Banker advises clients to lower payment on local home before moving to Florida

Mortgage banker: Harry Sessa Home value: $279,000

Loan type: Refinance of conventional 15-year fixed mortgage of $175,000

Backstory: Harry Sessa was recently contacted by clients who had closed a loan with him five years ago for the purchase of a Shoreline condominium.

They had reached an age where they were going to retire and wanted to move to Florida and rent for the next couple of years to see of it was a good fit for them.

Sessa suggested they first contact a local Realtor to determine what the market rental of their current condo would be. The Realtor indicated it would be approximately $1,800 per month.

Based on their current mortgage, which was a 15-year fixed with 10 years left on the term, Sessa explained that $1,800 rental income would not be enough to cover the cost of the condominium on a monthly basis.

The monthly payment, including the principal and interest, condo fees, taxes and insurance, totaled $2,079.

Sessa’s advice was to refinance the Connecticut condo into an interest-only seven-year Adjustable Rate Mortgage (7/1 ARM). The new payment, with a rate fixed for seven years was designed to pay only the interest and not the principal. This dramatically reduced the monthly mortgage principal and interest payment from $1,230 to $528.

The monthly savings of $702 provided more than enough income above the $1,800 rental of the condo along with their pension and Social Security to cover carrying costs.

This allowed them make the move to Florida and rent for a few years before deciding if it would be a good permanent move. They would also retain ownership of the condominium on the Shoreline if they decided Florida was not for them.

Conversely, if they decided to stay in Florida they would sell the Connecticut condo and take out the equity of more than $100,000 and use it to either buy a home or continue to rent in Florida.

This allowed them make the move to Florida and rent for a few years before deciding if it would be a good permanent move. They would also retain ownership of the condominium on the Shoreline if they decided Florida was not for them.

Based on Sessa’s advice to refinance, the new lower mortgage payment served both the purpose of increasing their monthly cash flow as well as allowing them to retain the Connecticut condominium