April 22, 2025 • 29 mins
Is now a smart time to buy a home—or just a risky financial move?
On this episode of Women's Money Wisdom, host Melissa Joy, CFP® sits down with returning guest and mortgage specialist Erica Powers CMPS®, CDLP®, NMLS#739673. First Merchants Bank is an Equal Housing Lender and a Member FDIC. She unpacks the ever-changing housing market and what it means for your money moves.
With over 20 years of experience and certifications in divorce lending and mortgage planning, Erica helps us cut through the confusion about mortgage rates, affordability, and refinancing strategies.
Together, Melissa and Erica explore:
🏡 The real reasons mortgage rates rise and fall—spoiler: it's not just the Fed
📍 Regional housing market trends across the U.S.—from inventory shortages to insurance issues
💡 How to evaluate if refinancing makes sense (and how to find your break-even point)
⏳ Advice for buyers on when to act and why trying to time the market is a myth
📈 What adjustable-rate mortgage holders need to know before their reset
Whether you’re a first-time buyer, thinking of refinancing, or just trying to understand how rates work, this episode will leave you feeling more informed and financially empowered.
The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Melissa Joy (00:01):
Welcome to the Women's Money Wisdom Podcast.
I'm Melissa Joy, a certifiedfinancial planner and the
founder of Pearl Planning.
My goal is to help youstreamline and organize your
finances, navigate big moneydecisions with confidence and be
strategic in order to grow yourwealth.
As a woman, you work hard foryour money and I'm here to help
(00:21):
you make the most of it.
Now let's get into the show.
Just a quick note before wedive in.
The information that we shareis meant to educate and inspire,
not serve as personalizedfinancial advice.
Everyone's situation is unique,so be sure to consult with your
(00:41):
own financial professional forguidance that fits your life.
So be sure to consult with yourown financial professional for
guidance that fits your life.
And just so you know, theopinions shared in this podcast
are my own and those of myguests, and they don't
necessarily represent those ofany organizations that I'm
affiliated with.
For more important disclosures,please go to our webpage at
(01:02):
pearlplancom.
Now let's get started.
Welcome back to the Women'sMoney Wisdom Podcast.
Today, we are going to betalking all about mortgages, and
I know that's a topic thataffects many of you.
Whether you have a house, todayyou are looking to protect your
low interest rate or reset yourhigh interest rate or you're
looking to buy in the future.
(01:22):
This is going to have a wealthof information for you and your
friends.
And back on the podcast isfriend of the pod, erica Powers.
Erica is a mortgageprofessional and she has been
assisting clients across thecountry with their mortgage
needs for over 20 years.
She is a certified divorcelending professional, so she has
(01:43):
expertise for people goingthrough a divorce that may need
a new loan, and she's also acertified mortgage planning
specialist and she has been awealth of wisdom over the years.
Welcome back to the podcast,erica.
Erica Powers (01:57):
Thanks for having me, Melissa.
I'm excited to be back.
Melissa Joy (02:00):
Well, it's always great to chat with you.
We talk all the time becauseyou're kind of my go-to person
when I need information aboutmortgages both the how-tos, the
what's possible, but also what'sadvisable, because those can be
two different things.
We're recording this on April8th and the episode's coming out
(02:21):
in a couple weeks and, becausewe're in pretty volatile times,
we could have a lot of changesin the next two weeks.
So I just want to give you likea little line in the sand about
when we're recording thisconversation and none of the
things that we'll talk about are, like you know, quotes, for
example, or anything like that.
But we're going to give you alay of the land, something we've
been planning on even beforethe turbulence in the market in
(02:42):
the last few weeks, even beforethe turbulence in the market in
the last few weeks.
But I think it's the perfecttime, as things are changing
significantly, to talk all aboutmortgages, how to borrow, when
to refinance, all that goodstuff.
So what are you seeing today,erica?
Give me a lay of the land of,you know kind of the real estate
market, mortgages, what you'redoing, what you're not doing,
(03:03):
like, give me some bullet pointsabout what's going on today.
Erica Powers (03:07):
Sure, so I can help clients all over the
country, but I do mostly assistclients in Washtenaw County and
the surrounding areas ofSoutheast Michigan.
So saying that, because we arestill in our area seeing a
shortage of inventory right, sopeople are competing for most of
(03:29):
the houses that go on themarket.
So we're seeing a lot of thatcompetition and we're still
seeing rates that are maybehigher than people got used to a
few years ago, and so there area lot of people I think that
maybe had been previouslysitting on the sidelines hoping
(03:49):
that we'd see rates come down,but I do think that we've seen a
lot of people decide that thatmay not be what's going to
happen, and so if they'reinterested in buying or getting
into the market and looking fora house, yeah, I work with
people all over the country, soabout half of my clients are
here in Michigan, half myclients are all over and it's
(04:12):
definitely a time period whereeverybody's real estate market
is not the same.
Melissa Joy (04:16):
I recently read that the housing market in the
Midwest and the Northeast isquite tight.
There's not a lot of inventory,you know, there really wasn't
like kind of an overbuild,oversell.
It just is an area that hasn'tbeen as intensively focused on
growth.
But then in certain parts ofthe South and Southeast and
(04:39):
maybe a portion of the WestCoast there's a little bit for a
variety of reasons, including,you know, natural disasters.
Unfortunately has soured peopleon Florida.
It's much more difficult toinsure a house in Florida or
California and then some partsof the country just had like
kind of parabolic, like justthrough the roof prices and
(05:00):
they're coming down to earth andso that's changing the
economics.
So it depends on where you'relistening as to what market
you're in.
Yeah, 100%.
So then you said interest ratesremain relatively high.
We had this very, very lowinterest rate situation after
years of relatively low rates,lower than they are today, right
(05:23):
, so when COVID hit, you knowcertain people can brag about a
2%, 2.5% mortgage and nowadayswe're talking in the sixes and
sevens right.
Erica Powers (05:36):
That is correct.
Last week we saw a little bitof a correction for about a day,
correction for about a day, fora moment in time, for a moment
in time and um, now this week umrates have gone back up again.
Um, so now historically they'restill lower than they've been
(05:56):
in the past.
So I don't want people to thinkthat, you know, if you look at
a historical graph we're stillkind of in the average or a
little bit low average over time, but it's still higher than
people got used to.
Melissa Joy (06:11):
Yeah, that is.
You know that's a big, hugeportion of your mortgage payment
when interest rates are wherethey are today.
And then we also at the sametime have dynamics where
property values are going up,property taxes are going along
with them, and then homeownersinsurance for better or worse,
(06:32):
like you want that insurance andit's just getting more
expensive because I mean theequation of the property values
plus losses that insurancecompanies are taking on, storms
and maybe a little bit of pilingon or, you know, kind of
sneaking in your rates alongwith it.
Like these are all very realparts of the equation for
affordability of housing.
Erica Powers (06:53):
Yes, I do find too.
A lot of times people will belooking on, you know, any of the
websites, the littlerelittercom, whatever it may be,
and some of the amounts thatthey're listing as what they
think the homeowner's insurancewill be monthly is not even
close to where it will end uponce that client gets a quote.
So it's important to kind ofbuild a padding into that number
(07:16):
because that will be a part ofyour monthly payment.
Melissa Joy (07:21):
That's right.
And also if the person whosehouse you're buying has owned
that house for a long, long time, they may have a low and
unsustainable property tax.
That is going to be reset whenyou purchase, so you can't count
on you know somebody that owneda house 20 years getting the
same range for the propertytaxes.
(07:42):
It's going to be higher.
You need to look at comparingthe person across the street
that sold their house last yearand not necessarily that owner.
Erica Powers (07:50):
Yes, you definitely need to take into
account that those taxes aregoing to go up and make sure
that when they do go up, thatthat's still going to fit your
budget.
Melissa Joy (08:00):
I also think, another important consideration.
I know some people just walk inthe door and they're like, well
, here's all the things I'mgoing to change in this house,
because you know it is my dreamhouse.
But also my dream house hasthis color walls and this type
of flooring and the kitchenneeds to be redone, et cetera.
And, gosh, I wish I lived inthat family, because my
(08:23):
husband's like no changes in thefirst five years, kind of.
But you know, you really needto think about that equation too
, because lending is the samewhen it comes.
If you needed to do a homeequity line or,000, let's say, a
(08:46):
powder room for $25,000 a yearago, it might be $40,000 or
$50,000 for the same projectbecause of the cost of materials
that are not all made onshorehere in the US, and so there's a
lot of factors that you canplan for going in as you're
selecting your house, and ifyou're going to have a home
improvement project, you reallyneed to budget that in right up
(09:06):
front.
Erica Powers (09:07):
Yes, and to realize that you may be being
very unrealistic about the cost.
So it's a good idea to do alittle bit of research about
what the cost actually will beand then also to factor in a
little bit of a buffer forthings that might break in the
house.
So for a lot of people thatthey're buying their first house
(09:29):
, they don't realize that, as ahomeowner, if it breaks, it's on
you to fix it.
So you need to have a littlebit of a cushion there to be
able to make up for any of thosecosts that might unexpectedly
come up.
Melissa Joy (09:42):
Yeah, I'll tell you .
In my financial planningsoftware there's a space for
maintenance, and you could alsoinclude, if you bought a condo,
the homeowners association costs, which can be quite high.
But they cover a lot of thingsthat you may otherwise really be
paying for, like landscaping,any exterior improvements, a
host of services.
(10:03):
But I often start with abaseline of 1% of the value of
the home.
So if you bought a $750,000house, I would say at least
annually, you would expect to domaintenance of at least $7,500,
if not more, and so that wouldbe a conversation point.
But it's not like when you rentand you can just call the
landlord to fix things.
(10:24):
You got it, that's on you, andthere are certain things you
need to replace and change overtime.
Erica Powers (10:30):
Yeah, 100%.
So it's good to have thatcushion so that when those
things come up you're really notcaught off guard.
Melissa Joy (10:37):
One of the reasons that I wanted to record this
episode is that we had a mutualclient who had asked like why
aren't interest?
I know the Federal Reservelowered interest rates.
Why aren't mortgage rates lower?
And there are so many factorsthat go into mortgage interest
rates that they're not justsaying, hey, is the Federal
(11:00):
Reserve going to lower by aquarter percent or a half
percent and thus that's whatrates are going to be.
How frequently do rates change?
Rates?
Erica Powers (11:11):
change, honestly, every day and sometimes
throughout the day.
So you know, you could talk tome in the morning and the rate
might be one thing at that pointin time and then you make a
decision in the afternoon therate could be different.
Oftentimes we do see our ratesheet stay the same throughout
(11:31):
the day, but it's never aguarantee and our rates don't
change just based on the Fedrate.
So that's kind of a misnomer.
Oftentimes people will call usand say well, the Fed lowered
the rate yesterday, so the ratesare lower today, but our
mortgage rates probably hadpriced in that change by the Fed
(11:54):
much earlier, before the Fedactually even changed the rates
Weeks in advance.
Yes, yes, yes.
And sometimes on the reverse,if we think that they're going
to change the rate, or we thinkthey're going to change the rate
by more and they don't, thenthat can actually harm our rate,
even if they still lower theirrate.
(12:16):
But our rates factor in manydifferent things.
So it takes into accountinflation, it takes into account
the 10-year treasury, it takesinto account other things that
might be happening eitherpolitically within the United
States or outside of the country, right, so the threat of war or
(12:38):
instability, those types ofthings are going to impact
mortgage rates, so it's not justone thing that impacts them.
Melissa Joy (12:47):
That's so interesting.
I often ask you how rates havechanged.
When I see the bond market asmeasured by, often, the 10-year
treasury, when I see that goingup or down, then usually there's
often a pattern or a rhyme,because bond markets are
listening to the same thing wehave.
Just so we mentioned, we'rerecording right after the first
(13:11):
week of April.
The first week of April we hadhistorically significant down
days.
The stock markets were down 10%and for the first two days
bonds like really were actinglike the seesaw that we
described, where stocks weregoing down and bonds, their
(13:31):
prices were going up, whichmeant their rates were going
down.
But then we had the third dayof you know kind of instability
where things weren't as bad butthey were still negative and on
that day interest rates actuallywent up and the price of bonds
went down.
And there is speculation.
(13:51):
Why is this happening?
And some hypotheses are maybeChina's selling some of their
bond reserves that are in UStreasuries.
Certainly, if we have tariffsthat are not going to go away,
that's inflationary in terms ofthe prices and what the Federal
Reserve does to fight that ismake interest rates higher.
(14:13):
Or you know, just simply thingsmight go back to normal, which
would be kind of put us back towhere interest rates had been
before.
All of these are possible andall of these are being factored
in to a bond market that has avariable and changing price and
is not predictable, even thoughpeople try to predict what's
gonna happen next all the time.
Erica Powers (14:36):
So how do you see it predict?
Oh, it's going to happen.
Melissa Joy (14:39):
Right, it really would make everything easier,
and that is such a stressor andadder to.
You know, people aren't mostpeople don't professionally buy
and sell houses all the time.
It's a transaction thattypically happens two, three,
four times in your life, and soadding the stress and anxiety of
a variable interest rate andtypes of loans and things like
(15:03):
that to your considerations whenyou're purchasing a house can
really make you feel a littlebit more uncertain and have, you
know, just more variablesyou're not experienced with.
Erica Powers (15:15):
Yes, I think that all of the different variables
when you're buying a house addsto that stress.
And I do think for my clientsthat are right now trying to
figure out do I buy a house, doI wait, what do I do?
It's really to look back andfigure out where their budget
lies.
If they're buying a house today, are they going to be able to
(15:36):
afford the house based ontoday's rate and will that fit
their budget?
If that's going to fit theirbudget, especially in the area
where we're at, where houseprices continue to increase and
are forecasted to continueincreasing, then you buy the
house when you find the housethat fits your budget and the
(15:58):
rates are where the rates are at, and then later on in the
future, if rates come down,that's when we have the
opportunity to look atrefinancing.
But at least you're not payingmore for the house because you
waited till rates came down andmaybe you get a better interest
rate but your house is a lotmore expensive at that point.
Melissa Joy (16:17):
Yeah, that's true, there's so many just variables,
and what we always do, if peoplecan afford it, is encourage
them.
If they feel ready and it's theright time to, yes, do it.
But then also have the rightgame plan in place to evaluate.
And so that game plan wouldinclude I know that for you any
(16:37):
loans that you've done in thelast few years for clients who
have the potential to refinance.
You've got your list, you knowwhat their interest rates are,
so you can kind of calculate hey, these 20 clients need a phone
call when interest rates golower.
Erica Powers (16:53):
Yeah, and that it's going to make sense, right?
So if you're going to refinance, you want to make sure that the
rate's going to be low enoughto recoup any costs and that
it's going to make sense overthe long term, right?
Melissa Joy (17:03):
So when you say low enough to recoup any costs,
you're saying like if a ratewere an eighth of a point lower.
So if you went from six and ahalf to six and a quarter, let's
say so 0.25 lower.
That might not be enough tomake up the cost because you
also have closing costs andyou're resetting If you did a 30
(17:24):
year to a 30 year you have awhole new 30 years to pay it off
.
Yeah, most likely that small ofa decrease is not going to make
a benefit.
What's a typical range wherepeople might want to reach out?
Erica Powers (17:41):
Like how much lower.
I mean a lot of people will uselike a 1% gauge, but you do
have to keep in kind of takeinto account loan size.
So for some people that have alarger loan, it might not take a
full percent before it's goingto be a benefit to them.
So you know, I think it's acase by case basis and that's
why it's a good idea to have thediscussion with your loan
(18:04):
officer, make sure that they'repaying attention and watching
for you, and have the discussionof what's going to make sense.
So when they call you and saytoday might be the day and it
only might be today that's theday you're ready for it and what
would the cost be in arefinance?
Melissa Joy (18:22):
And also, I know sometimes people say, oh, this
is no cost, but the cost mightbe buried in the interest rate.
Erica Powers (18:28):
In that case yeah , if you're hearing that it's a
no-cost refinance, usually thatmeans that the rate that you're
choosing has some type of acredit built in that's covering
the cost, because the costs torefinance are including whatever
the lender may charge you.
(18:49):
So whatever their fee istypically to cover things like
underwriting or cross-exemptfees.
But then there are also fees.
If you need an appraisal,you're going to need to pay the
appraiser.
You're always going to havetitle work that needs to be done
and there are fees that thetitle company is going to charge
to prepare the documents, forthe time that the notary is
sitting with you signing thedocument.
(19:12):
Depending on the state you'rein, sometimes there's taxes and
things on a refinance whereyou're going to need to pay that
locality a certain amount oftaxes.
You need to factor those in.
So there are a range of feesthat need to be calculated in
depending on where you'relocated at.
Melissa Joy (19:30):
And is that something that, when you're
talking to somebody aboutrefinancing, you can tell them
hey, here's an estimate of whatthe cost might be and here's
your new payment schedule.
Erica Powers (19:39):
Yes, yes, we would discuss in detail what the
cost would look like for theirspecific situation.
Would look like for theirspecific situation and then
based on the new payment, youknow how long does it take to
break even on those costs?
Melissa Joy (19:56):
to see its evenings Perfect?
And if you need to be on one ofthose lists, call the person
who did your mortgage.
Or if you don't have a person,erica I'm sure would be happy to
be watching for the refinancemoment.
Erica Powers (20:08):
Yes, I'm always happy to help anybody out.
Melissa Joy (20:12):
So just kind of bringing, I want to switch the
subject ever so slightly andthink ahead.
I hope that current environment, kind of the tariff trap,
doesn't create a US recession.
I don't think that that's like100% probability, but when we
have our next recessionaryenvironment, which you know, at
(20:35):
some point there will be arecession.
The question is when?
What changes when it comes tomortgages and mortgage
environment and what wouldpeople need to be kind of
knowledgeable about?
Erica Powers (20:52):
Well, it depends on.
Obviously there's all sorts ofthings that happen, but
typically in the previousrecessions that we've seen, it
has improved interest rates.
So if that were to happen againand that we saw an improvement
in rates, then there might besome opportunity to take
(21:14):
advantage of refinancing.
This is likely going to be forthe people who have purchased a
home in just the last few years,your people that are still in
the twos and threes of the olddays.
They may never refinance.
Melissa Joy (21:27):
Um, I kind of hope we never get to that point
because it was created out of amoment of extreme economic
stress with covid.
So yeah, my big inside if wedon't go back there.
Erica Powers (21:41):
I kind of don't think that I will see that in my
future again, um, but I I dothink that for people they're
likely not going to be raisedfinancing, unless maybe they're
looking to do something withequity in their house, and there
could be reasons why that wouldmake sense for some people.
But for the majority of peoplethe ones that have purchased in
(22:01):
the last few years if ratesstart to come down in the future
, then there is a goodlikelihood of that happening in
a recession, and then they wouldhave an opportunity to take
advantage of that.
So I think it's something to bekind of keeping an eye on and
be aware of that.
That would be a benefit.
(22:45):
No-transcript.
Keep in mind is it's not justone factor that's driving the
interest rates right, it's allthese different factors.
So just because we're in arecession doesn't mean that
rates are going to improve ifinflation is really high.
Inflation really affectsinterest rates probably more
than some of the other factors.
(23:06):
So you can't necessarily counton that, and that is why I think
it's important for people notto try to time the market,
because you may not be able totime the market.
Melissa Joy (23:20):
And so you probably won't be able to.
Erica Powers (23:23):
Yeah, yeah.
So you might be sitting aroundwaiting and thinking that you're
going to get to this pointwhere rates are going to be low
and house prices are going todrop dramatically, and that's
very unlikely to happen.
We don't really see that.
Even if we do go into arecession, it would not likely
be like what we saw in 2008,where home prices came down.
Melissa Joy (23:46):
We don't expect that in 08, where home prices
came down.
We don't expect that.
Yeah, never say never.
And certainly there are so manydifferent factors.
There's also, you know, factorswhen it comes to lending
standards.
So sometimes banks can eitherbe forced due to regulation or
because of their own focus ontheir ballot sheet, may choose
(24:11):
to be pickier about who theylend money to, and that
certainly can impact themortgage possibilities for you
as well.
Erica Powers (24:22):
Yeah, there's all sorts of things that are going
to impact where rates are at, soit's not, it's never just one
thing.
Melissa Joy (24:29):
Well, I think we might have made things less
clear and not more clear, butthat's really the nature of the
world of mortgage is.
It's constantly changing.
There are also different typesof buying programs and if you
could just briefly like, let'ssomebody say somebody has an
adjustable rate mortgage, whichis also called an arm, and they
(24:50):
may be coming closer to a reset,Although I think some of those
people probably have a few moreyears based on when interest
rates went up, unless they did avery, very short arm, like a
three-year arm.
But what should those people belooking for?
Erica Powers (25:08):
through your arm.
But what should those people belooking for?
I think it's the same thing,right?
You're going to take a look atwhere your payment is now, where
you think that it might addressto.
You know, when you did yourmortgage, there were terms of
how much the rate could adjusteither upwards or downwards each
year, and so I think it'simportant to call your loan
officer and have that discussionof where are you at, what are
the possibilities, and then atwhat point does it make sense
(25:32):
for you to maybe lock into afixed rate mortgage.
So you know, maybe it doesn'tmake sense right away, maybe
you're hanging on to the arm fora little bit, depending on
what's happening in the market,but in other situations it could
make sense, even right now, totake advantage and to lock it in
.
But that's where you have tohave the discussion, because
(25:52):
everyone's situation is going tobe different, right, and
everybody's goals are differentand their financial plans are
different.
Melissa Joy (25:59):
That's absolutely true and that's why you know
hopefully in this conversationyou're hearing a financial
planner, a really knowledgeablereal estate professional and a
mortgage person together canreally combine, for you know,
the ideas and concepts that canbe really informative for you in
making the most informeddecision when it comes to real
(26:21):
estate and mortgages.
Is there anything you wouldleave people with in terms of
things that you're seeing thatare different or questions they
should ask in today'senvironment about either
refinancing or new purchasemortgages?
Erica Powers (26:39):
I mean, I think the biggest thing is to have a
good plan when you're searchingfor a house.
So if you're a purchaser andyou're searching for a house,
have a really good plan and beknowledgeable about depending on
where rates are at or wherethey might move as you're
putting in offers, will youstill be within your budget?
So if you're able to do some ofthat research and have those
(27:02):
discussions ahead of time, thenwhen you're putting in an offer
you're going to be moreconfident, regardless of where
the rates are at.
So I think that that's numberone is to just have a good loan
officer that's working up thosenumbers for you and so that
you're going into your offerwith confidence.
And then I think forrefinancing it's kind of the
same thing, right?
Are you having that discussionwith where it's going to make
(27:24):
sense for you knowing how longyou're going to live in the home
and you know what your goalsare is going to drive your
decisions so that when you dosee a rate change that you're
able to take advantage?
Melissa Joy (27:40):
I love that.
I think that you know you canreally do a lot of pre-planning
to be prepared.
And you know you can really doa lot of pre-planning to be
prepared, especially, you know,with resources like Erica or
using financial planningsoftware to put in hey, this is
what we would buy something for.
Here's the interest rate, soyou can foresee how that will
impact everything and also yourbudget and how much money you
(28:04):
need to set aside for the house,including property taxes and
insurance and maintenance costs.
So do keep your eyes wide open,do be informed.
If you're not sure where tostart, calling somebody like
Erica, if you're going to be afirst-time homebuyer and saying,
here's the lay of the land ofour finances, can you tell me
(28:24):
what we can afford Can be reallybeneficial for you for being
prepared.
And that doesn't need to be acall the week you're going to be
under contract.
It can be a call six months or12 months out.
Erica Powers (28:35):
Yeah, I think if you know you're going to plan on
purchasing, it's always a goodtime to have the conversation
earlier rather than later.
Melissa Joy (28:43):
Well, Erica, where can people find you if they're
interested in learning more?
Erica Powers (28:49):
Sure, they can find me.
Well, I can give you my websiteand you can put that in the
show notes, and they can alsofind me on Instagram at local
mortgage banker and send me amessage.
I'm happy to help anybodythat's interested in purchasing
or refinancing.
Melissa Joy (29:09):
Well, thanks for bringing some mortgage wisdom to
the podcast, erica.
We appreciate you, as always,yeah.
Erica Powers (29:16):
Thank you for having me on.
Melissa Joy (29:29):
Thank you for listening to the Women's Money
Wisdom Podcast.
If you found value in thisepisode, the best way you can
support the podcast is toforward an episode to a friend
or leave a review.
Go to pearlplancom and thepodcast link to get all the
resources and links mentioned.
Welcome to the Women's Money Wisdom Podcast.
I'm Melissa Joy, a certifiedfinancial planner and the
founder of Pearl Planning.
My goal is to help youstreamline and organize your
finances, navigate big moneydecisions with confidence and be
strategic in order to grow yourwealth.
As a woman, you work hard foryour money and I'm here to help
(00:21):
you make the most of it.
Now let's get into the show.
Just a quick note before wedive in.
The information that we shareis meant to educate and inspire,
not serve as personalizedfinancial advice.
Everyone's situation is unique,so be sure to consult with your
(00:41):
own financial professional forguidance that fits your life.
So be sure to consult with yourown financial professional for
guidance that fits your life.
And just so you know, theopinions shared in this podcast
are my own and those of myguests, and they don't
necessarily represent those ofany organizations that I'm
affiliated with.
For more important disclosures,please go to our webpage at
(01:02):
pearlplancom.
Now let's get started.
Welcome back to the Women'sMoney Wisdom Podcast.
Today, we are going to betalking all about mortgages, and
I know that's a topic thataffects many of you.
Whether you have a house, todayyou are looking to protect your
low interest rate or reset yourhigh interest rate or you're
looking to buy in the future.
(01:22):
This is going to have a wealthof information for you and your
friends.
And back on the podcast isfriend of the pod, erica Powers.
Erica is a mortgageprofessional and she has been
assisting clients across thecountry with their mortgage
needs for over 20 years.
She is a certified divorcelending professional, so she has
(01:43):
expertise for people goingthrough a divorce that may need
a new loan, and she's also acertified mortgage planning
specialist and she has been awealth of wisdom over the years.
Welcome back to the podcast,erica.
Erica Powers (01:57):
Thanks for having me, Melissa.
I'm excited to be back.
Melissa Joy (02:00):
Well, it's always great to chat with you.
We talk all the time becauseyou're kind of my go-to person
when I need information aboutmortgages both the how-tos, the
what's possible, but also what'sadvisable, because those can be
two different things.
We're recording this on April8th and the episode's coming out
(02:21):
in a couple weeks and, becausewe're in pretty volatile times,
we could have a lot of changesin the next two weeks.
So I just want to give you likea little line in the sand about
when we're recording thisconversation and none of the
things that we'll talk about are, like you know, quotes, for
example, or anything like that.
But we're going to give you alay of the land, something we've
been planning on even beforethe turbulence in the market in
(02:42):
the last few weeks, even beforethe turbulence in the market in
the last few weeks.
But I think it's the perfecttime, as things are changing
significantly, to talk all aboutmortgages, how to borrow, when
to refinance, all that goodstuff.
So what are you seeing today,erica?
Give me a lay of the land of,you know kind of the real estate
market, mortgages, what you'redoing, what you're not doing,
(03:03):
like, give me some bullet pointsabout what's going on today.
Erica Powers (03:07):
Sure, so I can help clients all over the
country, but I do mostly assistclients in Washtenaw County and
the surrounding areas ofSoutheast Michigan.
So saying that, because we arestill in our area seeing a
shortage of inventory right, sopeople are competing for most of
(03:29):
the houses that go on themarket.
So we're seeing a lot of thatcompetition and we're still
seeing rates that are maybehigher than people got used to a
few years ago, and so there area lot of people I think that
maybe had been previouslysitting on the sidelines hoping
(03:49):
that we'd see rates come down,but I do think that we've seen a
lot of people decide that thatmay not be what's going to
happen, and so if they'reinterested in buying or getting
into the market and looking fora house, yeah, I work with
people all over the country, soabout half of my clients are
here in Michigan, half myclients are all over and it's
(04:12):
definitely a time period whereeverybody's real estate market
is not the same.
Melissa Joy (04:16):
I recently read that the housing market in the
Midwest and the Northeast isquite tight.
There's not a lot of inventory,you know, there really wasn't
like kind of an overbuild,oversell.
It just is an area that hasn'tbeen as intensively focused on
growth.
But then in certain parts ofthe South and Southeast and
(04:39):
maybe a portion of the WestCoast there's a little bit for a
variety of reasons, including,you know, natural disasters.
Unfortunately has soured peopleon Florida.
It's much more difficult toinsure a house in Florida or
California and then some partsof the country just had like
kind of parabolic, like justthrough the roof prices and
(05:00):
they're coming down to earth andso that's changing the
economics.
So it depends on where you'relistening as to what market
you're in.
Yeah, 100%.
So then you said interest ratesremain relatively high.
We had this very, very lowinterest rate situation after
years of relatively low rates,lower than they are today, right
(05:23):
, so when COVID hit, you knowcertain people can brag about a
2%, 2.5% mortgage and nowadayswe're talking in the sixes and
sevens right.
Erica Powers (05:36):
That is correct.
Last week we saw a little bitof a correction for about a day,
correction for about a day, fora moment in time, for a moment
in time and um, now this week umrates have gone back up again.
Um, so now historically they'restill lower than they've been
(05:56):
in the past.
So I don't want people to thinkthat, you know, if you look at
a historical graph we're stillkind of in the average or a
little bit low average over time, but it's still higher than
people got used to.
Melissa Joy (06:11):
Yeah, that is.
You know that's a big, hugeportion of your mortgage payment
when interest rates are wherethey are today.
And then we also at the sametime have dynamics where
property values are going up,property taxes are going along
with them, and then homeownersinsurance for better or worse,
(06:32):
like you want that insurance andit's just getting more
expensive because I mean theequation of the property values
plus losses that insurancecompanies are taking on, storms
and maybe a little bit of pilingon or, you know, kind of
sneaking in your rates alongwith it.
Like these are all very realparts of the equation for
affordability of housing.
Erica Powers (06:53):
Yes, I do find too.
A lot of times people will belooking on, you know, any of the
websites, the littlerelittercom, whatever it may be,
and some of the amounts thatthey're listing as what they
think the homeowner's insurancewill be monthly is not even
close to where it will end uponce that client gets a quote.
So it's important to kind ofbuild a padding into that number
(07:16):
because that will be a part ofyour monthly payment.
Melissa Joy (07:21):
That's right.
And also if the person whosehouse you're buying has owned
that house for a long, long time, they may have a low and
unsustainable property tax.
That is going to be reset whenyou purchase, so you can't count
on you know somebody that owneda house 20 years getting the
same range for the propertytaxes.
(07:42):
It's going to be higher.
You need to look at comparingthe person across the street
that sold their house last yearand not necessarily that owner.
Erica Powers (07:50):
Yes, you definitely need to take into
account that those taxes aregoing to go up and make sure
that when they do go up, thatthat's still going to fit your
budget.
Melissa Joy (08:00):
I also think, another important consideration.
I know some people just walk inthe door and they're like, well
, here's all the things I'mgoing to change in this house,
because you know it is my dreamhouse.
But also my dream house hasthis color walls and this type
of flooring and the kitchenneeds to be redone, et cetera.
And, gosh, I wish I lived inthat family, because my
(08:23):
husband's like no changes in thefirst five years, kind of.
But you know, you really needto think about that equation too
, because lending is the samewhen it comes.
If you needed to do a homeequity line or,000, let's say, a
(08:46):
powder room for $25,000 a yearago, it might be $40,000 or
$50,000 for the same projectbecause of the cost of materials
that are not all made onshorehere in the US, and so there's a
lot of factors that you canplan for going in as you're
selecting your house, and ifyou're going to have a home
improvement project, you reallyneed to budget that in right up
(09:06):
front.
Erica Powers (09:07):
Yes, and to realize that you may be being
very unrealistic about the cost.
So it's a good idea to do alittle bit of research about
what the cost actually will beand then also to factor in a
little bit of a buffer forthings that might break in the
house.
So for a lot of people thatthey're buying their first house
(09:29):
, they don't realize that, as ahomeowner, if it breaks, it's on
you to fix it.
So you need to have a littlebit of a cushion there to be
able to make up for any of thosecosts that might unexpectedly
come up.
Melissa Joy (09:42):
Yeah, I'll tell you .
In my financial planningsoftware there's a space for
maintenance, and you could alsoinclude, if you bought a condo,
the homeowners association costs, which can be quite high.
But they cover a lot of thingsthat you may otherwise really be
paying for, like landscaping,any exterior improvements, a
host of services.
(10:03):
But I often start with abaseline of 1% of the value of
the home.
So if you bought a $750,000house, I would say at least
annually, you would expect to domaintenance of at least $7,500,
if not more, and so that wouldbe a conversation point.
But it's not like when you rentand you can just call the
landlord to fix things.
(10:24):
You got it, that's on you, andthere are certain things you
need to replace and change overtime.
Erica Powers (10:30):
Yeah, 100%.
So it's good to have thatcushion so that when those
things come up you're really notcaught off guard.
Melissa Joy (10:37):
One of the reasons that I wanted to record this
episode is that we had a mutualclient who had asked like why
aren't interest?
I know the Federal Reservelowered interest rates.
Why aren't mortgage rates lower?
And there are so many factorsthat go into mortgage interest
rates that they're not justsaying, hey, is the Federal
(11:00):
Reserve going to lower by aquarter percent or a half
percent and thus that's whatrates are going to be.
How frequently do rates change?
Rates?
Erica Powers (11:11):
change, honestly, every day and sometimes
throughout the day.
So you know, you could talk tome in the morning and the rate
might be one thing at that pointin time and then you make a
decision in the afternoon therate could be different.
Oftentimes we do see our ratesheet stay the same throughout
(11:31):
the day, but it's never aguarantee and our rates don't
change just based on the Fedrate.
So that's kind of a misnomer.
Oftentimes people will call usand say well, the Fed lowered
the rate yesterday, so the ratesare lower today, but our
mortgage rates probably hadpriced in that change by the Fed
(11:54):
much earlier, before the Fedactually even changed the rates
Weeks in advance.
Yes, yes, yes.
And sometimes on the reverse,if we think that they're going
to change the rate, or we thinkthey're going to change the rate
by more and they don't, thenthat can actually harm our rate,
even if they still lower theirrate.
(12:16):
But our rates factor in manydifferent things.
So it takes into accountinflation, it takes into account
the 10-year treasury, it takesinto account other things that
might be happening eitherpolitically within the United
States or outside of the country, right, so the threat of war or
(12:38):
instability, those types ofthings are going to impact
mortgage rates, so it's not justone thing that impacts them.
Melissa Joy (12:47):
That's so interesting.
I often ask you how rates havechanged.
When I see the bond market asmeasured by, often, the 10-year
treasury, when I see that goingup or down, then usually there's
often a pattern or a rhyme,because bond markets are
listening to the same thing wehave.
Just so we mentioned, we'rerecording right after the first
(13:11):
week of April.
The first week of April we hadhistorically significant down
days.
The stock markets were down 10%and for the first two days
bonds like really were actinglike the seesaw that we
described, where stocks weregoing down and bonds, their
(13:31):
prices were going up, whichmeant their rates were going
down.
But then we had the third dayof you know kind of instability
where things weren't as bad butthey were still negative and on
that day interest rates actuallywent up and the price of bonds
went down.
And there is speculation.
(13:51):
Why is this happening?
And some hypotheses are maybeChina's selling some of their
bond reserves that are in UStreasuries.
Certainly, if we have tariffsthat are not going to go away,
that's inflationary in terms ofthe prices and what the Federal
Reserve does to fight that ismake interest rates higher.
(14:13):
Or you know, just simply thingsmight go back to normal, which
would be kind of put us back towhere interest rates had been
before.
All of these are possible andall of these are being factored
in to a bond market that has avariable and changing price and
is not predictable, even thoughpeople try to predict what's
gonna happen next all the time.
Erica Powers (14:36):
So how do you see it predict?
Oh, it's going to happen.
Melissa Joy (14:39):
Right, it really would make everything easier,
and that is such a stressor andadder to.
You know, people aren't mostpeople don't professionally buy
and sell houses all the time.
It's a transaction thattypically happens two, three,
four times in your life, and soadding the stress and anxiety of
a variable interest rate andtypes of loans and things like
(15:03):
that to your considerations whenyou're purchasing a house can
really make you feel a littlebit more uncertain and have, you
know, just more variablesyou're not experienced with.
Erica Powers (15:15):
Yes, I think that all of the different variables
when you're buying a house addsto that stress.
And I do think for my clientsthat are right now trying to
figure out do I buy a house, doI wait, what do I do?
It's really to look back andfigure out where their budget
lies.
If they're buying a house today, are they going to be able to
(15:36):
afford the house based ontoday's rate and will that fit
their budget?
If that's going to fit theirbudget, especially in the area
where we're at, where houseprices continue to increase and
are forecasted to continueincreasing, then you buy the
house when you find the housethat fits your budget and the
(15:58):
rates are where the rates are at, and then later on in the
future, if rates come down,that's when we have the
opportunity to look atrefinancing.
But at least you're not payingmore for the house because you
waited till rates came down andmaybe you get a better interest
rate but your house is a lotmore expensive at that point.
Melissa Joy (16:17):
Yeah, that's true, there's so many just variables,
and what we always do, if peoplecan afford it, is encourage
them.
If they feel ready and it's theright time to, yes, do it.
But then also have the rightgame plan in place to evaluate.
And so that game plan wouldinclude I know that for you any
(16:37):
loans that you've done in thelast few years for clients who
have the potential to refinance.
You've got your list, you knowwhat their interest rates are,
so you can kind of calculate hey, these 20 clients need a phone
call when interest rates golower.
Erica Powers (16:53):
Yeah, and that it's going to make sense, right?
So if you're going to refinance, you want to make sure that the
rate's going to be low enoughto recoup any costs and that
it's going to make sense overthe long term, right?
Melissa Joy (17:03):
So when you say low enough to recoup any costs,
you're saying like if a ratewere an eighth of a point lower.
So if you went from six and ahalf to six and a quarter, let's
say so 0.25 lower.
That might not be enough tomake up the cost because you
also have closing costs andyou're resetting If you did a 30
(17:24):
year to a 30 year you have awhole new 30 years to pay it off
.
Yeah, most likely that small ofa decrease is not going to make
a benefit.
What's a typical range wherepeople might want to reach out?
Erica Powers (17:41):
Like how much lower.
I mean a lot of people will uselike a 1% gauge, but you do
have to keep in kind of takeinto account loan size.
So for some people that have alarger loan, it might not take a
full percent before it's goingto be a benefit to them.
So you know, I think it's acase by case basis and that's
why it's a good idea to have thediscussion with your loan
(18:04):
officer, make sure that they'repaying attention and watching
for you, and have the discussionof what's going to make sense.
So when they call you and saytoday might be the day and it
only might be today that's theday you're ready for it and what
would the cost be in arefinance?
Melissa Joy (18:22):
And also, I know sometimes people say, oh, this
is no cost, but the cost mightbe buried in the interest rate.
Erica Powers (18:28):
In that case yeah , if you're hearing that it's a
no-cost refinance, usually thatmeans that the rate that you're
choosing has some type of acredit built in that's covering
the cost, because the costs torefinance are including whatever
the lender may charge you.
(18:49):
So whatever their fee istypically to cover things like
underwriting or cross-exemptfees.
But then there are also fees.
If you need an appraisal,you're going to need to pay the
appraiser.
You're always going to havetitle work that needs to be done
and there are fees that thetitle company is going to charge
to prepare the documents, forthe time that the notary is
sitting with you signing thedocument.
(19:12):
Depending on the state you'rein, sometimes there's taxes and
things on a refinance whereyou're going to need to pay that
locality a certain amount oftaxes.
You need to factor those in.
So there are a range of feesthat need to be calculated in
depending on where you'relocated at.
Melissa Joy (19:30):
And is that something that, when you're
talking to somebody aboutrefinancing, you can tell them
hey, here's an estimate of whatthe cost might be and here's
your new payment schedule.
Erica Powers (19:39):
Yes, yes, we would discuss in detail what the
cost would look like for theirspecific situation.
Would look like for theirspecific situation and then
based on the new payment, youknow how long does it take to
break even on those costs?
Melissa Joy (19:56):
to see its evenings Perfect?
And if you need to be on one ofthose lists, call the person
who did your mortgage.
Or if you don't have a person,erica I'm sure would be happy to
be watching for the refinancemoment.
Erica Powers (20:08):
Yes, I'm always happy to help anybody out.
Melissa Joy (20:12):
So just kind of bringing, I want to switch the
subject ever so slightly andthink ahead.
I hope that current environment, kind of the tariff trap,
doesn't create a US recession.
I don't think that that's like100% probability, but when we
have our next recessionaryenvironment, which you know, at
(20:35):
some point there will be arecession.
The question is when?
What changes when it comes tomortgages and mortgage
environment and what wouldpeople need to be kind of
knowledgeable about?
Erica Powers (20:52):
Well, it depends on.
Obviously there's all sorts ofthings that happen, but
typically in the previousrecessions that we've seen, it
has improved interest rates.
So if that were to happen againand that we saw an improvement
in rates, then there might besome opportunity to take
(21:14):
advantage of refinancing.
This is likely going to be forthe people who have purchased a
home in just the last few years,your people that are still in
the twos and threes of the olddays.
They may never refinance.
Melissa Joy (21:27):
Um, I kind of hope we never get to that point
because it was created out of amoment of extreme economic
stress with covid.
So yeah, my big inside if wedon't go back there.
Erica Powers (21:41):
I kind of don't think that I will see that in my
future again, um, but I I dothink that for people they're
likely not going to be raisedfinancing, unless maybe they're
looking to do something withequity in their house, and there
could be reasons why that wouldmake sense for some people.
But for the majority of peoplethe ones that have purchased in
(22:01):
the last few years if ratesstart to come down in the future
, then there is a goodlikelihood of that happening in
a recession, and then they wouldhave an opportunity to take
advantage of that.
So I think it's something to bekind of keeping an eye on and
be aware of that.
That would be a benefit.
(22:45):
No-transcript.
Keep in mind is it's not justone factor that's driving the
interest rates right, it's allthese different factors.
So just because we're in arecession doesn't mean that
rates are going to improve ifinflation is really high.
Inflation really affectsinterest rates probably more
than some of the other factors.
(23:06):
So you can't necessarily counton that, and that is why I think
it's important for people notto try to time the market,
because you may not be able totime the market.
Melissa Joy (23:20):
And so you probably won't be able to.
Erica Powers (23:23):
Yeah, yeah.
So you might be sitting aroundwaiting and thinking that you're
going to get to this pointwhere rates are going to be low
and house prices are going todrop dramatically, and that's
very unlikely to happen.
We don't really see that.
Even if we do go into arecession, it would not likely
be like what we saw in 2008,where home prices came down.
Melissa Joy (23:46):
We don't expect that in 08, where home prices
came down.
We don't expect that.
Yeah, never say never.
And certainly there are so manydifferent factors.
There's also, you know, factorswhen it comes to lending
standards.
So sometimes banks can eitherbe forced due to regulation or
because of their own focus ontheir ballot sheet, may choose
(24:11):
to be pickier about who theylend money to, and that
certainly can impact themortgage possibilities for you
as well.
Erica Powers (24:22):
Yeah, there's all sorts of things that are going
to impact where rates are at, soit's not, it's never just one
thing.
Melissa Joy (24:29):
Well, I think we might have made things less
clear and not more clear, butthat's really the nature of the
world of mortgage is.
It's constantly changing.
There are also different typesof buying programs and if you
could just briefly like, let'ssomebody say somebody has an
adjustable rate mortgage, whichis also called an arm, and they
(24:50):
may be coming closer to a reset,Although I think some of those
people probably have a few moreyears based on when interest
rates went up, unless they did avery, very short arm, like a
three-year arm.
But what should those people belooking for?
Erica Powers (25:08):
through your arm.
But what should those people belooking for?
I think it's the same thing,right?
You're going to take a look atwhere your payment is now, where
you think that it might addressto.
You know, when you did yourmortgage, there were terms of
how much the rate could adjusteither upwards or downwards each
year, and so I think it'simportant to call your loan
officer and have that discussionof where are you at, what are
the possibilities, and then atwhat point does it make sense
(25:32):
for you to maybe lock into afixed rate mortgage.
So you know, maybe it doesn'tmake sense right away, maybe
you're hanging on to the arm fora little bit, depending on
what's happening in the market,but in other situations it could
make sense, even right now, totake advantage and to lock it in
.
But that's where you have tohave the discussion, because
(25:52):
everyone's situation is going tobe different, right, and
everybody's goals are differentand their financial plans are
different.
Melissa Joy (25:59):
That's absolutely true and that's why you know
hopefully in this conversationyou're hearing a financial
planner, a really knowledgeablereal estate professional and a
mortgage person together canreally combine, for you know,
the ideas and concepts that canbe really informative for you in
making the most informeddecision when it comes to real
(26:21):
estate and mortgages.
Is there anything you wouldleave people with in terms of
things that you're seeing thatare different or questions they
should ask in today'senvironment about either
refinancing or new purchasemortgages?
Erica Powers (26:39):
I mean, I think the biggest thing is to have a
good plan when you're searchingfor a house.
So if you're a purchaser andyou're searching for a house,
have a really good plan and beknowledgeable about depending on
where rates are at or wherethey might move as you're
putting in offers, will youstill be within your budget?
So if you're able to do some ofthat research and have those
(27:02):
discussions ahead of time, thenwhen you're putting in an offer
you're going to be moreconfident, regardless of where
the rates are at.
So I think that that's numberone is to just have a good loan
officer that's working up thosenumbers for you and so that
you're going into your offerwith confidence.
And then I think forrefinancing it's kind of the
same thing, right?
Are you having that discussionwith where it's going to make
(27:24):
sense for you knowing how longyou're going to live in the home
and you know what your goalsare is going to drive your
decisions so that when you dosee a rate change that you're
able to take advantage?
Melissa Joy (27:40):
I love that.
I think that you know you canreally do a lot of pre-planning
to be prepared.
And you know you can really doa lot of pre-planning to be
prepared, especially, you know,with resources like Erica or
using financial planningsoftware to put in hey, this is
what we would buy something for.
Here's the interest rate, soyou can foresee how that will
impact everything and also yourbudget and how much money you
(28:04):
need to set aside for the house,including property taxes and
insurance and maintenance costs.
So do keep your eyes wide open,do be informed.
If you're not sure where tostart, calling somebody like
Erica, if you're going to be afirst-time homebuyer and saying,
here's the lay of the land ofour finances, can you tell me
(28:24):
what we can afford Can be reallybeneficial for you for being
prepared.
And that doesn't need to be acall the week you're going to be
under contract.
It can be a call six months or12 months out.
Erica Powers (28:35):
Yeah, I think if you know you're going to plan on
purchasing, it's always a goodtime to have the conversation
earlier rather than later.
Melissa Joy (28:43):
Well, Erica, where can people find you if they're
interested in learning more?
Erica Powers (28:49):
Sure, they can find me.
Well, I can give you my websiteand you can put that in the
show notes, and they can alsofind me on Instagram at local
mortgage banker and send me amessage.
I'm happy to help anybodythat's interested in purchasing
or refinancing.
Melissa Joy (29:09):
Well, thanks for bringing some mortgage wisdom to
the podcast, erica.
We appreciate you, as always,yeah.
Erica Powers (29:16):
Thank you for having me on.
Melissa Joy (29:29):
Thank you for listening to the Women's Money
Wisdom Podcast.
If you found value in thisepisode, the best way you can
support the podcast is toforward an episode to a friend
or leave a review.
Go to pearlplancom and thepodcast link to get all the
resources and links mentioned.
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