adjustable-Rate Mortgage Right For You?

There are a few situations where an ARM might present significant advantages:

• Falling interest rates: during economic booms, interest rates tend to rise. If you’re buying at what you think is a peak in interest rates, you might benefit from falling rates a few years down the road without needing to refinance. 

As of the middle of 2021, we’re in the exact opposite situation. Interest rates are as low as they’ve been for nearly 70 years, so signing an ARM in the hopes that they’ll fall is ill-advised.

• Short-term ownership: if you’re planning on living in your house for significantly less than the life of the loan, you might benefit from the lower introductory rate of an ARM and sell before rates go up.
• Higher future earnings: if you’ve recently graduated from med school, law school, or obtained an MBA, you’re likely to see a significant bump in income in the next few years. An ARM will allow you to borrow a higher amount at your current, lower income, and when your monthly payments go up, you’ll be able to afford them with your predicted future income.
• Early payment: if you have the cash on hand (or are likely to in the near future) to pay off your mortgage early, an ARM might be right for you. For example, you might buy a new house with a two-year ARM, sell your old house, and use the proceeds from your old house to pay off the remainder of the loan on the new house before the interest rate rises. You could also do the same with an inheritance or the sale of a business.

Talk to First Western Trust Bank

No matter what your situation, an ARM is something you should consider carefully before signing. At First Western Trust Bank, we can combine our in-depth knowledge of the state of financial markets and interest rates with a holistic examination of your personal finances and goals. The end result is a tailored recommendation and loan that’s right for your circumstances both now and years down the line. If you’re ready to start looking at mortgages, get in touch with First Western Trust Bank today.