A Plan To Prepay The Mortgage Should Be A Defensive Position In Any Investment Portfolio, Says MIFSP
Atlanta --
Mar 2, 2005 --
For Immediate Release
The Mortgage Institute For Financial Services Professionals (MIFSP) finds that the best defensive position in any investment portfolio, for a person who has a mortgage, is a plan to prepay the mortgage. MIFSP also recommends that disclosure of the guaranteed return and no cost-no risk nature of prepaying the mortgage should be a self-imposed ethics obligation for any financial services professional that sells investments or investment advice.
“Most financial services professionals make inappropriate comparisons between prepaying the mortgage and investing,” says Leon Morris, QFP, ChFC, CLU, ACS, RFC, RMP, FFSI, Executive Director of MIFSP.“When comparing prepaying the mortgage to investment alternatives, it’s very common for professionals to make improper risk comparisons, improper tax calculations, and/or to ignore the impacts of the source of funds being invested, not to mention failing to factor in the impact of the consumer’s contractual obligation to pay the mortgage while waiting for expected investment returns. It wouldn’t be surprising if consumers start holding these professionals liable for financial damages resulting from inappropriate comparisons,” says Mr. Morris.
“When consumers invest, more than likely, they are expecting that their investments will grow sufficiently to keep them securely in their homes.The performance of the investment portfolio isn’t guaranteed, but the results of effectively managing your mortgage can be,” says Morris.
Mr. Morris believes that with anticipated changes to social security the pressure on the financial services professionals to get it “right” is increased even more so.“When things go awry, the consumers bear the risk, but the financial services professional faces the potential liability”, says Morris.
As the financial services industry evolves, there may be instances when the soundness of many aspects of the consumer’s future are entrusted to the care of one financial services provider and/or one financial services professional (FSP).“If you’re a financial planner or registered representative offering mortgage origination services, or even if you don’t, you should be prepared to defend allegations that you recommended certain mortgage transactions or investment transactions that were inconsistent with your clients' financial goals, objectives and risk temperament, or that you failed to make them aware of less risky ways to reach those goals,” says Morris.
“It would be extremely hard for any investment to beat the wide-ranging benefits and extremely low risk and low cost of prepaying your mortgage. However, if you don’t want to apply all of your discretionary funds toward prepaying the mortgage, it should at least be included in your investment strategy,” says Morris.
About MIFSP:MIFSP offers the only training in residential mortgage planning and residential mortgage advisory services for qualified financial services professionals that leads to the Residential Mortgage Planner (RMPâ) and Certified Mortgage Evaluator (CMETM) designations.
For the white paper on this subject or to order Managing Your Mortgage to Financial Independence visit www.mifsp.org.
