Quicken Loans recently launched YOURgage, a program that puts a unique spin on conventional fixed-rate loans by allowing clients to choose a term between 8 and 30 years.
We sat down with Bob Walters, Chief Economist at Quicken Loans, to discuss what makes YOURgage a great option for clients across the country.
QL: What trends or behavior in the mortgage market led to the launch of YOURgage?
BW: Three or four years ago, many homeowners were taking cash out of their homes for other items, but now, more people are realizing that they would rather pay down their mortgage. So they’re essentially doing a “cash-in” refinance, where they invest more money into their home instead of pulling out additional debt.
QL: What changed to make the YOURgage possible now? Regulations? Fannie & Freddie?
BW: It’s not a brand new thing, but the reality is that much of our industry is based on convention – 30-years, 15-years, interest rates ending in eighths, and for a long time we’ve all just accepted that that was the way it was. Now, it’s time to break out of convention and offer what is best for the client.
QL: What makes YOURgage beneficial to people?
BW: Customization is really what it’s all about. It’s about matching the desires of each client, whether they want to pay a specific amount, minimize interest, pay off their loan by a certain time – whatever their goal might be. Clients can set the type of loan they feel comfortable with in order to meet their goals.
QL: What type of clients can benefit from the YOURgage?
BW: All types of clients, I can give you 100 examples. Let’s say a couple has a 30-year fixed and they are three years into the loan. Instead of refinancing back into a 30-year, why not take a 27-year loan or 25 if they are comfortable with it? Or how about a client that is planning on retiring in eight years or wants it paid off in 17? The examples are endless since everyone’s situation and goals are different. Actually, the 8-, 9- and 27-year mortgages are the most popular right now, so there’s a range of needs being met there.
QL: By exploring options other than a typical 30-year fixed or ARM, does this change the way clients view a home loan?
BW: I think clients see it as a more flexible way to meet their specific needs, down to the exact year that makes the most sense for achieving their objectives.
QL: Do you expect other lenders to offer a “choose-your-term” option?
BW: Yes, there are a few out there who offer it, but I expect additional lenders to want to offer it as well. However, not every lender sees benefit in it. They may stick with conventional terms and tell clients they can just pay more each month to pay their loan down faster. But, the reality is, many folks pay just what is listed on their statement, nothing more. So if a client has a specific goal, why not pick a mortgage term that lets them get there with a payment that’s comfortable and discipline that’s built-in.
QL: Does the YOURgage revolutionize mortgage products or does it simply meet the needs of an ever-changing housing market?
BW: People asked, and we are happy to offer it. We are simply responding to a housing demographic that is changing because of life events, job changes and salary fluctuations. We’re giving them a loan that matches their needs without having to add years to their mortgage each time they refinance in order to keep a comfortable payment.
QL: Let’s say I’m a 28 year-old first-time home buyer and want to buy a $130,000 house. Which YOURgage should I choose?
BW: It depends on what you want your payment to be, how soon you want to pay off your home, and how much of your income you want to devote to your mortgage. A YOURgage is anywhere between 8 and 30 years, so depending on your goals, a 30-year might make the most sense. But if you can handle a 29-year or 28-year, why not shave that extra interest off? Ultimately, you have to ask yourself what you desire more, reduce interest by being more aggressive with the mortgage, or freeing up cash flow for other things.
QL: Which YOURgage would you personally choose?
BW: Definitely the lowest comfortable payment. I think it’s important to accelerate and not go backwards. This program definitely makes you think proactively about getting rid of your loan.
QL: Any other thoughts about the YOURgage?
BW: That it’s a great program namely because everyone’s situation is infinitely different, so they shouldn’t feel like they have to be shoehorned into a 30-year or 15-year simply because that’s the way it’s always been. So far, it’s been a huge hit and I think it’s just another example of a mortgage trend that is consumer-friendly.
For more information on this great product, please visit our YOURgage page.