Written By: Karen Deis
"What are your interest rates?"
Ever hear that question before?
What if you knew how to answer that question much differently than your competitors by providing them with not only the current interest rate, but the net effective interest rate and monthly payment examples instead?
The information we are about to share...is a great tool to use to set yourself up not only as the mortgage expert in your area, but to work with accountants who can show your clients how to complete a new W-4 form to realize the tax savings immediately. When you read this article, you will also learn 8 1/2 different marketing ideas on how you can use it to get more business.
Subscribers can download a Net Effective Payment Chart with not only the net-effective interest rates, but also the p & i payments, so you can demonstrate the actual dollar amount difference to your clients. The payments are based on a $150,000 loan amount but since interest rates are provided, you have the ability to figure the payment on any loan amount.
But, before we go any further with this article, it's critical to understand what the term Net Effective Payment/Interest Rate means.
It means that it's the effective interest rate your client will pay if they complete a Form 1040A when filing their income taxes.
The biggest impact is reviewing it with first time homebuyers who have filed IRS Form 1040EZ in the past. Now they will get to write off their mortgage interest and property taxes.
They have a couple of options here: If they file a new W-4 form, they have the option of having less money deducted from their federal tax withholding (from their paycheck) - which they can subsequently use towards their mortgage payment.
If they elect NOT to re-file a new W-4 form with their employer, chances are they will receive a larger, lump-sum refund at the end of the year.
While we won't go into the technicalities on how to do this, we suggest that you meet with an accountant (also a great way to get your foot in the door) and ask them to show you a case study (what-if scenario) on the difference between filing a 1040EZ and 1040A and how interest rate deductions affect the amount of income taxes paid. Ask them to show you how your clients would go about filing an updated W-4 Form.
Here is an example of just a few effective rates and effective payment examples based upon a 6%, 7% and 8% interest rate.
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