Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
Let’s jump right in! Analysis paralysis is the state of over-analyzing or over-thinking a situation. In effect, as Wikipedia says, a decision or action is never taken. To some degree, this is something that is more relevant today than ever before and is having a wide range of impact on decisions or indecisions that people make.
For the past seven weeks, I have been in touch with a couple who have owned their single-family home in New York for over ten years. When they purchased their home, they obtained two mortgages – a 30-yr fixed first mortgage, and a small home equity line of credit for the balance to avoid “jumbo rates.” They expeditiously paid off their home equity with an inheritance that they received a few years ago, but they never refinanced their first mortgage.
Granted after the market crashed, they lost a lot of equity in their home, but they are quite aware that their house is worth significantly more today than what they bought it for. When they approached me in August and went through the basic information, I determined that they were well qualified with enough income, assets, and good credit to make a refinance worthwhile. I asked them why they didn’t refinance sooner, and they embarrassingly admitted there was no good reason for the delay.
I carefully went through all their information and gave them what I believed to be determinedly good rates and terms for a potential refinance so they can start saving with the lower rates. Yes, I went through the 15-year, 20-year, 25-year, and 30-year differentials, and the “true cost of interest” over the life of the new loan depending on what term they chose. We discussed the break-even points regarding any closing costs and expenses that they might have to incur. We even reviewed their other long-term debts and plans and took all of those variables into consideration.
The options were well-documented and carefully analyzed, and they were excited to discuss and get back to me. Needless to say, that I was surprised when I didn’t hear back from them so quickly. I checked infrequently throughout the next few days, and over the next few weeks and each time they said they were evaluating the options and that they would be in touch. I was finally able to schedule a follow-up meeting with them a few weeks ago, and I began to understand what I was faced with.
Each of them was doing extensive investigations online and through friends about the pros and cons of refinancing. Some acquaintances scared them about the refinance process, and how burdensome and intrusive it has become over the past few years. Other research suggested that people in their age-bracket only consider 15-year mortgages which made them nervous. Some financial advisors they spoke with proposed reinvestment vehicles with the monthly cash savings they would have that could be allocated towards investments. The list went on and on.
When I sat with them, the amount of “information overload” that they were experiencing was overwhelming even to me. There is so much information “out there” that it is easy to be frozen with uncertainty because every piece of research leads you somewhere else. Even worse, there are so many “opinions” out there, by unapprised onlookers that make the “noise” and hesitancy even more gripping. I wish I could say that I was able to reach through to them, but I wasn’t at that point. When they finally called me back this week, rates were almost a half-percent worse. Even worse, they still couldn’t decide.
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