Episode 25: Stuck at 3%: What Today's Mortgage Market Means for Buyers, Homeowners, and Divorcing Couples
Are you holding onto a 3% mortgage and wondering if moving will ever make sense again?
With rates in the 6% range and home prices well above where they were a few years ago, many homeowners are staying put, and buyers have fewer homes to choose from.
Todd Sheppard, founder and owner of Inspired Mortgage Brokers and a Certified Divorce Financial Analyst, explains how he builds a preapproval around a comfortable monthly payment, how discount points and loan recasting work, and what divorcing spouses should know about keeping or buying a home.
Listen in as Todd shares real client examples to help you set a price range you can live with, decide when buying down your rate pays off, and plan your next home purchase during a divorce.
What You’ll Learn:
What's keeping homeowners with low rates from selling and what could change it.
The question to ask before "How much can I qualify for?"
A $250 option that can lower your mortgage payment without refinancing.
How to tell if buying down your rate is worth the upfront cost.
What's behind the rising age of first-time home buyers.
How divorcing spouses can buy a new home while still on the old mortgage.
What to expect when refinancing to buy out a spouse after divorce.
Ideas Worth Sharing:
"One of the biggest mistakes folks make over the years is liquidating their retirement account because the stock market wasn't doing anything." - Todd Sheppard
"If it's spelled out in the settlement agreement that one spouse is responsible for it, then the other spouse is not. We don't have to include that mortgage payment in their debt-to-income ratio." - Todd Sheppard
"For every $100,000 you pay down the loan balance, it would reduce your payment by about $570 a month." - Todd Sheppard
Resources:
About Our Guest:
Todd Sheppard is the founder and owner of Inspired Mortgage Brokers, where he partners with wholesale lenders to find the right loan options for his clients. A hands-on loan officer and Certified Divorce Financial Analyst (CDFA), Todd personally handles pre-approvals, rate quotes, and program discussions for many of his clients. He has worked with first-time home buyers, recent retirees, business executives, and high-net-worth clients, closing on properties that range in size and price, including starter homes and luxury beachfront properties. He is known for putting clients at ease and helping them make confident decisions about home ownership and retirement.
Connect with Us:
If you're ready to stop avoiding your finances and start building the future you deserve, schedule a free call with me at pelicanfinancialplanning.com and let’s create your personalized financial plan together.
And if you want ongoing guidance, clarity, and confidence as you grow your wealth, subscribe to our newsletter for financial insights delivered right to your inbox.
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Read the Transcript:
Todd Sheppard: An online application is just a data taker. It's not learning about your situation. It doesn't let you tell your story. And having gone through the process personally, it does make me a more valuable resource for the folks I'm talking to, because a lot of times you kind of get hyper-focused on one thing and you don't see the forest for the trees.
Welcome to The Wealth Development Studio. I'm your host, Genevieve George, Senior Financial Advisor and Founder of Pelican Financial Planning & Wealth. Our goal for this episode is to provide clarity about today's financial topic, inspire you to be brave with your questions, and gain confidence in your financial future. So take a deep breath, grab your favorite cup of coffee, and step into the studio. Your dose of financial empowerment begins now.
Genevieve George: Buying a home, refinancing, or even tapping into home equity in retirement are some of the biggest financial decisions most people will ever make, and yet so many of us walk into those conversations without really understanding our options. Add a major life transition, like a divorce, into the mix, and the stakes and the confusion only grow.
Today, we're pulling back the curtain on the mortgage process, what's actually happening in the housing market right now, and how reverse mortgages can fit into a retirement plan, as well as how home financing decisions play out in a marriage that is ending. Joining me today is Todd Sheppard, founder and owner of Inspired Mortgage Brokers.
He's a hands-on loan officer. Todd also holds the Certified Divorce Financial Analyst designation, the same one that I have, which gives us a shared lens on how mortgage decisions intersect with the financial side of a divorce. I'm excited to dig in with all of that today. So Todd, thank you so much for being here.
Todd Sheppard: Thanks so much for having me. I'm looking forward to this conversation with you.
Genevieve George: Yeah. And let's just kick it right off with what is going on. In the news, we just hear about the interest rates staying the same or raising or decreasing. So, talk to us about what that market really looks like these days.
Todd Sheppard: Sure, yeah. I read an interesting article last week, and it kind of described the mortgage, or really the real estate industry. We're kind of in a reset right now, where everybody refinanced in 2020 or 2021, and they're sitting on a 3% mortgage in the 3% range. But life happens. The kids get bigger.
You want different school districts. You wanna move. They're looking at their current mortgage payment, they're looking at that rate, and comparing that to what's available now, something in the 6% range, where we had been in the sevens before and they're looking at that, and they just really are struggling with giving up that lower rate, which was just… it was just a gift. That wasn't the norm. That was just an anomaly. But then they're also looking at housing prices have gone up so dramatically since COVID.
And so they're looking at, okay, my housing payment is gonna jump $1,000, 1500, whatever it is, to buy this new home, and with the lack of inventory, a lot of times they're struggling with, “I don't see the value in this new home” versus what I'm paying for it in terms of the payment.
And so we have a lot of people kind of stuck in gridlock. And then those same people aren't listing their properties for sale. And so it's just kind of stuck to a large degree.
Genevieve George: Yeah, stuck in that, like as a homeowner, if I'm at a low interest rate, it's hard for me to want to get into a new interest rate, like for a different piece of property.
Todd Sheppard: Exactly. And that new home has to really be something really special.
Genevieve George: And they feel, I don't want to say overpriced, but the sort of like for the money because of the increase so much, right? If the same house was available for $600,000 a couple years ago and now it's 1.2, it feels different.
It's hard to make that leap.
Todd Sheppard: I get that. I mean, that new home needs to be really compelling. I think when, I'm gonna say when rates get below 6% and it starts with a 5%, I think that psychological barrier will loosen things up. And then we've been needing inventory for so long.
I think that'll free up some inventory as well.
Genevieve George: Yeah. Yeah. And you talk a little bit about that payment sensitivity, like really caring about what my monthly payment is versus what that long-term loan. Can you dive into that a little bit? What does that really mean for the homeowner as well as on your side, on the business side, talking to people about their mortgages?
Todd Sheppard: Yeah. Whenever we start a pre-approval conversation with someone, a lot of times they'll ask, "What's the most I can qualify for?” The highest point, the highest amount. Usually, you could qualify for a lot more than you're comfortable paying for.
So it doesn't really make any sense.
Genevieve George: Yeah. I can qualify for a million-dollar loan, but my payment's gonna be insurmountable, like every month.
Todd Sheppard: Well, it's gonna be something that you're not comfortable paying every month, that's gonna make you change your lifestyle. Or maybe you're not able to fund the 529 plans for the kids or retire, whatever.
So it's more important to get down to what's your comfort level on a monthly payment standpoint? What's your budget there? Let's target that. And then how much do you have available to come to closing for your down payment and closing cost. And then we can kinda determine, okay, what's a really truly comfortable price range for you based on your numbers, not what the lending guidelines would allow you to do.
Genevieve George: Right. And that's a part of, you have a comprehensive preapproval process that you go through for your clients. And it sounds like that's a part of it. Do you wanna talk to us about that process?
Todd Sheppard: Sure.
Yeah, and that's really the… Whenever I start a conversation, usually someone has a, they've been looking online, or their realtor's maybe sending them a feed, and they have an idea of a price range. So we'll talk about that, and I'll tell them I like to run my numbers at kind of a worst-case scenario of the high side of their price range.
Just that way, if those numbers make sense, and you can qualify, if we run those numbers and you find something lower priced, then everything will fall into place. That's obviously gonna make sense. But we talk about that, and then we talk about how much do you have available to bring to closing, and then what's your comfort level on a target payment.
Once we've got that nailed down, then we'll get into more of the loan application: where do you work, how long have you worked there, talk to me about your income. And we really drill down on, all right, are you getting a base plus commission plus bonus? Are you self-employed? Are you a business owner? Just where's your income? Are you getting Social Security? Are you taking IRA distributions? Those types of things.
Take a look at that whole picture, and then the assets. Where's your money coming from? And are they coming from really from tax-efficient sources? One of the biggest mistakes folks make over the years is liquidating their retirement account because the stock market wasn't doing anything.
They were losing money there, so I'll just put that in real estate, which is just a huge mistake. But that’s really the process. And then we start gathering up their documents, income and asset documents, so that we know your preapproval is solid when you go to make an offer; you're not gonna have any issues with the financing and no surprises.
Genevieve George: I just wanna pause for a second to just appreciate that as a financial planner, that you're talking with your clients and saying, "No, taking this from your retirement dollars is not the best plan. Please consider the pros and cons of that decision." There are people in your market that don't care where the assets are coming from.
They care that the dollars are there for closing, right? They're not really taking the time to understand the client and it sounds like you really are taking the time to really understand the full picture.
Todd Sheppard: 100%. I mean, I was a registered rep before, so I understand the planning process, and I'm gonna be 60 years old.
I'm planning for retirement myself, and I've put kids through college, and I've done all of that stuff. So I've paid attention to that, and the tax efficiency of drawing assets and the tax consequences of capital gains and all those kind of things. So, I think maybe a lot of people in my industry just, they don't think about those things.
They're not thinking about it for themselves and they're just, like you said, they're kind of looking for the path of least resistance. Sometimes that's, that is the way to go, but sometimes it's not. There are other avenues that we can tap into.
Genevieve George: Now, for you, it sounds… let’s say like a new, maybe a first time home buyer is coming to you and they're, "Hey we're really serious about buying a new home," it sounds like maybe in this process it might not be like a ready, set, okay, let's go.
It might be, okay, here's the analysis, and here are the other things that you need to get in line, like your down payment or whatever the case may be. Maybe you have a client example that you can talk to us about.
Todd Sheppard: Well, that's 100% right, and that's right with a first-time home buyer divorce situation, or even a lot of the conversations we have right now are, "Can I buy before I sell my new home?"
And a lot of times we'll have conversations, especially in divorce situations, we'll have conversations now for a transaction that's gonna take six months, 12 months down the road so that we can do the right things now to put us in the best position then. Recent conversation I had it wasn't a first time home buyer, but it was a buy before a sell, and they could qualify.
Lending guidelines would allow them to qualify to purchase this new home that fit their needs and was perfect. But if they did, it would involve going with a VA type, a VA loan, which is a great financing, but it doesn't allow for re-amortizing, where once they sell their home, they would have $300,000; they could pay down the loan balance, and if you re-amortize, which is a $250 process, it's very simple, then you can adjust your payment down to reflect that lower balance.
Genevieve George: So what you're saying, like for somebody that maybe doesn't understand that, when you have your loan, you have an amortization schedule. So that is saying, okay, I'm making a monthly payment—I'm just making up numbers—$1,500 a month. I'm making that payment for the life of the loan.
And you can see, actually see, like in an Excel version, how the balance changes with those payments, what part of it is going to principal, what part of it is going to interest. And what you're saying is that if I'm able to re-amortize the loan, I can put that $300,000 towards the principal, and instead of now still making $1,500 payments until it's paid off, the actual calculation gets updated for that large chunk of dollars that was put towards the principal.
So I think that that's a really important point, because I don't know that everybody really understands what that means. And that is really powerful in a situation like you're talking about, where you're buying before you're selling, or maybe there's some other windfall coming that you're planning to use that as a tool and being able to plan that out.
Todd Sheppard: That’s exactly right.
Genevieve George: We'll un-pause it.
Todd Sheppard: No, that's exactly right. And the caveat is re-amortizing or you might hear the term recasting, is not available for government loans. VA, FHA loans do not allow that. All right?
Genevieve George: Okay. Very important note.
Todd Sheppard: So for these folks, they would spend and VA has a funding fee.
So they were gonna spend $40,000 in closing costs. It was a million dollar per loan amount. For this VA loan. And then when they had that money to pay down the loan balance, they would've had to refinance out of that loan into a conventional loan, which is your, plain vanilla, Fannie Mae, jumbo type of loan that allows for re-amortizing.
In their situation, with where rates are right now, for every $100,000 you pay down the loan balance, it would reduce your payment by about $570 a month.
So for them, it would be $1,700 a month that they could lower their payment just by re-amortizing, paying $250. It's not a refinance.
You don't have to re-qualify. And for their situation, because they were also, one of their daughters was going to be going into a private school situation, that's a new expense for their budget. They really needed to re-amortize. So to make a long story short, I had to recommend to them, so they don't, even though you can, buy before you sell.
And even though this is the perfect house, this is why I don't think you should do it. And they did decide to wait.
Genevieve George: Well, and that's what we… I know that our roles are different, but we'll call ourselves advisors, right? Our role is to give you the pros and cons of these decisions.
And then I always tell my clients at the end of the day, "These are your dollars. You can decide." That family could have said, "Thank you, Todd, I appreciate the explanation, but we're moving forward." But they chose to not move forward because you provided that explanation, and they better understood the pros and cons of what they were walking into.
Todd Sheppard: That's exactly right. I mean, our clients are engaging us for our experience and for our expertise. And that's our role is to educate them, is to lay it out in a simple way to understand, okay, if we do this, this is what it looks like, these are the consequences. If we wait, this is what it looks like.
And then let them decide. But to give them enough information, always give them enough information to be comfortable in the decision that they're making at that time.
Genevieve George: Yeah, I love that. Can you talk to me about the concept when somebody is purchasing their home or potentially refinancing, there's this concept of being able to buy points.
And I think that that's sort of an unknown area of the market to somebody that maybe isn't going through that or hasn't considered going through that. So can you just sort of explain what that means?
Todd Sheppard: Absolutely. So every rate has a price associated with it or a cost to get that rate.
A mortgage is essentially a bond. Whenever you go to borrow money, it's a 30-year bond. You're promised to repay someone. And an investor's gonna buy that mortgage, and so they expect a rate of return, the interest rate.
So let's say today I just priced one, but let's just say the going rate is 6.5% with… And that's what we call the par rate with no points.
And so that's the market rate of interest that these investors expect. If I wanted a lower rate, if I wanted to… expected to pay a lower rate, the investor says, "Okay I'll let you pay me a lower rate over time, but you're gonna need to pay me some interest up front so that I'm essentially gonna get six and a half over the life of it."
That upfront interest are discount points. And they're expressed as a percentage of the loan amount. So let's say the par rate is six and a half. You want a rate of six and a quarter. It costs one point or 1% of the loan amount. So on a $500,000 loan, that's $5,000 of interest that you're paying up front to the investor that's holding your loan.
And that's how that works.
Genevieve George: And is that beneficial because you're paying that piece at a discount, or is that beneficial because mentally I'm not paying six and a half, I'm paying six and a quarter?
Todd Sheppard: It's a lot about budget. Some people, it's mental. It's mental.
They just wanna be, if we're on the cusp of between six and five or whatever. But pretty much everybody’s…
Genevieve George: That budget for that payment sensitivity that you're talking about.
Todd Sheppard: It is. In most cases, people are paying about a half a percent. It just works out. For the longest time, we weren't paying discount points, but the way everything's become compressed with pricing.
And what we look at is whenever we get to the final, someone's under contract or we're talking about refinance, I'll send three different rate options. Here's one with no points. Here's a half a point, here's a full point, or something like that. Here's what the costs are for each rate. Here's what the end, the payment is.
So by paying this additional half a percent, you're saving X per month, but you're spending X. So we do the math, okay? If I'm spending $5,000 to buy this rate down, and I save $100, 5,000 divided by 100 is 50 months. Over four years to make that money back, which seems like a long time. But we break it down into what's your payback on that to see what makes the most sense.
Genevieve George: Yeah. And that's great, and it sounds like you're coming to the table and explaining that to your clients that you're working with so they understand, "Okay, if I do it with no points and it's six and a half, this is what it looks like. And if I do it with points, this is what it looks like."
And does that truly equate to more money at closing from the buyer's pocket?
Todd Sheppard: It does. It's an additional closing cost. Absolutely. And so that's what they weigh. On purchases, a lot of times they don't wanna pay a lot of points because they've got all the other costs, expenses of moving and all that stuff. But this way, they're able to see, "Okay, you know what? I don't need to pay these points. It's not that big of a deal on a monthly basis. And I'm okay with… that’s maybe that slightly higher rate with the lower closing cost.
Genevieve George: Okay.
Todd Sheppard: Yeah. And again, it's giving them the information to feel comfortable with the decisions that they're making in that scenario.
Genevieve George: Yeah. I love that. Now, kind of just speaking to the broader market, I think something that comes up a lot when I'm talking with people is, the affordability of purchasing a home, particularly for those younger first-time home buyers.
Are you seeing the average age of your younger clients actually increasing or what are you seeing in that area?
Todd Sheppard: For the most part, yes. I mean, we still have first-time home buyers in their 20s, but typically folks, I mean, we've had first-time home buyers in their late 30s, early 40s or something like that. But yeah, they typically are a little bit older than they were when I first started in the industry.
Genevieve George: Yeah. And what would you kind of attribute that towards? I mean, is it the obvious? Is it that the home prices have increased and the interest rates have increased in the last few years or?
Todd Sheppard: I mean, I think there was a generation of folks that home ownership wasn't as big a priority as...
And the world got smaller. Traveling the world, that was something when I was growing up, that was a really big deal to go to Europe or this and that, all this. And because the world's gotten so much smaller, I think you had a group of folks that were prioritizing those types of things, those experiences.
And if you're single, maybe it's not as big a deal. You're gonna wait until you are married or whatever. But home ownership was not as big a priority I think. So people just tended to wait. I think that had a lot to do with it. But now the affordability really comes into play.
And I think also another thing now that we're seeing is now folks are having to pay for student loans. For a long time, they weren't making student loan payments, and now they are. That impacts your budget. I mean, inflation, which is the worst thing in the world that can happen to an economy, affects everybody's budget.
You're spending a couple hundred dollars more for groceries than you did.
Genevieve George: And the gas pump.
Todd Sheppard: Well, and, you're going out and spending $15 on lunch and not getting anything super awesome or anything. And so whenever your expenses go up and your budget gets trimmed and you're just, any kind of big purchase just really…
Genevieve George: Yeah, it gets put on the back burner because it's a lot harder to achieve or, there's a lot more work that goes into that. And to your point, yeah, like prioritizing some experiences over that probably comes into play even before we talk about the affordability of actually buying a house.
Todd Sheppard: Well, and then there's that exhaustion of, you know what, and I see, I mean, my daughter's 28, my son's 24, that their generation, they feel that, “I'm probably never gonna be able to buy a house,” which breaks my heart to hear that.
But I understand why they feel that way. I don't agree with that, but I get it. I get it.
Genevieve George: Yeah.
Todd Sheppard: Yeah.
Genevieve George: And it's hard, too, 'cause even some of the things we're talking about where it's not the new home buyer, it's somebody that's considering, they have their home, but they are considering moving.
Like your example that used a different school district or whatever the case may be that we wanna move for, we feel stuck. I'm sure the younger generation is "Those people over there are so stuck. I don't wanna be stuck." Especially, when you think of… I bought my first home when I was 24, and I do not live there, so it's reasonable that think through, "Is this where I wanna be forever," right?
And nothing is necessarily permanent, but it's something that probably plays into the thought process of like “I bought that home 'cause I just got tired of paying rent, and I felt like that must be the right next choice.” The reality was that I wasn't really rooted where I bought my home, and I ended up leaving.
Todd Sheppard: But it was a good investment for you, and it got you on your start. It,
Genevieve George: Well, 2006, so.
Todd Sheppard: Okay. Okay.
Genevieve George: It maybe wasn't the best investment for me.
Todd Sheppard: So it was a valuable lesson. Yeah, it was a valuable lesson.
Genevieve George: A very valuable lesson. Yeah. A really expensive lesson.
Todd Sheppard: Yes. Yes, yeah.
Genevieve George: But that's okay. That's okay. We talk about mistakes so people can learn from them.
Todd Sheppard: That's exactly right. That's what makes advisors valuable. As advisors, it makes us more valuable. The mistakes that we've made along the way are the lessons that we've been forced to learn.
Genevieve George: Yeah. Yeah, absolutely. One of the things that, that I believe we share is this certified divorce financial analyst designation. And I had my own reasons for wanting to seek that out to, to help clients going through certain things. So maybe talk to me about what made you go get that designation and how that plays into your regular business.
Todd Sheppard: Sure. Yeah, so I'm divorced myself, and I had over the years worked with several clients that were going through the divorce process, so I just wanted to learn more about it. And be more of a resource for my referral partners and my clients through that education process.
And I'm glad that I did. Like I said, it exposed me to a lot and helped me understand the process a little bit more.
Genevieve George: Sure. And what are some of those sort of missteps you wanna help others avoid… as it relates to their real estate in a divorce. Somebody's gonna keep the home, and maybe it has to be refinanced, or they're gonna sell the family home and now we gotta go get two different homes or maybe talk to me about some of the things that that you've run into that you're trying to help people work through.
Todd Sheppard: Sure. One of them is the feeling that, okay, we have to sell the house, so that we can each have a mortgage. And one of the things people don't realize is on your settlement, on a divorce settlement agreement, it will be spelled out that one of the spouses, let's say one of the spouses is gonna keep the marital house.
In the settlement agreement, it will say that spouse is responsible for any kind of housing payment for that property, which means we could exclude, and I'm assuming that you've got the husband and wife both on the settlement agreement. Or both spouses. Yeah. Excuse me. On the mortgage. Well, so if it's spelled out in the settlement agreement that one spouse is responsible for it, then the other spouse is not, we don't have to include that mortgage payment in their debt-to-income ratio.
So that they could go and qualify for a new mortgage without having sold the other one.
Genevieve George: Now, and even in that situation, does that mean when they come to you and they say, "Hey, Todd," "I gotta buy another house, and my wife is," or whomever is keeping the old house.
But they need to bring that marriage settlement agreement to the table as a part of their documentation for their qualifications. Is that accurate?
Todd Sheppard: That is correct. The underwriter's definitely gonna wanna see the settlement agreement, because that's gonna spell out what assets you have left, if you're receiving or paying alimony or child support, because that's gonna go into your debt-to-income ratio, those types of things. So anytime there's a divorce…
Genevieve George: When you run their credit, their name is gonna show up as owning this loan on the primary home?
Todd Sheppard: It will show up on their— That’s right. Yeah. That's right. That mortgage will show up on their credit report.
Genevieve George: And so the way to say "Nope, that's not included," is to have that agreement to show to prove that it's not included so that it can be excluded for their debt to income ratio. Is that correct?
Todd Sheppard: That's exactly right.
Genevieve George: And when do you see sort of those discussions starting?
When are spouses reaching out to you to start considering their next property? Because they, in that situation, they need the mortgage settlement agreement, or a marriage settlement agreement (MSA), to come to you to qualify. What if they haven't finalized yet?
Todd Sheppard: Well, and that's the time to have the conversation.
A lot of times, I may get referred by a financial advisor or a realtor. With the realtor situations, a lot of times the realtor had helped the family buy that home, and one of them is gonna keep it, and the other one's gonna go buy the house, and they've engaged the realtor.
But when they're starting the process is really the time to have the conversation so that, again, they have the information that they need to say to learn that, oh, yes, you definitely need to have this divorce finalized before we're able to do anything, or you're able to go out now and qualify for a mortgage, even with that mortgage in your debt-to-income ratio.
Genevieve George: So what happens in that same example that we were using, where the spouse keeping the home, that mortgage was originally granted to both spouses together. So does something happen at the mortgage company level as well? Like that spouse that's staying, do they have to somehow re-qualify or it just there's no change on the mortgage side? They just stay in the home, and whatever the marriage settlement agreement is, it is.
Todd Sheppard: That's correct. They just keep making their payments. It's just if one of the spouses were to pass away. Both were on the mortgage. One of them were to pass away.
The surviving spouse, or the spouse that's staying in the marital property just continues to make the mortgage payment.
Genevieve George: Okay.
Todd Sheppard: And in most cases, some people are, in the divorce decree, they have to refinance to remove that other person. And that's true.
Genevieve George: Because that person doesn't want to be tied because a part of their agreement was that they would no longer be tied to that to that mortgage.
Todd Sheppard: Correct. And I understand that because it still is on your mortgage, and if that other spouse doesn't make the mortgage payment, then you, that late fee is going on.
Genevieve George: Yeah, you're still on the hook. Yeah.
Todd Sheppard: Right. A lot of times they need to refinance to pull cash out to buy out for the settlement, and that's something that's required.
Genevieve George: In that situation, if somebody is staying in the home, but they actually need to refinance to, to pull some of the equity to pay off the other spouse that is not staying in the home for whatever kind of buyout or whatever, what does that process look like as far as qualifying and what has to be brought to the table to prove to the mortgage company that they can do that and that kind of thing?
Todd Sheppard: So it's a refinance. So they're gonna be getting a new loan. They're gonna be filling out an application, pull their credit and run their numbers that based on whether you're paying alimony, child support, whatever your situation is, can you qualify for this new larger mortgage and this new larger mortgage payment? And then if they can, then we go to the closing, pay off the existing mortgage, they get the cash, and the proceeds go to the spouse. A lot of times I've seen this where the proceeds will go directly from the closing table, the closing attorney will wire the proceeds to the spouse that's left the property and do it that way.
And the spouse that has vacated the property will quitclaim their interest in the property to the spouse that's staying in it.
Genevieve George: Okay. And that could certainly be interesting because they could go through that process and then find out, like in the situation that we were talking about previously, they may have refinanced in 2021 and they're in a 3% mortgage.
When they go to refinance now to be a single spouse owning this home, their interest rate is gonna be different, and that's gonna change their overall payment and their payment sensitivity, correct?
Todd Sheppard: Yeah. And if they're doing a cash out, they're increasing their balance, so that's correct. That's correct.
Genevieve George: Do you run into people that are considering keeping it and then ultimately deciding, actually, we're gonna sell it because it's not financially feasible?
Todd Sheppard: A lot of times it happens where there's not a really big equity position, perhaps. Or perhaps they couldn't qualify, so that is the option is to sell the home.
Or sometimes in a divorce situation, everybody wants a fresh start. Both parties want a fresh start. They don't want to stay in that house, and so that'll happen as well.
Genevieve George: I've run into it, too, where I've been engaged to help along the way in a divorce proceeding, and the plan on the early stages are spouse A is gonna keep the house and live there and that's gonna work best for co-parenting and all this stuff. But when you really start running the numbers, I'm like, "That might not work."
I think there's an emotional side to that, too. So many people, when they're going through that, they're really thinking about what's gonna be most stable, what's gonna be best, and a lot of people think, "Okay, well, this is our family home, and this is what the kids are used to, and this is what's best," but the financial, the math might not work for that, right?
Todd Sheppard: The math doesn't math. That's exactly right. Yeah. That housing payment makes such a big jump the same time when maybe their income's dropping as well. Maybe you've got one spouse that had been a stay-at-home parent, and now they're getting some child support and some alimony, but they've got to get back in the workforce, which is not a lot of fun right now.
But yeah, and a lot of times maybe they just both decide, you know what, I'm gonna rent, hit the easy button. And there's something to be said for that because when you're going through a divorce, there's so much going on, and the number... And there's so much changing. And my experience with divorce proceedings is it's almost similar to when you're building a new house.
You think everything's moving really fast, and it's amicable, and this ought to be done in 30 days and all this stuff, and we're agreeing on the numbers, and then things slow down. And what feels like it's gonna be done in 60 days takes six months. I mean, we had several situations within the past year where we helped and just the timing that we helped the husbands get financing, and we did it before the divorce was final.
We had one in November, one in January, and another one, gosh, another one in September. None of those divorces are final yet.
Genevieve George: Right. Yeah. I think that's a common thread just in the divorce space as well, is that you think it's gonna be amicable or collaborative and then certain things end up getting...
There's the emotional side of what's going on just sort of helps with the…
Todd Sheppard: Well, and I think a lot of times what happens, too, maybe for the spouse that was the stay-at-home spouse or earning less, their lifestyle is really gonna change. But then also, okay, the spouse that was earning more, or the breadwinner, their lifestyle's gonna change, too, because of alimony and child support.
And so the numbers start sinking in as they start looking at, okay, what's my new housing payment? What's that rent pay? Whatever. And then they start realizing, oh, crap. I'm really gonna have to make some lifestyle changes here.
Genevieve George: Yeah. And then that, I think, creates a little more disagreement in what was previously amicable because it's something that has to be adjusted to on both parties, right?
Todd Sheppard: It creates stress for both people because when you're talking about your finances and you're talking about your monthly living expenses and what this is gonna look like, and maybe you've got to give up some certain luxuries or things that you're no longer gonna be able to afford, then absolutely, it creates stress and resentment as well.
Especially when maybe it was just one party that, that wanted the divorce or one party that made some decisions that led to the divorce, and the other person's like, “Why the hell did you do this? Why did you put us in this situation?" And that's what makes working with folks that are going through divorce, it's just we're part therapist as well and we need to have a lot of… We have to have a lot of empathy for what they're going through.
Fortunately, I mean, my divorce situation was indeed very amicable. In fact, my ex-wife is my business partner. We work together. She owns part of the company, and we talk on a daily basis. And I know that I'm very blessed in that because we see situations where…
Genevieve George: Where that is not the case.
Todd Sheppard: Well, there's spite, and there's just and people are doing things out of spite and not thinking about the kids or whatever.
Genevieve George: Well, it sounds like it's wonderful that your clients that are coming to you in that situation have such a hands-on resource that's gonna really take the time to understand, okay, where are you at in the process?
What are we looking at as far as your balance sheet goes? And helping them understand what they truly can afford in that situation through your comprehensive approval process. So it seems like that they're very lucky to have a resource like that, 'cause I think so many people probably go out and just sorta start trying to almost DIY this and end up sort of… where there isn't necessarily a person to talk to on the other end.
And really not getting that help, where having an independent broker that can really understand who they are, and then know what carriers to go to for those, for the right loans for that person that some, I think there's a lot that goes into what we talked about, where, if I just apply online for a new loan, none of those questions ask me if I have a marriage settlement agreement that tells me, tells the company that I don't actually have to pay that previous loan that I'm on. You need an actual person to go through that with.
Todd Sheppard: An online application is just a data taker.
Genevieve George: Yeah.
Todd Sheppard: It's not learning about your situation. It doesn't let you tell your story. And having gone through the process personally, it does make me a more valuable resource for the folks I'm talking to.
Because a lot of times, again, their head's spinning and you kinda get hyper-focused on one thing, and you don't see the forest for the trees. And so it's helpful to kinda lay it out. Well, have you considered this and this? And how this is gonna impact. And kinda let them know what to expect, too.
Genevieve George: I think I think anybody going through that situation is hoping, 'cause it's terrible. It's terrible. It's a terrible transition in your life, so you just wanna get it over with. But there are true steps that have to be taken and they, whether it's emotions and fighting that draws it out, or the actual timeline of having to manage these different steps in the court system is I think the delays come from all ends in that…
Todd Sheppard: And back to your original question about missteps, that's a big misstep that people take, too, is they get in a hurry. They just want it over. They're mad at the situation. They're frustrated with the situation, the back and forth, and they just wanna be done with this person and move on, and they kind of shortchange themselves.
Genevieve George: Yeah, and you can make mistakes along the way in that too, right? It compromises that you wouldn't have otherwise made if you were not rushing. Because these financial decisions being made in that moment are lifelong consequences of that.
Todd Sheppard: Right. That's right. Yeah. Agreed.
Genevieve George: Now let's switch gears a little bit. So can you explain what a reverse mortgage really is? And maybe I think a lot of people just have negative connotations in their mind when it's associated with a reverse mortgage.
So I really am curious, what are the not negative parts of this that we can I know it can be used as a real tool in retirement and not necessarily a crisis planning tool.
Todd Sheppard: it's not always a loan of last resort. Basically, it gives you the ability to tap into the equity in your home, and you're not required to make a payment.
Genevieve George: Circling back, you clearly have a passion for this work and helping people navigate that chapter, the next chapter of their lives, whether buying a new home or refinancing or whatever the case may be. What brought you to the industry, and what drives you to keep doing this every day?
Todd Sheppard: Yeah. A college roommate of mine had started a company, mortgage company. I had been around it for quite some time. And honestly, I was a young man in my 20s in Atlanta, didn't grow up in the town and struggling as a registered rep. And I figured it was probably easier to help people get into debt than to save for retirement, and it certainly was at the time.
So I kind of shifted over into that business, and I kind of joke, but shifted over into that business when I got married and we had our first child. And just kind of grew with it, and went through an evolution of working for a lot of different industries, large national banks, regional banks, small brokers.
And knew that I always wanted to own my own business as I got older. And a few years ago, the industry just spoke to me that, okay, now's the time. This is the time that you need to do this. And so Danielle and I went out in 2023 and opened our own business so that we could be more in control of the customer experience, because we're both very… Everything we do is about the customer experience.
We want it to be stress-free. We want it to be straightforward. We want it to be streamlined and efficient. And by opening our own company, that's how we were able to do that. When you're working for a large bank or another lender, they have their way of doing things. And they have their reasoning, and I understand, but we just knew that we could provide a lot better service for our customers.
And that's our passion is, again, when we get reviews that tell us how easy the process was, or it's the easiest the process had ever been, or how great our communication is, or whatever, that's what gets me excited. That's what keeps me going, for sure. Yeah.
Genevieve George: I love that. I love that. That's how I feel, too. If I was able to really help and make somebody's life easier, I think that's where I get really excited. Yeah. And so how do people find you and work with you, Todd?
Todd Sheppard: You can reach out to me on LinkedIn. You can find us on the web at getinspiredmortgagebrokers.com, or my cell is 770-304-6699.
Genevieve George: Excellent. Thank you. And just for clarification, you work in the state of Georgia, but you have resources where you can help individuals from other states if they need to.
Todd Sheppard: Absolutely.
Genevieve George: But specifically working with you, they would be in Georgia. Is that right?
Todd Sheppard: Or the property located in Georgia.
Yeah. That's correct.
Genevieve George: Okay. Property located in Georgia. Perfect. Perfect. Well, thank you so much for your time today and for being here. Any last thoughts on anything you'd like to share with the group?
Todd Sheppard: It was my pleasure. In any situation, whatever your situation is, if you're a first-time home buyer, you're going through a divorce, you've recently opened a business and you think, "Oh, well, I've heard horror stories about getting loans for self-employed," have a conversation with a mortgage professional that you trust.
And find out exactly what the situation is, because Claude, Gemini, whatever, yeah, that can be a good resource, but you need to speak to someone that maybe has walked the walk, the road that you're going down right now, and can make you, help you think about things a little bit differently, 'cause we can kind of get fixated on, this is, "Oh, this is what I need to do," or, "This is what my situation is."
That second perspective can really help you. And it's never too soon to have that conversation.
Genevieve George: Yeah. I love that. Well, thank you so much for being here, and I look forward to talking with you again soon.
Todd Sheppard: Thank you for having me. Absolutely. Me too. Me too.
That's it for today's episode of The Wealth Development Studio. Remember, financial clarity is powerful. Do you need help with your financial plan? Go to pelicanfinancialplanning.com to schedule a call with me. Until next time.
