Rob Lawrence, Chief Mortgage Warrior Of mortgagebattlecall.com

Times are tough, there is no doubt about that. Interest rates are inching up and much of the hub-bub of the refinance boom is over. It's the difficult loans that remain, amongst them mostly purchases.

It's time to face facts. The A-paper good credit refinance loans are over. There is little chance that you'll be able to convince anyone to refinance, unless they are in extreme dire financial straights and have a tremendous amount of debt to pay off (and in that case, they are probably sub-prime borrowers anyway). Because consumers are interest rate sensitive, even though they are combining total debt into a lower payment, you will be hard-pressed to get them to trade their 5.25% mortgage rate for a 7.5% rate. It simply won't happen.

In order to sell these types of refinance loans (combining and rolling debt into the mortgage), you will have to hit the customer's hot buttons. Are they concerned about lowering the monthly out-go? Have they recently had a major financial change in their life? Lost their job? Unexpected bills? Whatever the reason, the customer's immediate concern is the monthly cash flow. They aren't thinking long term, and what this will do to their financial future. All they care about is getting back on their feet. And this is where YOU can help. But do it if it only makes sense. Don't sell a loan if you yourself wouldn't do the same thing.

Know that long term, when you roll debt into a mortgage, you pay much more on that debt than you ever would by paying it off yourself. You end-up carrying the debt over a much longer term, 30 years on a 30 year note, and the accumulated total interest charged is much, much higher. Even tens of thousands of dollars higher!

Yes, there are tax benefits to this and you can deduct the interest from your mortgage off of your taxes. But, what happens cash-flow-wise is that the customer is stuck with an elevated monthly mortgage payment over the LONG TERM. Short term, the combined total monthly cash flow is lower by combining debt, but long term their monthly mortgage payment will be higher than what they originally started with.

In order words if the customer simply got a debt consolidation loan or a HELOC from their bank, at least when the debt is finally paid off, they would still have the same low monthly mortgage they have now. By paying debt though refinancing, long term the customer shoots themselves in the foot by paying a higher interest rate and having a higher monthly mortgage payment (which will never go back down unless they refinance again or pay off the note).

These types of refinance loans made sense when rates were low and customers were cutting both their monthly mortgage rate and monthly payment. It was logical and the financial benefits could be seen in black and white. Nowadays, these debt-consolidation mortgage loans are almost un-sellable. It's simple economics and no matter how you try to push it, it's a very hard sell indeed. You would not only be doing the customer a disservice but yourself.

Give up on these types of refinance loans for now. Focus on purchase loans and sub-prime. That's where the money is and that's how you're going to succeed in this market.