Latest / The Jon Sanchez Show / The 3% Mortgage Trap: When Is It Worth Giving Up Your Low Rate?
Transcript
- Jon G. Sanchez: Good Thursday afternoon to you. Welcome to the John Sanchez show on News Talk 780 KOH. It's a pleasure to be with you and pleasure to be with one of our two co-hosts. Mr. Merlard has the afternoon off, but we do have Mr. Aaron Clark of Adrility, as we do each and every Thursday. I just look forward to every Thursday being able to be with you, man. Yeah. That's right. That's right. Exactly. Exactly. Aaron Clark, Edge Realty: That should be the marquee, you know? Jon G. Sanchez: All those all the podcast stats, everything just goes shooting up on Thursdays. I just don't understand it. Aaron Clark, Edge Realty: Yeah, right. Jon G. Sanchez: But you look so handsome on YouTube. Yeah, I I gotta admit, man. You you do, you do. And for some you know, one thing I hate about YouTube, and and I I I'm I'm I'm talking to our people that we use you know, to record the show, to put it on YouTube. It's like it always grabs these pictures. You never know when it's gonna grab a picture of you. And 99.99% Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: of the time, I'm making the most stupid looking face. But for some reason, Aaron Clark, Edge Realty: Ha ha Jon G. Sanchez: when it grabs the picture of Aaron Clark, he looks so handsome. His face is smiling, his beautiful white teeth. I mean, you know, i I I I don't I don't get it. Aaron Clark, Edge Realty: that's funny. Jon G. Sanchez: I don't get it. The camera has to know, you know, who the good looking one is on the group and who's not. But the same thing with Dwight. It always gets a good picture, yeah, but not me. It it's just Aaron Clark, Edge Realty: There's a there I mean there's a few on there I've seen where we all look like we're from a wanted poster, so like we just did a train robbery. Yeah. Jon G. Sanchez: Yeah, not many though. Yeah, yeah, exactly. Exactly. Bad day of the market, interest rate skyrocketing, housing prices plummeting. Yeah, those I think I think we deserve that. That's the that's the downside of having video when you're also on the radio. guys. Aaron Clark, Edge Realty: Well now I mean everything everybody uses AI for all that stuff and it's all integrated into the systems. So you Jon G. Sanchez: Ye y yeah. Yeah, yeah. Aaron Clark, Edge Realty: get su sometimes like AI goes, I want everyone to look serious. And so it grabs all these snapshots of us looking like we're about ready to, you know Jon G. Sanchez: Right. Yep. That's right. That's right. I have that ability a and I don't I don't use it. Well, I told you the other day that that I found out with the again with this software that we use, I have the ability to to have an AI twin. Aaron Clark, Edge Realty: really? I did not know that. I don't no, I don't remember that. No. Jon G. Sanchez: I do. I do. Yeah. I didn't tell you. Yeah. Yeah. It's crazy. It's I not that I'll ever use it, but I experimented with it. And so I did a little just a little 10 second, you know, re you know, fun recording. And son of a gun. I mean, it takes it actually takes me and then it puts in the words. The the only th it was Aaron Clark, Edge Realty: Wow. Jon G. Sanchez: it was weird facial expressions. The voice sounded pretty Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: similar. The but the facial r actions were just they kind of look, you know, you definitely could tell it was AI. But that's where this technology's going, Aaron. That's where the technology's going is, yeah, Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: I I you know, at some point there's not gonna be any live radio hosts anywhere. It's just gonna be all AI. Because what's crazy about it is you once it has, once it it's captured you, you know, as far as your video and stuff like that, once it knows what you look like, all you literally have to do is type in whatever you want your AI twin Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: to say, and it'll, it'll just do it. So you could just type in, you know, the the entire show and my AI twin. Maybe I am the AI twin right now. Huh? Gotcha thinking now, don't I? Gotcha thinking. Yeah. Aaron Clark, Edge Realty: yeah, yeah. See, I think now the way AI works is it's pretty easy to spot it after a few seconds. It 'cause it's not quite there yet. But what's interesting Jon G. Sanchez: Yes, yes, agree. That's right. That's right. Aaron Clark, Edge Realty: that we're seeing now is, you know, one of the big things that's becoming popular i in the marketing world is a lot of AI used social media platform basis for advertising, faceless YouTube channels, faceless social media pages. And then you also have you have a lot of people that are creating social media platforms and even like the OnlyFans stuff, where it's Jon G. Sanchez: Yes. Aaron Clark, Edge Realty: somebody using an AI model to create it. And now we're seeing it a lot in the scam world. Jon G. Sanchez: yeah. yeah. Good point. Aaron Clark, Edge Realty: So that would be an interesting topic on on the show is to talk Jon G. Sanchez: That would Aaron Clark, Edge Realty: about some of the latest scams that we're seeing with AI, because they're becoming very prevalent from cloning voices, Jon G. Sanchez: Yes, yes. Yep. Aaron Clark, Edge Realty: video, misrepresenting, all kinds of things. Jon G. Sanchez: have you have you ever seen on on YouTube and I I haven't seen it in a while, but there's a one channel that I know of, there's probably more. And this company that does this, they take Trump and they put him into music videos. And I tell you what, isn't that a ma i the ones with Trump and Putin and and Kim Aaron Clark, Edge Realty: I have seen that. It's yeah, it's wild. Yeah. Jon G. Sanchez: Jong-un and I I mean, wow, and they're Yeah, it it's it is amazing what the AI on the graphic side can do. It's it but it but at the same time, it's getting that's it. Well that's what I mean. Aaron Clark, Edge Realty: Yeah. Where's it gonna be in ten years? Or five years? Yeah. Jon G. Sanchez: I I don't I don't know if you're gonna have live actors, if you're gonna have live radio hosts. I really don't. because it's Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: it's it it's evolving so doggone fast. I mean, I get alerts, you from again the the company that we use. we just came out with this AI feature. we just came up with that A I'm just like, I haven't learned the one that you released, you know, three months ago, much less, you know, all these new ones Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: and it's It it's it's amazing. It is absolutely Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: amazing what it can do. And and you know, I'll I'll just disclose when I get done with the show and and I edit it, I AI edits the show. I cut out the commercials, but AI will edit all the ooms and ahs and all that stuff, and it does it literally in a matter of a few seconds. Where, you know, basically an hour long show, you know, we have roughly twenty three, twenty-four minutes of talk time on average. It would it take a human producer probably close to an hour every day. To do that editing where AI does it in a matter of a few seconds. I mean, it's crazy. It's crazy. And then I Aaron Clark, Edge Realty: Yeah, that's wild. Yeah. Jon G. Sanchez: can do the, you know, the social media, it'll it'll also tell me, here's the best things that you talked about. Here's your top they're called magic clips, the top things that you talked about on the show, this little 30 to 50 second clips, and it'll already do that. And AI will already edit it and make us look good. And and then I press that button and it goes out to whatever social media sites, YouTube, et cetera, that I want. So I'll use make that into YouTube shorts, which I know you've seen a million times. So yeah, Aaron Clark, Edge Realty: Yeah, absolutely. Jon G. Sanchez: but it's there's there's a lot of AI that goes behind this show that people just don't see, you know. But Aaron Clark, Edge Realty: Yep. Jon G. Sanchez: but we are live, we are human beings. You can tell by all our screw-ups and things like that. I always love talking tech with you, man. We need to do it just a just Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: a a tech show, John, the John and Aaron Tech Show. There's so many things I just I love talking with you about Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: this. All right. Well, let me tell you what we have lined up for you today. We're gonna go through today's market activity. Remarkably didn't do all that bad today. We did have a a big bump up in bond yields again. a little bit of a bump up in oil prices again. Hey, but Iran says they're they're willing to make a deal, Aaron. You know, why the why why did oil pri yeah, why did right why Aaron Clark, Edge Realty: W What? Surprise. We haven't heard that before. Jon G. Sanchez: did oil prices go up if Iran says they're w you know willing to make Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: a deal? I I I just don't understand. geez. Yeah, what are we like? Fifty. Maybe they're doing AI. Yeah. No, I know. Aaron Clark, Edge Realty: The yo yo effect. Maybe they're maybe they're doing AI. Yeah. Jon G. Sanchez: but yeah, so uptick there. So again, a little bit of a of a sloppy day today, at least on the the down the SP side. Well, I can't say sloppy on the SP. It lost two points, big deal. NASDAQ actually was way down this morning. I mean, I'm looking at my notes. We were down, gosh, almost 300 points right before the opening today. And actually finished with a gain of about four points. Yeah, yeeha, but it was it was a gain. So we'll take it. But anyways, we'll go through that. and then we're gonna get into a really interesting topic today. We've titled today's show The Three Percent Mortgage Trap. When is it worth giving up your three percent or your low rate mortgage? Fascinating, huh? Got you thinking, didn't it, Mr. Clark? Got you thinking. Aaron Clark, Edge Realty: Yeah. Well it honestly it's a question that comes in all the time. Yeah, it's yeah, Jon G. Sanchez: Does it? Okay. Good. Good. Aaron Clark, Edge Realty: you know, you've heard golden handcuffs, like it's it's that position Jon G. Sanchez: That's right. Aaron Clark, Edge Realty: where people are constantly wondering if is this a moment, is this the right move? Can I afford this? Because they're people are used to being able in in the last twenty years, we've talked about this many times. We've only seen a progression upward with rates being low to where people Jon G. Sanchez: That's right. Aaron Clark, Edge Realty: every five years could change their situation without having really any increased cost. And they've grown accustomed to that. And Jon G. Sanchez: yeah. That's right. That's right. That's right. Aaron Clark, Edge Realty: this has been the longest period really where people have kind of been in a position where they go, I I I I can't do that. I can't leverage my house. I can't switch homes. I can't do take money out, whatever it is. And so Jon G. Sanchez: I'm stuck. Aaron Clark, Edge Realty: it's kind of an interesting conversation is is the balance of is this the time or a lot of the ones that are in the place where they have to do it. You know, and wondering yeah, exactly. So it's a good topic. Jon G. Sanchez: Yes. Life changing event. Yeah. That's right. That's right. Well, you know, we're yeah, we thank you. Where where we're gonna go with this is again, I think we all agree if you do have that I had a client the other day, two and a half percent mortgage. so let's just say the two to three percent range, we're probably in our lifetime, you know, probably we'll never see that again. I mean, I'd be surprised. I really would be. But then, you know, all of a sudden, here's what happens in life, right? You find that dream home and you go, my god, do we stay put? Because look at we've got a you know, 3% mortgage, or do we give up that incredible rate and move to our dream home, right? They we we've got kids, we were busting at the seams, we we need more room, whatever the reason may be. So today Aaron and I are gonna do the math. And again, we're gonna be asking when your low mortgage rate, as Aaron hit s hit it right on the head, becomes the golden handcuffs. So we're gonna go through all the things that you need to think about if that decision ever comes your way. And and and you're you you know you need to kind of Do the old Ben Franklin T chart and put all the positives on one side, all the negatives on the other. Aaron Clark, Edge Realty: Ha ha. Jon G. Sanchez: And then and then make a make a decision off of that. D have you ever used that? Do you ever do that? The Ben Franklin T chart? Yeah. Yeah. I I do it all the time. I it it is it is foolproof. It is literally foolproof. Aaron Clark, Edge Realty: yeah. Yeah, absolutely. Yeah. It's very helpful. Jon G. Sanchez: It really is. It really is. So gonna be again a a really fun topic. But let's get down to the stock market side of things. As I said, not a not a you know It's real exciting day today. It was earlier this morning. I tell you, it looked like we're on on the path for, like I said, a pretty rough day. But had some positive events happen that I'll share with you. But here's where we finished for the day. We finished down 162 on the Dow, point three one percent loss to a close of fifty one thousand three forty nine. Like I said, a three point gain on the NASDAQ and a two point loss on the SP 500. the oil situation. So here's again what happened $2.22 gain on oil, $94.68 a barrel. We hit $96 earlier in the session. But then the tone improved after Reuters reported that a potential phased reopening of the Strait of Hormuz is being discussed with Iran. Oil quickly backed away from those highs. That eased the concern a bit. And like I said, we finished up about $2.22. So that was that. Now let's move over to the other issue, the treasury market. Not quite so fortunate here, and seven basis point increase on the tenure, five eighteen, five point one eight percent. We had another Fed member today. Today it was New York Fed President John Williams, voting member, said it's reasonable to expect another rate increase this year. And then we had Philadelphia Fed President Anna Paulison, also a voting member, say that, quote, some modest further tightening may be warranted if conditions evolve as she expects. It's like, folks, we should just come out and have the guts to say, look at Wall Street, prepare. We got another rate increase coming. I I mean, it's read between the lines. so that's what pretty much attributed again to what's going on in the bond market. while we're on that subject, let's hit the 30-year mortgage according to Mortgage News Daily in Dwight's absence. I'm kind of glad he's not here today. I don't think he'd be in a good mood, Aaron. I'm whispering Aaron Clark, Edge Realty: No. Jon G. Sanchez: to you here. You ready for this number? A 19 basis point increase today on the 30-year fixed Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: mortgage. 19. Remember, folks, 100 basis points Aaron Clark, Edge Realty: That's crazy. Jon G. Sanchez: in 1%. It is a huge, huge one-day move. I mean, you're talking almost a quarter percent in one day. 7.4%. five percent Aaron Clark. Seven point four Aaron Clark, Edge Realty: Mm-hmm. Jon G. Sanchez: five percent. Man, this momentum continues, I which I don't think it's going to, but man, if it did, yeah, you're knock, you're knocking on the door seven and three quarters. That's a that's a nasty psych. Matter of fact, Wall Street Journal today did a great story of what we've talked about for the last couple months, that psychological barrier, Aaron, of 7% in the, in the, in the, in the borrower's eyes, right? And again, we touched on a book months ago and And they just did a story, really good story, by the way. If you you missed it, but yeah, 745 on the 30 year 15 year was 7.1, up 23 basis points for the day. So let's just call it a quarter percent right there, right? 7.1%. 30 year jumbo. You want to take a guess at this one? 7.55%. Aaron Clark, Edge Realty: No. That's nuts. Jon G. Sanchez: Almost, yeah, yeah, 0.15% increase. 30-year V FHA, 7.05% today. Up 18 basis points. 30 year VA, 707, up 18 basis points. I mean, they just nailed it right across the board. Just right across the board. So yeah, tough, tough, tough environment on that side of it. All right, you're now up to date on that. When we come back, I want to hit a few movers and shakers, and then we're gonna get an early start on our three percent mortgage trap. Welcome back to the John Sanchez show on Newstock 780KO8 with Aaron Clark of It's related white as I said has the afternoon off. All right, we're gonna get to our topic, the three percent mortgage trap in just a moment. once again, to recap the market, we finished down one sixty-two on the Dow, NASDAQ rose three, the SP down one, oil up two dollars and twenty-two cents. But the basic story of the day was the bond market with a seven basis point increase on that tenure to yield a five eighteen, which transitioned over to that. Aaron, did you happen to see the story on Oracle today? Aaron Clark, Edge Realty: No, I didn't. Jon G. Sanchez: That broke crazy. Crazy. Think about let me share this with you real quickly. So this was one of the pressure points on the NASDAQ this morning when the story came out. Bloomberg reported that Oracle, which by the way finished the day down $5.04, 3.48% loss to $139.52. Bloomberg reported that the company sent a force majeure notice to the developer of their new Mexico data center project. Now, what does all that mean? So this is a massive, massive two, two point something gigawatt data center that's being built in New Mexico. I mean, it's so big. The president touted it when they broke ground, on and on and on. enough to power multi-millions of homes, right? That's how much power is in this thing. So, like I mentioned on the show the other day, Aaron, 60, I think the number 62 billion or 64 billion. I think 62 billion. of AI data center projects are at a halt right now for various regulatory and Aaron Clark, Edge Realty: Geez, I didn't realize it was that much. Jon G. Sanchez: yeah it is it's a significant sum. mainly of course community saying, you know, great, we don't want it in our backyard. Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: Well this this happened with with this new this project in New Mexico of Oracle's. and trust me, there's a lot of money behind them. There's 20 Wall Street banks have lent Oracle 18 or lent the project 18 billion dollars. I mean That's I'm sure there's a heck of a lot more that's out there. So what's this force majeure? So they they they so the the natural gas company in that area, which was gonna supply the natural gas to the data center to power, you know, all the all the servers, et cetera, they're running into all kinds of environmental problems getting the permit from New Mexico to get the gas there. So all these delays are starting to happen. So Oracle came out today, and I've never seen a company do this and again filed the force majeure. And what it says is we're not responsible for payments to the lenders because these of these events are happening out of our control. Think about that for a second. Think if you were, okay, you got again 18 you know Wall Street banks lent 20 billion, so let's just call it or you know, roughly a billion dollars each, and you just found out that your your borrower just said. Hey, you know what? We're filing this legal notice. And by the way, we may not be able to pay you when we said we're going to start to pay you because we can't get this project, you know, up and running and create cash flow. How many more of these could we see happen? I think I think this may set a precedence for Aaron Clark, Edge Realty: Yeah, it sets a precedence. Yeah. Jon G. Sanchez: for all these others. Yeah. So I can just see it. I agree. I agree. Hey, Mr. Mortgage Company. Yeah. Force majeure. It's that's that's right. Aaron Clark, Edge Realty: We should try that on our own stuff. Yeah. We can't pay you, my bathroom remodel is is late. Jon G. Sanchez: That's right. Exactly. Or come up with any reason. But yeah, I thought that was Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: interesting. That was again why we kind of set a negative tone this morning. Meta, man, this thing's just on fire. What do you what do you think of this Muse? This this this Muse announcement a couple of weeks ago, but this week it's really been focused. just is ripping this stock higher. Just ripping up thirty-three dollars and forty nine cents just today. It's up in September already, it's up thirty-six percent. thirty-three dollars and forty-nine cent gain today on meta, seven seventy seven fifty nine. What do you think of Muse? Have you played with it yet? Aaron Clark, Edge Realty: No, I haven't messed with it too much. I've just been seeing some of the reports about it, but it's pretty interesting, all the stuff that they're doing right now. Jon G. Sanchez: Yeah. Yeah. Well it it hit the the financial services stocks and insurance stocks a couple of days ago, because it's saying, you know, we're all gonna be out of work, basically, because meta, because of Muse, the AI agent's gonna take over managing money and it's gonna go shop the best intro insurance for you and you know, the list goes on and on. So getting a lot of talk in Aaron Clark, Edge Realty: I mean hopefully it creates good competition in the areas where we need it. I mean that there's some pros with it. Yeah. Yeah. Yeah. Jon G. Sanchez: Yeah, yeah, I'm sure it will. Well, I think just AI in general it's already doing that. It's already doing that. And then of course they came out with the the two thousand dollar glasses that you know from meta that tie into the the Muse AI agent. So yeah, it's crazy, but boy, investors just loving it. Moderna, big move today, it's almost six point nine eight percent. I was gonna say almost seven, twelve dollars and seventy one cent rise to one ninety four eighty two, continuing its strength. Lily up thirty two dollars and eighty cents. Again, just standouts there in the in the healthcare area. MGM down four dollars and seventeen cents, eleven percent loss after people incorporated PPLI the the symbol. They withdrew their acquisition proposal for MGM. So that put some pressure on the stock down 11%, $4.17 loss at $3368. Other than that, pretty light on the economic calendar side of things. We had our initial claims up, excuse me, down a thousand filings for the week, continuing claims up two thousand filings. you know, so on so forth. It just really was a more of a lockluster day. But you know, in your world, Aaron, new home sales nationwide up six point four percent month over month. you know, year over year basis, home sales though down two percent. So got a little bit of a peak there, which I'm I'm trying to figure out why would we have received a peak in in August? Rates I guess rates back down a little bit there, but Aaron Clark, Edge Realty: They backed down a little bit. We were in our seasonal high that that's reflecting. There's a lot of I mean, you know, cause that data trickles down way behind. Yeah. And I think Jon G. Sanchez: Yeah, good point. Okay. L little reasons there. Yes, yes, obviously, that's for sure. Aaron Clark, Edge Realty: a lot of those new home builders were offering lots of incentives to move product at that point as well, because they were getting bottlenecked. Jon G. Sanchez: Yeah, yeah, exactly. All right. Speaking of mortgages and houses, we're gonna tackle this when we come back with Aaron, three Aaron Clark, Edge Realty: Mm-hmm. Jon G. Sanchez: percent mortgage trap. When is it worth giving up your low rate? Welcome back to the John Sancho Show on New Stock seven eighty KOH Aaron Clark of Edge Rility. Once again, we finished down one sixty-two on the Dow, rose three on the NASDAQ, and a decline of two on the SP five hundred. All right, all of you that are fortunate enough out there to have that three percent or somewhere near that mortgage. This show is devoted to you. Here's the situation. When does it make sense to give up that 3% mortgage? And you may be saying, well, wait a minute here. It's never going to make sense. And for some of you, it may not. But today we're going to give you some ideas where it potentially, everybody's circumstances are different, it may potentially make sense for you. So the first one, again, I'm going to use Aaron's term, the golden handcuffs. Let me explain why this is such a big deal. According to Realtor.com, in the first quarter of this year, nineteen point five percent of mortgages in the country were at a three percent rate or lower. Nearly half were at a rate of four percent or lower. And only twenty-two point one percent of mortgages were at six percent or higher. And if you just joined us today, we skyrocketed in mortgages, according to mortgage news daily, up nineteen basis points. To a a a 30 year fixed rate of seven point four five percent, just to give you a perspective. So, Aaron, here's the first question. Are you seeing people who want to move but won't because they don't want to give up that 30% mortgage? Aaron Clark, Edge Realty: yes. but I think, you know, we've talked about this on the show quite a bit with pri gas prices as high as they are, inflation as high as it is. I don't think that it's so much that it's you know, they they won't because they don't want to lose that magic number. I think it's because there's a lot of uncertainty and it's more of an affordability by picking up The new product at that higher rate and they're going, okay, well, if gas prices are this high, you know what you I think we were talking about this on the show the other day that it was like diesel was seven dollars a gallon or something like that, right? Jon G. Sanchez: yeah. yeah. Yeah. Aaron Clark, Edge Realty: So if gas prices are this high and groceries are this high and there's just all this stuff out there, that it's not so much giving Jon G. Sanchez: That's inflation. Aaron Clark, Edge Realty: up that 3%. It's that I just don't feel comfortable in taking a risk where other things could go up as well. If it was stable, I I think if we were in a market where Gas prices where they always at, groceries were all they where they always are at. Then I think people would actually look at it more from the perspective of do I want to give it up? As opposed to do I want to take the risk? Yeah. Yeah. Jon G. Sanchez: Right. Okay. Interesting perspective. And we're going to talk about some solutions for those of you that don't want to give it up here shortly. But let's put a little let's put a little bit of math to this. Okay, so let's say this. Let's do an example. All right, let's say you have a $350,000 house at a three percent mortgage, 30-year principal and interest payment, you're at $1,476 a month. Now imagine financing that same $350,000 mortgage. At when I run the numbers, we're at 7.37 this morning on on the 30 year. So I'm just gonna use that number. So you finance it 350,000 at 7.37, right? So from 3% to 7.37. Aaron, that's $2,417 a month. That is a difference. Aaron Clark, Edge Realty: Yeah, and where are you gonna get a $350,000 mortgage when our our median home price is almost $600,000? You know? Yeah. Jon G. Sanchez: Yeah, right, exactly. Yeah, so let's double that, right? That's right. I was being kind, all right. I was being kind for our listeners and you know other parts of the country. but that's a difference of nine hundred and forty one dollars. And to your point, here we are, you know, let's just bump it up to seven hundred thousand. Now you're talking a two thousand dollar a month difference approximately. Two thousand dollars a month, exactly to your point. Who has that excess cash flow to do that? So that's why not even buying a more expensive house, you know, can sway people. So When someone says to you, why don't these people just move? What do you say? Because they can't afford it? Okay. Aaron Clark, Edge Realty: I mean that's why, it's 'cause they can't afford it, yeah. Jon G. Sanchez: All right. Now, let's buy that dream house, right? I've fallen victim to this one. I've used you share those stories where here, here, yeah, I know. You're out and about and it's like, my God, I gotta have this house. It's just it's that's the one. Aaron Clark, Edge Realty: Yeah, we've heard your stories. That's the one. Yeah. Jon G. Sanchez: I'll figure out somehow some way to be able to do this. All right, so we got a hypothetical couple here. Mike and Lisa. Mike and Lisa are middle-aged, age fifty-two. Currently live in a house of Worth about 700,000. They've had it for a while. They got the mortgage down to 300,000 and they are one of the lucky ones at 3%. So they have obviously about $400,000 in equity. Then they find that dream house. Out and about on a Saturday morning, they stumble upon this housing track and go, That's the one, honey. That's the one. But of course, they like a big house, right? But now the price is 900,000. But it's the dream property. Better ne better neighborhoods. Hey, Mike finally gets his shot. Kitchen, Lisa loves the kitchen, right? That big granite island. She loves all that. There's room for the grandkids eventually. I mean, they've wanted something like this for years. So they sell the old house and put, say, $400,000 down for simplified math. So now they've got the new mortgage, the $900,000 house, $400,000 down, half a million dollar mortgage at 7.37%. With PI, it's roughly $3,450 per month. $3,450. So then you you sit back and go, okay, what would you do? What would you do? Would you take on that higher mortgage rate to get that dream home or not? So Aaron, with that said, let's go to reason number one to move. Your life has changed. Aaron Clark, Edge Realty: Yeah. I mean, I think that in your example, we're talking about a couple that's retired. they're they've been working really hard, yeah, their Jon G. Sanchez: Getting close. Yeah. Yeah. Aaron Clark, Edge Realty: whole life. They've probably have a lot of residual income in other areas that they can shift around. So affordability becomes something that they can splurge to make up the difference to step in. And I think that for people like that, the reality of it is is that if you've gotten to that place in life, then yeah, you should move. You should make that change. Because right now, I mean Remember that if rates are high, then you're gonna get a better deal on the purchase price and negotiations of the house. Jon G. Sanchez: There you go. There you go. Aaron Clark, Edge Realty: If if rates are low, so everybody think back to the COVID days when rates were under three percent, I had buyers that would call me and say, Hey Aaron, I wanna buy a house, I'm approved up to whatever dollar amount and I I would have to tell them, are you prepared to offer $50,000 over the asking price, waive the inspections, and waive the appraisal contingency? If the answer is no, I cannot help you. You will lose on every home. It's just a waste of your time. So those people all paid way more because of those lower rates. So in a situation like that, like you can take advantage as long as you have the room in your budget to compensate for the difference, because as we always say, at some point in time. The rates are probably going to soften a little bit. We might get that Jon G. Sanchez: They will. Aaron Clark, Edge Realty: one, one and a half, two percent relief. It could be five years, it could be two years, who knows? And you can change that. So you've got to but you've got to be able to survive that time period. And if you have the ability to do it, then yes, in this scenario, I think it's worth moving. Jon G. Sanchez: And I didn't put it in our notes, but you and I both know this is the reality. So so they go from the seven hundred thousand dollar house to nine hundred thousand dollar house. They can afford it in this example. But here's something else to remember. Yeah, okay, the payment's probably gonna be a bit more. But hey, if we get a ten percent appreciation on a nine hundred thousand dollar house, that's ninety grand. Ten percent on a seven hundred thousand dollar house, obviously seventy grand. Twenty thousand dollar differential, not bad. Right. And people I always tell this to clients that are, you know, call me and they Hey, you know what? It's just, you know, Jack and I, and you know, we we leave three out of the four bedrooms closed because it's just he and I in this, you know, three thousand square foot house. We're thinking of downsizing. What you think? And I'm like, what's your payment? If they even have a payment, you know, it's like twelve hundred dollars a month because they've lived there forever. I'm like, You're you're crazy. Keep it. And I use that, I use that appreciation example all the time, saying, Look at you would you rather be in a nine hundred thousand dollar house that's appreciating. 10% or a you know six, seven hundred thousand dollar house that appreciates. So you really have to factor that in. But again, life has changed, right? You you maybe you had another child, kids moved out, divorced, marriage, all these different things that happen in life. So, what you have to think about is are we making our life fit our mortgage instead of making our house fit our life? Right. And I think that's a really important philosophical question we have to ask. All Aaron Clark, Edge Realty: Absolutely. Jon G. Sanchez: right. Reason number two, you can actually afford it. So, Aaron, this sounds pretty obvious, but Then again, we have to get to the qualification side. So fill in for Dwight on this one. Aaron Clark, Edge Realty: I mean, you have to make sure in those scenarios that the bank can qualify you. And one thing that we're not talking about in this whole scenario basis is if you're upsizing too from that seven hundred thousand to nine hundred thousand year increasing home, et cetera, it's probably gonna be newer, it's probably gonna be bigger, it's probably gonna be in a better area quality wise, which means maintenance costs are gonna be more, insurance is gonna be more, you know, all of those things. So those are all things that you need to take in consideration as well. Because if you're selling that $700,000 home that's let's say $1,500 square feet and you're buying a $2,500 square feet, now you have Jon G. Sanchez: Mm-hmm. Aaron Clark, Edge Realty: two HVACs, you have more square footage, et cetera, then you're taking on increased cost for maintenance as well and landscape and things like that. So you need to make sure that the bank's going to qualify you on that. And Dwight doesn't ask, you know, things like what's the maintenance cost on your house to qualify you. He's looking at Jon G. Sanchez: Sure. It's your responsibility. Aaron Clark, Edge Realty: Debt to income ratio, credit, all that. So you have to look at that stuff. And then you need to put the whole pros and cons list, the increased costs, the difference in how your lifestyle is going to be. Because what we don't want to do, Corey and I have this conversation with every single person that calls us and says they want to buy anything, whether it's giving up a mortgage or buying first time. We don't want someone to come in so stretched thin that they get into a place that they're what we call house poor. And now they're regretting their decision. Cause it's really Jon G. Sanchez: Yes. Yes. Aaron Clark, Edge Realty: easy to fall in love and make bad decisions. After that, when the dust settles, you don't want to be kicking yourself, right? So then you have to decide, even though I qualify for that, because Dwight's going to qualify you for the max. We Jon G. Sanchez: Yes. Mm-hmm. Aaron Clark, Edge Realty: got to work backwards and decide what you're comfortable with and then decide if that's something that you should spend. Jon G. Sanchez: Great advice. All right. When we come back, we're going to wrap things up. A couple points we're going to mention. The first one is could you keep that three percent mortgage? We'll talk about one strategy. If you're like, I can't give this up, but I also want my dream house. So we'll touch on that one. Welcome back to the John Sanchez Show on Newstock Seven Eighty K which Aaron Clark, Edge Realty: six seven three sixty seven hundred. Jon G. Sanchez: All right, beautiful, beautiful. All right, now let's get to the three percent mortgage scenario. Could you keep the three percent mortgage? Okay, Aaron, lay it on us. There are some scenarios where it does make sense to do both. Aaron Clark, Edge Realty: Yeah. So you can do it. And you know, there's obviously more information to this, but you can keep that. A lot of people that I have that are in a situation where they have to move, so job relocation, for example, but they don't want to get rid of that mortgage, they don't want to get rid of that house. What we're doing is we're putting that house into the position of an investment property, using it as a rental, and we're taking because remember if you have a two and a half, three percent mortgage on a property like that. you're probably making a nice profit at the end of every month. So then you turn that profit towards the increased payment on your new purchase to compensate for the difference. And, you know, it's not perfect. It's not like it fills in all of the hole, if you Jon G. Sanchez: Right. Aaron Clark, Edge Realty: will, but it gets you close enough that, you know, your 7% mortgage now feels a little bit more like maybe a 5% mortgage or something like that. And it Jon G. Sanchez: Mm-hmm. Mm-hmm. That's right. That's right. Aaron Clark, Edge Realty: becomes affordable. It's temporary. And then later on they can do something with that house. You know, sell it, keep it, whatever. Jon G. Sanchez: Well, i it and let's keep in mind, Aaron, this is a tremendous way to get your feet wet in the world of investment real estate, right? You you already own the place. It's not like it's gonna, Aaron Clark, Edge Realty: Absolutely. Tessa Waters. Jon G. Sanchez: you know, maybe throw some paint on there and freshen it up and then you put it on the rental market. One cautionary note that I've seen people make mistakes on, however, and that is this. Unless you like I've got some, I'm thinking of some clients right now who bought an RV at retirement and they're traveling, but they didn't sell their house, they're renting it Because they didn't they don't know when they're coming back, if ever, right? So this does not apply to those type of people. But if you go and buy that new dream home, you need to consider putting what was your primary home into an LLC. But you must be very careful and have a great discussion with your accountant on this. Because remember, once you do that, it no longer is your primary home. And so you have very strict rules, the two out of five year rule to keep that tax-free exclusion if you are married. Remember, you can sell your primary home if you've lived there two out of last five years and make a half a million dollar profit. If you're single, you can make a quarter million or two hundred and fifty thousand dollar profit. But a lot of times, Aaron, you and I have both seen this. The people are not aware of the rule, and they'll do that. They'll keep that house, turn it into a rental, and then they forget about it. And essentially the downside is you're walking away from potentially hundreds of thousands of dollars of tax-free money. Aaron Clark, Edge Realty: Correct. Jon G. Sanchez: where you could have sold that if you like being a landlord, sell it, make the profit tax for you while you're still within the window and take those proceeds, go buy another house for rental and, you know, or whatever you want to do. But that's a real it's a real great strategy, but you have to be aware of that. And same thing, you know, when you get a divorce, you gotta be aware of that two to two Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: out of five year rule. It's it I've seen a lot of people get get caught on that one. Aaron Clark, Edge Realty: Yeah, you you have to be careful of that. So I have a lot of clients that when they do that, it's usually temporary. You know, it's like a Jon G. Sanchez: Yes. Aaron Clark, Edge Realty: a job situation. Or it's it's I wanna kick the can down the road, see what the next couple of years brings me, and then I'll make that decision when I have to. Yeah. Jon G. Sanchez: Yeah, I hear that one a lot. I'm glad you brought that one up. Yep. I'm glad you brought that one up. Okay. We're running rapidly out of time here. What's your final piece of advice for someone that finds the dream home but they got the three percent? What's kind of the Aaron Clark checklist at this point? Aaron Clark, Edge Realty: I mean, for me it's always gonna be if you did out everything you wanna do to become in that place where you're in your dream home, do you feel comfortable enough that if the unforeseen things of life pop up that you still feel comfortable enough that you have the resources to be able to handle them? And if the answer is yes, hey, make the move. We only live this life once and do the fun things that you've worked so hard your whole life to achieve and go from there. And if not, wait. Give it time. Time settles all things. Jon G. Sanchez: Yeah, yeah, absolutely. It it's it's amazing. I know in houses that I've had over the years, there's some houses that you just walk in and you're like, This is a home, this isn't just a house. I've had others where it was just the opposite. It's like, man, it's gonna be a great investment, it's got a lot of room, it's good for the ego, whatever the case is, and it turned out to be a miserable house, right? So you you Aaron Clark, Edge Realty: Mm-hmm. Jon G. Sanchez: gotta look at to your point the quality of life that it's gonna afford you. And again, maybe it's better schools or if you're retired. Closer to medical facilities or other amenities and things. So there is so much that goes into it. Just I think the bottom line is don't be handcuffed, golden handcuffed, to the 3% mortgage. There are many, many alternatives and ways to slice the, slice the pie, as the saying goes. Great job, Aaron. Appreciate you so much. We'll do it again tomorrow on the John Sanchez show. God bless.