- Key insight: When it comes to homebuying, advisors can make an impact for clients by helping them understand the advantages of shopping for the best mortgage rates.
- What's at stake: Borrowers spend $65 billion annually on excess interest, according to
Bankrate.com , or more than $3,300 per household. - Expert quote: "The expertise financial planners can provide is assessing the impacts, again, across their broader financial life." — Vincent Birardi, senior wealth advisor at Halbert Hargrove
Homebuyers often accept the first mortgage quote they receive, potentially leaving thousands of dollars on the table. Financial advisors can help clients learn how to shop for better rates while integrating mortgage decisions into broader financial planning.
"Even though we're not going to be part of the signing process, we can be part of the education process," said Alicia Fuller, founder and managing director of Naples, Florida-based Coastal 360 Capital Advisors, which partners with registered investment advisor Steward Partners.
Such guidance can have significant impact. Across home loans initiated since 2022, borrowers have
Advisors can help clients coordinate mortgage decisions alongside investment, tax, cash flow and estate planning considerations, Fuller said. To finance a home purchase, some clients liquidate investments, while others borrow, and some do both. Some clients may be good candidates for
Clients should first define their desired outcome, Fuller said.
"Once you know the outcome, then you go look for the mortgage," she said.
Advisors can also point clients toward resources for rate shopping. Fuller cited Bankrate.com as one widely used tool for comparing mortgage rates. Advisors can also help clients evaluate options ranging from mortgage brokers (which Fuller said may charge high fees) to banks, including local lenders, which sometimes offer more competitive rates than national ones.
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Use referrals when needed
Advisors have to be careful if they aren't mortgage brokers, said Rich Arzaga, the Colorado Springs, Colorado-based founder and CEO of The Real Estate Whisperer, a registered investment advisor.
"Once you start going into an area that you don't have expertise in, you're out of your lane — then you can create some risk for yourself and some regret for the client," Arzaga said. "So, for me, the way I manage that risk is I refer off to two or three mortgage brokers when somebody should look at refinancing."
While advisors may not be mortgage specialists, they should still understand how mortgage and refinancing decisions fit into a client's broader financial picture, he said.
Advisors without mortgage licenses should be aware of current market conditions and pay attention to clients' existing interest rates and loan terms, Arzaga said.
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Integrate mortgages into the financial plan
Even without a mortgage license, advisors can play a critical role by helping clients understand how mortgages affect cash flow and long-term goals.
One important aspect to consider is the impact of any new mortgage product on household cash flow needs, said Vincent Birardi, a senior wealth advisor at Long Beach, California-based registered investment advisor Halbert Hargrove.
"We want to get out ahead of that," he said. "And then secondarily, even bigger picture, what impacts having a change to their mortgage product situation might have to their larger financial goal plan?"
Such impacts could include educational, travel or retirement savings goals, he said.
"The expertise financial planners can provide is assessing the impacts, again, across their broader financial life," Birardi said.
Help clients evaluate their options
Birardi said he might point clients to mortgage modeling websites — and he cautions them to take their time rather than rush into a decision.
"Be thoughtful. Interview several mortgage lenders," Birardi said. "Let's say you meet with a mortgage lender. They offer a product that seems enticing. There is little to no harm in stress testing that and speaking with other professionals in that realm just to make sure that you're not missing out on a better opportunity, and oftentimes that's really what I try to bring to the situation."
In addition to speaking with their financial advisors, Birardi said clients can benefit from speaking with their CPAs and their other financial professionals.
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Ultimately, mortgage planning should be viewed as part of a broader conversation about debt and household finances, Arzaga said.
"You cannot do everything, but I think in this case you really should try to squeeze debt in and mortgages and refinancing," he said. "That is part of the household cash flow. … The first thing I learned when I got into this business and was learning was: The backbone of a good financial plan is understanding cash flow of the household, and that cash flow includes the debt."
