In this episode, the host delves into the concept of blended rate mortgages, also known as blend to extend mortgages, which is a financial tool that combines existing mortgages with newer ones at lower interest rates. The host discusses the potential pitfalls and risks associated with this approach, cautioning listeners against falling for what may seem like a beneficial option but could ultimately jeopardize their financial stability and home ownership.
In this episode, the host delves into the concept of blended rate mortgages, also known as blend to extend mortgages, which is a financial tool that combines existing mortgages with newer ones at lower interest rates. The host discusses the potential pitfalls and risks associated with this approach, cautioning listeners against falling for what may seem like a beneficial option but could ultimately jeopardize their financial stability and home ownership.
Hello and welcome to the Accelerate Your Legacy podcast. I'm Laura Sexton, your trusted financial coach and money mindset specialist. Join me as we explore the world of money and money mindset while also paving the way for a lasting legacy that extends far beyond money. Together we'll eliminate stress, amplify freedom, and ensure you stop paying for your past so you can start saving for your future. If you're seeking peace in your finances, more margin in your budget, and a legacy that inspires generations to come, you're in the right place. Hey, Accelerators! Today I wanted to talk to you about something that is blowing my mind. It's making me absolutely insane. If you've read the title, you already know what it is. It is a blended rate mortgage. Some of these are called blend to extend mortgages and oh my gosh, Atlanta. If you have been considering this, you want to stick around for the answer to this. And if you have not been considering it, but you want to know what I'm all hopped up about, please listen to this episode and know that I love you and I want the best for you. And I don't want you to fall into the traps that a lot of people are throwing out there. So I heard about a blend to extend mortgage from my friend, Steve. Steve is part of a BNI group. It's a business networking group. And 1 of the real estate agents in this group said, I want to talk to anybody that's considering a blended mortgage. He and I hadn't never heard of this before. And so we went on to ask some questions. What is a blended mortgage? So, a blended mortgage is when you take your existing mortgage. And you blend it with a newer mortgage at a lower interest rate. So you don't get the lower interest rate though. You get. A blending of the interest rates. I don't understand why you would want to do this it's being pitched as if you have high interest credit cards, what you can do is you can blend them together with your mortgage. So you bring them into your mortgage and instead of having this high interest rate, you blend the 2 debts into a lower interest rate. My friends, what you have just done is you have taken that pizza. And you have now leveraged it against your home. So what was an unsecured debt, being a credit card, is now secured to your home. So if you don't pay it back, you know what happens? You lose your house. Before when it was just a credit card, if you didn't pay it, your credit was shot, but they weren't coming after your house. They may come after you for the amount. They may sue you for the amount, depending on what it is. They can do that. Your creditors can come after you. They can file lawsuits. They can garnish your wages. There are things that they can do, but there are things they can do to a limit. They cannot come after your home. But if you blend your credit card payments or any other consumer debt payments into your home, your home is now at risk. And that is what this mortgage broker is saying. She's saying, hey, why don't you come blend your credit cards in with your mortgage? The upside to this is that instead of paying a 22 to 26 percent interest, which is the average right now for credit cards, You're making it an 8 percent interest for your house or 6 percent wherever you're at. But you have to remember that instead of just having your regular mortgage at whatever rate it was, you were now refinancing it, but not refinancing it. So you're blending it. And by doing this, what it's doing instead of being like a HELOC, where you take out a second mortgage, which News alert, a HELOC is a 2nd mortgage on your home. Instead of being 2nd mortgage on your home, you're blending it into your, your mortgage rate. So what they can do is a mortgage broker can sit down and work through this and they get a cut. Of you folding it into your mortgage. That's why the mortgage broker is really all up about this. They're like, look at this. It's going to benefit you. You're going to pay less than interest. It's going to be wonderful. Well, you're not going to pay less than interest. My friend, unless you completely change your habits on how you use that credit card, because 9 out of 10 times people that I work with that gets a consolidation loan for their credit cards, 9 out of 10 times, they get the consolidation loan and then they Jack their cards right back up to the limit again. I have seen this countless times. I can, I literally would have to sit down and do some in depth study of my clients to find out which ones didn't. Have this happen when they had a consolidation loan, because most of them have. People that even aren't my clients that I've just had a conversation with. This happens all the time. So you can take this idea of I'm going to take my credit cards. I'm going to fold it into my home loan. It's going to be better for me in the long run, because it's only going to be 8%, except you were putting your home at risk. Please don't do this. This is, this is not a benefit to you. This is not something that's going to help you. I went and looked at what this blend to extend, or you can do blend to term. So blend to extend, you blend the mortgage together and you extend the mortgage out. So instead of having your mortgage for 15 years or 30 years. You now extend your mortgage longer, so your payments stay the same, but your term is longer, so in the end, you're paying more interest to your lending agent, or you can blend to term. A blend to term mortgage means that your monthly payment is higher, but your term stays the same. Why are we doing this? Why are we doing this? I do not understand. So, some of the pros that are being touted is that you can have a lower interest rate. Look at you, get a lower interest rate. You know what my interest rate is on my credit cards? It's 0%. You know why it's 0%? Because I don't have one. A blended mortgage. Here's another pro that they tout. You can avoid a prepayment penalty. Did you know you get penalized for prepaying your mortgage? You might want to check in on that. Make sure that when you sign the documents for your mortgage that there is not a significant prepayment penalty. You don't want that. The other pro of a blended mortgage is that you can unlock home equity. We, we're trying to pay the house off. I know so many people who purchased a home. For 150, 000 and because they kept going in and taking out equity, taking out equity, taking out equity, taking out equity, they've had the home for 40 years and they still owe 150, 000. Why? That is mind blowing to me. You could have a home that is completely paid for, but instead you keep taking equity out and you have to keep paying the mortgage. Pay it off. And then you have more money in the bank and you don't have to keep borrowing against your house and putting your life at risk. If you want to retire at 65, but you still owe on your mortgage, what are you doing? I want to retire, but I can't because I have to pay the mortgage payment. Your social security, it's probably not going to cover your mortgage payment and your food. What I'm seeing these days is social security payments of 2, 400 a month. Can you live your life on 2, 400 a month while you're still paying your mortgage? Maybe if you didn't have a mortgage to pay. Maybe if you weren't paying the average. 1, 900 a month mortgage. Maybe you could do it then, but if you have 2, 400 a month coming in from Social Security and 1, 900 of it are going out to your mortgage, you have 500 to live the rest of your life. Do not trap yourself. We, we are doing this whole money thing to be free. That is the whole reason why I'm here is because I want you to have freedom. I want to talk about one of the biggest cons to the blended mortgage that the mortgage lenders are telling you about. I'm telling you it's a big con because you're putting your life at risk and you're making your life harder. In the long run, you're making things harder for yourself when they could just be easy. But one of the biggest cons that the mortgage lending companies are telling you about is that there is an inflexibility in moving. I'm going to read this directly from the Pegasus Mortgage Lending Center, Incorporated. Blended mortgages combine your current mortgage rate with a new lower rate, so they're combined. However, unlike regular mortgages, you can't move a blended mortgage to a different house as it is tied to your existing property, you can't move can't move. You have to take your blended mortgage. You have to then refinance the property, which means that at that point. You've already paid to blend it right? You paid your broker to do all the work to blend the mortgage, but now you have to pay for a new mortgage with new closing costs and new everything to fix the mortgage on your current house so that you can move to a different house. You were adding so much stress and so much extra work on the back end. If you were considering something like this and you're like, I just want to take out some of the equity in the house so I can pay off my credit cards or I can give myself a little bit more margin. If you were considering that a HELOC is the way to go. It does give you a variable rate, so it could jump up. Considering what things are doing right now. I would not, I would not try it, but a HELOC would be the way to go. That's going to put you at more risk and it's going to hurt you in the long run because now you have two payments every month. So that's the thing with a blended mortgage is only one payment with a HELOC, you have two payments, right? But it also has a variable rate, so it could jump up sky high. We saw 8 percent rates recently in the mortgage arena, where we were looking at 2 to 3%, and 8 percent on a 2nd mortgage could be very painful. And let me just explain to you that when banks can increase your rates, they'll do it when they can decrease your rates. You have to pull teeth to get them to even think about starting the paperwork. They're not going to decrease your rates. A variable rate just means it's going to go up. Do not get sucked into the lull of, look, this could make it easier because it can't. This is going to make your life harder. Do not do a blend to extend. Do not do a blend to term. I hope I've made myself clear. That I think this is an absolutely horrible, horrible decision. Please don't do it. And if you want to have a conversation about this, if you're like, Laura, you're a crazy person. I'm a mortgage broker and I think this is wonderful for people. Let's have that talk. I'd love to bring you on and you tell me how people can get more freedom and more peace by doing this. I'm going to go ahead and bet that you can't find anybody that's willing to combat me on that one. I want you to have peace. I want you to have freedom. I want you to accelerate your legacy. And I hope you want that for yourself. If you heard something on the show that you enjoyed today, or if you know somebody that's considering this, can you share this? Podcast with them. I would absolutely love to get this message of hope and freedom and peace out to more people in the world because peace in your finances is not something that we talk about very often. I want more people to know that it is totally possible to balance your checkbook and not be stressed, to talk to your spouse about money and not be concerned about how they're going to respond. I would love to have a conversation with you about the best ways we can create freedom. I have a strong desire to have this conversation with more people. So would you share it? Can you help me get this out in the world so that people find the message of hope and freedom and peace that I'm sharing with you today? Thanks so much, Accelerators. Go out and make a difference. Thank you for investing your time with us today on the Accelerate Your Legacy podcast. Remember, your legacy isn't just measured in dollars and cents, but in the tools, habits, mindset, and reputation you leave behind. Don't just listen to the show, but take action on what you've learned. Share this wisdom with a friend who can benefit and help us spread the word by rating and reviewing the podcast. For questions or encouragement, reach out to me on Instagram at Accelerate Your Legacy or explore the resources listed in the show notes. I will be back with you next week. Until then, build your legacy with intention.