case study: vacation home purchase

Mortgage Planning Case Study:

Vacation Home Purchase

Mortgage Planning Case Study

Second Home Smiths• Case background:

• Buying a new construction second/vacation home.

• Referred by listing agent of builder who had a relationship with me.

• Planning to use investment account for down payment.


Second Home Smiths• Mr. Smith is 41 and is a W-2 employee for a local

cellular provider earning $110,000 yr.

• Mrs. Smith is 40 and is a commissioned sales rep for a medical supply company earning between $25K to $50K year.

• They own a primary residence worth $650,000

• They have a 15 yr. Fixed rate mortgage with $162K balance and a Home Equity Line Of Credit (HELOC) with an $85K balance.

• They also have other debt totaling $99,000.


Second Home Smiths• They have a sizable unmanaged investment

portfolio of $750,000

• They have a small amount of life and disability insurance

• They have no will or estate plan in place.


Second Home Smiths• The Process:


• I illustrate the mortgage planning process to my clients with my “Strategic Mortgage Planner” shown below:


• The discovery process involves a consultation along with a “Goals Worksheet” :


• From the Goals Worksheet I learned that:

- They were not working with a financial planner

- They had minimal life insurance coverage

- They did not have a will/estate plan

- They had high levels of non-preferred debt

- They had a significant amount of equity in their primary residence

Second Home Smith


• It was at this point (before any action was taken) that I recommended, and they expressed interest in, having a financial planner take a look at their situation.

Second Home Smith


• The financial planner they met with formulated some basic recommendations but, before he took any action, he referred them to a CPA and an Estate Planning Attorney.

Second Home Smith


• We then all met together and formulated a comprehensive plan for the Smith’s. This plan was presented to the Smith’s and, with a few minor changes, was put into place.

Second Home Smith


• This plan involved a strategic refinance of their primary home.

• A strategic mortgage product and down payment structure for their vacation home purchase.

• A reallocation of their investment account.

• Additional life/disability insurance.

• A comprehensive income/expense & tax plan.

• A Will & Estate plan.

Second Home Smith


• If they had not done anything, in 15 years they would have a combined asset & real estate value of $2.7 million.

• By executing this strategic refinance now, in 15 years they will have a combined asset & real estate value of $3.6 million with NO CHANGE TO MONTHLY CASH FLOW.

Second Home Smith


• More than the dollar figure is the fact that they were able to meet a CPA that they like and trust and as a result their tax situation improved

• They met with a estate planning attorney and finally put a will and estate plan in place

• They now have adequate life insurance and disability insurance

• They repositioned their assets consistent with their risk tolerance and time horizon, resulting in a much more secure portfolio.

Second Home Smith


Second Home Smiths• This is what Mortgage Planning is all about and

what I am trained to do as a Certified Mortgage Planning Specialist: Asking questions to find hidden needs or opportunities that may exist for the clients I have the privilege to serve.

case study: vacation home purchase

Real Estate