NorthWesternFinancialReview.com Blog

The historically low rates available on mortgages currently create an opportunity for banks. The rate on a conventional 30-year fixed-rate mortgage is 4.25 percent. That’s amazingly low, allowing people to buy more house with less money. For most people interested in moving, however, the challenge isn’t finding a house to buy, it’s selling the one they’ve got.

Unless your house is nearly perfect — no, let’s say perfect — it’s very difficult to attract the attention of buyers, particularly in urban areas. There is a lot of inventory out there and only the best homes are attracting good offers. So many homeowners who wish to move need to do remodeling or updating on their existing home. Where there is a lot of competition for homes, a seller needs to have a home with an attractive exterior, updated kitchen, good floors and window treatments, and clean walls. Any decorating remaining from the early 1990s needs to be updated.

This can cost some money, and this is where a bank might have an opportunity. A bank might consider promoting a loan product to people who need a little money to update their home so they can sell it. It’s a pretty good loan for a bank because it would be paid off when the home is sold. So most of these loans would not need to have terms any longer than a year, or perhaps two years at the most.

Home sales remain slow, but there is activity. Some people really do want to move. If they have been in their house for a decade or more, they can likely expect to pull considerable equity out of the house when they sell, so they can put 20 percent down on a new one and get an incredible rate on their next mortgage. But they might not be anticipating the level of work they need to do on their current home to assure a sale. A good marketing campaign from the local bank could educate them on this point. This would be a real service for people considering selling, while putting the bank in great position to make some new loans.