A cash-out loan is essentially a way to refinance your mortgage with a loan that is larger than your current loan balance. The difference between the new and the old loans is “cash” that your customer can keep to reach a wide assortment of goals. Successfully selling that cash out loan option to your customer is directly proportional to your ability to explain to him that this is the only way to improve his life and reach his goals. Cash-out loans can be used for anything from remodeling, planning a vacation, sending a child to college, paying for a wedding, starting a business and the more typical use of paying off credit card debt. There was even an instance in my career where we were able to process a cash-out loan for a customer who needed bail money and funds to pay for a quality defense attorney for his son.
The first step in selling cash-out transactions is to take complete applications from all of your prospects regardless of whether you think the deal will close. In my career, I have seen many loan officers lose substantial business because of prejudice. There was an underlying assumption that the customer would not be interested in. Keep in mind that you are the true expert and your job is building that relationship which begins by truly getting to know your customer. Your customer wants to refinance to obtain a more stable rate, improve his debt, and reach some larger financial goals. Your job is to walk in with an open mind and demonstrate how you will help make this happen for your valued customer with the cash-out loan option.
Check Vital Signs
The next step is to think of yourself as a “mortgage doctor.” Check your customer’s vital signs in order to see where he is at so that you are able to prescribe him the best antidote for his current status. Your prescription is going to improve his life and make him happier and healthier.
Once you have a customer’s completed application in hand and taken his vital signs, you will be armed with their entire financial bill of health. You may find that they have much more in credit card debt than they had originally thought or reported. Your customer did not think credit card debt was something that a cash-out mortgage could help. Keep in mind that you are the expert and you will be able to dispel this preconceived notion. Since most of the cash-out loans are utilized to pay off credit card debt, let’s look more deeply at how to sell this fact to your customer and explain how it will improve his financial health.
Provide Hands-On Insight
Once you have a complete application and offer in hand, you can put the ownership of this process and its benefits right in the customer’s hand. You can begin by explaining that you understand his skepticism about financing credit card debt over the course of a 30-year loan. Empathize with your customer’s belief that he is certain he will be able to pay them off sooner by paying extra each month. Explain that the average credit card will anywhere from 27-32 years to pay off using the minimum payment. This is also if there are no unexpected challenges, such as a loss of a job, health issue, etc. that may come in the way of paying minimum payments and making them on time. Even paying just the minimum payment over the next two decades will only pay off 3% of the balance. That is practically nothing!
Provide your customer with some pen and paper. Have him use his phone calculator. Begin by having him list his current loan balance payment and the amount of current credit card/other miscellaneous debt. Then instruct him to add the total balance combined as well as the combined monthly payment and calculate that to what an entire year of payment looks like in a dollar figure.
Then present the structured mortgage and demonstrate how it will pay off everything and provide a new lower payment. Don’t stop there! Break that down even further to how much your customer will pay after the first year of this new restructured mortgage. Have your customer calculate the difference between the old and new yearly dollar figure to demonstrate the large difference of savings in the first year alone. Then demonstrate what five years of savings will look like for him and move on to ten years and then the life of the loan. The huge savings will be evident immediately to your customer in a way that will enable him to see his life financially lighter perspective.
Review all of the facts and figures with your customer so that he is able to see in a tangible and real way how it relates to his own life. Once these numbers are evident in black and white, they can be visualized into something greater. The customer is able to see the hundreds of thousands of dollars in savings that you are providing with this personalized solution. Ultimately, you are selling your cherished customer a new way of life in the form of a cash-out loan and a new, less stressed, more financially secure existence.
Cash-out loans are sometimes overlooked when they might be the perfect option for a borrower. The key is looking at all of the details and knowing how to present this option to your borrower. Check out the recorded webinar below and keep reading to learn how you can successfully sell cash-out loans.
Josh Friend is founder and CEO of Insellerate, true mortgage CRM. Josh began his career as a loan officer and soon moved on to open six mortgage call centers. Over the past 19 years, he has grown to manage and train thousands of loan officers, processors, and marketing managers. With a keen eye for developing best-in-class sales processes, he leveraged automation software to build a better loan cycle. Combining the best from both a CRM and lead management system, Josh now enables lenders to achieve higher revenue goals with Insellerate.