Warren Buffet just gave 30-year mortgages a serious thumbs-up. Here's a round-up of what “The Oracle of Omaha” has to say about what MLOs and Realtors try to communicate to the public every day:
- "A home should be the greatest asset for most people."
- "If you find a house you like and you're going to stay in the locale for a while, buy it with a 30-year mortgage."
- "Take advantage of the mortgage interest deduction - I doubt very much they will take it away in the end."
When Warren Buffet, one of the most successful investors of all time touts your product, you should waste no time in getting the word out. You definitely want your prospects to hear about the Berkshire Hathaway CEO's ringing endorsement, but it's also great to share with your past clients. Offering high-caliber validation that your customers made a good decision lays great groundwork to ask for referrals.
Buffet was talking real estate because he recently put the Laguna Beach home he bought for $150,000 in 1971 on the market for $11 million. The $150,000 price tag was pretty steep in 1971 – it would translate to about $900,000 in today's dollars – and Buffet took out a mortgage to buy it.
Buffet explained that he took out a mortgage for about $120,000 to buy the home and spent that same amount in cash to buy Berkshire Hathaway stock. If he gets close to his $11 million list price, Buffet will make nearly seventy times what he spent for the Laguna Beach house. But more importantly, his decision to get a mortgage and use his cash differently, paid off even bigger.
Here's what Buffet told CNBC: "I thought I could probably do better with the money than have it be an all equity purchase of the house. I might have bought 3,000 shares of Berkshire or something like that… so that's [worth] $750 million [today]."
Straight from the multi-billionaire's mouth – and an outrageous example of what can happen. For the rest of us and the clients we're seeking to do business with, here's the more practical example: Average annual home value appreciation of 4-7% combined with monthly housing dollars applied to pay down a mortgage is like a savings account for a homeowner. Barring extraordinary circumstances or market corrections that don't appear to be on the horizon this year, owning a home is a sensible, reasonable way to use money everyone has to spend each month anyway.
With the second-wealthiest individual in the U.S. singing the praises of mortgages, MLOs and Realtors have some high-powered backup for why it's still a great time to buy a first, second, investment or retirement home. The question is, are you getting the word out?
Hear Warren Buffet's comments here.