Seek employer assistance or seek an employer who gives assistance

In John Grisham's novel, The Firm (Random House, 1991), senior lawpart-ner Royce McKnight uses employer-sponsored, low-interest-rate home financing to help recruit Mitch McDeere into the law firm.

"As you know" [Royce tells Mitch], we require you to buy a home. It adds stability and prestige and we're very concerned about these things, especially with our associates. The firm provides a low-interest-rate mortgage loan, 30 years, fixed rate, non-assumable should you decide to sell in a few years. It's a one-shot deal, available for your first home. After that, you're on your own."

"What kind of interest rate?" [asks Mitch].

"As low as possible without running afoul with the IRS. Current market rate is around 10, 10.5. We should be able to get you a rate of 7 to 8 percent. We represent some banks, and they assist us. With the salary we're paying, you should have no trouble qualifying. In fact, the firm will sign on as a guarantor [i.e., cosignor], if necessary."

"That's very generous, Mr. McKnight."

"It's important to us. Once you find a house ... all you have to do is move in." [Note, too, the references to "non-assumable" and "guarantor."]

Could your employer use its influence with banks or other mortgage lenders to help you and other employees get below-market financing? At Colgate-Palmolive, Robert Berg says, "We came up with a mortgage assistance plan that used the financial muscle of the company to help our employees get the best possible terms. Our program is a very cost-effective fringe benefit... it's tax-effective to employees and much more desirable than just giving people a salary increase."

To reduce the costs of homebuying, Fannie Mae has developed an employer-assisted program named Magnet. Participating employers offer their employees homebuyer helper techniques that include lower interest rates, down-payment assistance, second mortgages, loan guarantees, closing cost assistance, and interest rate buydowns. Employers know that homeowners make more stable employees. If your employer values your contribution to the firm, ask how they might help boost your buying power. When bargaining for a new job, include mortgage assistance as part of your requested package of pay and benefits.

Keep an exit strategy in mind. Find out what happens to the mortgage— or other homebuying assistance—if you get fired, laid off, or change jobs voluntarily. The employer could withdraw its contribution, or even declare the loan due, as is the practice with loans secured by an employer 401(k) plan.

0 0

Post a comment