W. Ben (00:08.046)
you
Nate Reineke (00:14.19)
Hello physician moms and dads. I'm Nate Renneke, Certified Financial Planner and Primary Advisor.
W. Ben (00:20.49)
And I'm Ben Utley, certified financial planner and the service team leader here at Physician Family. So Nate, before we get rolling, I want to just make a shout out to one of our listeners. It's a physician mom in primary care in Northern California. I got a text that says, I'm G. I just heard your podcast and I so appreciate you guys. And I think she was referring to what I've affectionately known as the Trump-isode, which is the last
Nate Reineke (00:47.586)
Yeah.
W. Ben (00:48.718)
the last podcast where we talked about what if Trump does this, what if Trump does that.
Nate Reineke (00:53.102)
Yeah, it's funny because this morning my wife didn't listen to it yet, but she pointed out, she's like, did your podcast drop today? I'm like, yeah, kind of like it has for the last 100 weeks. But because it said Trump, she's like, I gotta listen to that one. Like, oh, nice. Yeah.
W. Ben (01:10.083)
Yeah. Yeah. The news has been fascinating. It's been, I get flooded sometimes with the news. So rather than watching it on television or even listening to it on podcasts, I tend to absorb headlines. So if I, if I get news in print, it's a little bit easier for me to digest it. Yeah.
Nate Reineke (01:29.28)
Yeah, yeah, and I do the same. I think everyone has that tendency and kind of dangerous, right? Headlines are scary, but...
W. Ben (01:36.356)
Yes.
Yeah, better than sticking your head in the sand, but I think that everyone has their own way of coping with the media overload that we have these days. And hopefully we won't be contributing to that overload. Hopefully we'll just be putting a smile on your face, a song in your heart and a dollar in your pocket as you are driving to work this morning. Nate, listen to your questions. Let's hit it.
Nate Reineke (01:42.734)
True.
Nate Reineke (01:48.398)
That's right.
Nate Reineke (01:59.842)
That's right.
Let's do it. So first one is from a cardiologist in Oregon. We want to save for retirement, but also want to reduce our debt. How do we figure out how much should go to debt versus savings?
W. Ben (02:12.495)
Mm-hmm.
W. Ben (02:17.487)
Thanks
Nate Reineke (02:19.598)
So Ben, start this every time, I get this a lot because physicians hate their debt, most of them, and I understand why it's a big scary number. And so I like to start, and I know you know what I'm gonna say, but you need a plan. Yeah, yeah, yeah.
W. Ben (02:36.592)
Wait. wait. I don't have kombucha ready to drink this morning. Drinking game continues. Yeah.
Nate Reineke (02:42.542)
Yeah, but the way that I would describe this plan, if you're nervous about your debt or you want to get rid of it, is a non-negotiable plan. So don't start with a plan, maybe that's really aggressive, I want to retire at 55 or 52. Start with a non-negotiable plan. You can retire at 60 or 62 or 65 if you decide that. And then save and invest
and also for college. Save and invest for retirement in college at a rate that is more comfortable in the beginning and then apply your extra money toward debt after that.
W. Ben (03:25.104)
Okay, so hold on, you lost me with a non-negotiable plan. Tell me, is there a negotiable plan and then what's a non-negotiable plan?
Nate Reineke (03:26.21)
Mm-hmm. Yeah. Well...
Well, I would say, yeah, I think it is negotiable when you say, I want to get aggressive here and retire at 54. But you and I know, we've talked to hundreds of physicians that usually when someone says for 54, it is a stretch goal. But retiring at 65, like you have to be prepared to retire at 65 as a physician because your health might give out. So that's right. And so
W. Ben (03:39.151)
Okay.
W. Ben (03:56.005)
Yeah. Yeah, it could be a medical retirement at that point.
Nate Reineke (04:00.992)
Start with a year that there's no negotiating this year. I have to retire by filling the number.
W. Ben (04:08.373)
It's your throw down your stethoscope run from your scalpel date. Yes.
Nate Reineke (04:12.512)
Yes, and you need to be investing at least that much. And that shouldn't, in most cases, that shouldn't be too difficult.
W. Ben (04:25.933)
So let me get this right. You plan for your later retirement date. And, and that caused you to save a certain amount, versus planning to retire 10 years earlier, which caused you to save a lot more. Right. And, and, invest a lot more. So if I get you right, and listeners, I'm, really grasping this. I've been planning for years, but Nate and Chelsea run rings around me in planning world. So,
Nate Reineke (04:29.293)
Mm-hmm.
Nate Reineke (04:34.274)
Mm-hmm.
Nate Reineke (04:40.12)
Yeah.
W. Ben (04:54.225)
So what I'm getting here is that you save the minimum you can to be able to have a successful retirement at a later date. And then beyond that, you pay down your debt, right? Okay.
Nate Reineke (05:07.138)
Yeah, that's right. And here's why. Here's the why. physicians, their retirement plans, just the nature of your life, you're starting late. And if you're starting late, the worst thing to do with money is to invest late, right? Because of compound interest and all the goodies that come with investing and having decades of growth.
W. Ben (05:36.529)
Mm-hmm.
Nate Reineke (05:37.004)
And so you can't, or I would say, it would not be wise to continue to push down the date of when you start investing. So we do get some physicians who they do this backwards, they pay off all their debt and then they start investing. They will probably still be able to retire. They can catch up, but it will take some brute force.
W. Ben (05:47.547)
Mm-hmm.
W. Ben (06:00.133)
Right.
Nate Reineke (06:00.684)
And so if you take a longer term approach to this and you say, I don't like looking at this debt, but what would be a reasonable amount of time to pay it off in? Usually though, a reasonable retirement date plus a reasonable payoff date is, is doable. And sometimes it takes a third party to remind you or to even tell you that this is a reasonable amount of debt or not. So I should say that there are certain cases.
W. Ben (06:26.043)
Mm-hmm.
Nate Reineke (06:30.158)
You know, I've had physicians who had a million dollar home and $500,000 in student loans and they're in their mid 40s. And for them, this may not be the right approach. They may need to be more aggressive toward their debt or move or do something drastic. And that is because their debt is going to get in the way of retirement. But for most physicians, if you just take a reasonable approach, like with student loans, let's say you pay them off in 10 years,
W. Ben (06:36.293)
day.
Nate Reineke (06:58.71)
it's not going to get in the way of retirement. so debt is more of an emotional decision than it is a mathematical decision about preparing for retirement.
W. Ben (07:07.707)
I think there's more to it. I think it's definitely that and there's more. you know, I take all the calls from prospective clients, right? And many of them tell me what they're doing. And it's not uncommon. I would say probably a fourth of people I speak with, maybe a third are like, well, I didn't, I don't really know how to invest or didn't know how to invest. Or maybe I'm not super comfortable with finances. You know, my family of origin is not.
I was not native born here and I'm less familiar with the system. I really know how to save and I definitely know how to hammer debt. And so what I did is I hammered all my debt and now I'm ready to invest. So, you know, I think that there's a level of comfort and familiarity that goes with that. Just knowing how to do something. It's harder to say, okay, I'm going to invest. I'm a hold on to this debt. I'm going to optimize the rate and when things go down, I'm going to refinance and I'm going to amortize this over the course of my life.
That is far more nuanced, I think. So I think there's some comfort level that people are experiencing when they make that mistake. And it is, most of the time, it is a mistake to demolish that debt before you really begin to invest. And I guess it's like this. So if you had a choice between paying off a 6 % debt and saving something that will earn 6%, it would seem like a push.
Nate Reineke (08:21.095)
Mm-hmm.
W. Ben (08:32.948)
But the thing is, once you stop, once you extinguish that debt, it doesn't continue to earn 6%. Whereas the investment that you get continues to earn 6%. And that makes a massive difference.
Nate Reineke (08:45.932)
Yeah, yeah, there is a balance here. Most physicians that come speak to me and they hate their dad. It reminds me of like, you know, my kid who has to eat their vegetables, so they just shove them down their throat first.
W. Ben (09:00.338)
Mm-hmm.
Nate Reineke (09:00.832)
and then they get to enjoy the rest of the meal. someone who knows how to eat and enjoys vegetables because they mix it in with their other food and it's part of their daily diet. It's kind of like that. And I'm telling you, balance. You do not have to shove your vegetables down your throat all at once. We can enjoy a little bit of everything and take it a step at a time.
W. Ben (09:14.215)
Yeah, balance.
Nate Reineke (09:25.238)
But I will say, are right. I totally missed that when I thought about this question. It is difficult, more difficult to take the route that I'm talking about. There's just more things to think about. Yes. Yep. Yeah.
W. Ben (09:39.957)
Balance is more difficult. It's easy to eat dessert first. Yeah.
Nate Reineke (09:46.816)
Okay, so get a plan. All right, next one isn't exactly a question, Ben, but a neurosurgeon in Connecticut sent us an academic paper challenging the use of target date investment strategy for retirement and wanted you to discuss it on the podcast.
W. Ben (09:50.1)
Get a plan. I'm so shocked to hear you say that.
W. Ben (10:01.397)
Mm-hmm.
W. Ben (10:11.113)
Yeah. So, yeah, they, asked you the question, they forwarded you the paper and I read the paper, most of it. And the gist of it was kind of throwing bonds under the bus when it comes to target date funds. Right. and so the way that they did the study is they put together several different portfolios. One of these portfolios had us stocks decreasing over time.
but international stocks increasing over time. And I believe it was like, it was all stocks. It was like 90 % stocks. And the authors of this paper, brilliant academics that they are, said that people would get better results with that. And I'm like, yeah, that's because stocks have historically outperformed bonds and probably always will in the long run. But the thing that they use as the supporting evidence for this paper was,
They had several people, you know, a sample of investors who chose the portfolio that they would prefer to have. Right. And so ostensibly you have this very knowledgeable person, this astute investor sitting down, looking at a Laffa curve of trade-offs, know, a return versus risk volatility versus, you know, whatever portfolio longevity. And of course they chose the portfolio with the higher return. Duh. Right.
But the reality of this, the practical reality, when you deal with this day to day, hand to hand combat with the market and participants that are in it, is everybody chooses the more, you know, the juicier portfolio. Everybody chooses the portfolio with the higher returns. And then when they get in the thick of the fight, they throw down their weapon and they run away. So, you know, it's one thing to say I can live with an all equity portfolio, even a diversified all equity portfolio.
Nate Reineke (12:01.454)
Yeah.
W. Ben (12:08.737)
But the reality of it, actual investors, when you get in the thick of the fight, it does not work that way. It's always nice to be able to say, yes, I know things are in the toilet. Yes, I know that all hell's going to handbasket. Someone's flown a plane into a building. There's something in the air that's killing people. It's like, yes, I know that's, and it seemed like it's different this time, but remember, not all of your stuff is in the stock market. Even if it's only 20 % in the bond market, you get to say that.
And it causes people to just calm down, right? And take a look around and realize that at least that 20 % of their portfolio is not going to vanish. And by the way, the other 80 % that's in stocks, some of it's going to vanish, probably temporarily, and usually not more than half of it, right? So, know, 80-20, that's a fairly aggressive portfolio. And so to have a 40 % loss in there, which I've experienced this with live clients,
three or four times in my career. It's a very different conversation than, which of these portfolios would you like to have? It's more like, oh, let's talk about how we feel here. Let's get real about this. So, and there's a lot of that right now. There's a lot of people that are like, oh, I'm just going to put everything in S &P 500 and chill. That's what I see in Reddit. And like, yeah, well, you can do that when you've got $50,000 tucked away in your Roth IRA. It's a very different equation.
Nate Reineke (13:19.731)
Mm-hmm. Yeah.
Nate Reineke (13:29.048)
Ha ha ha.
W. Ben (13:37.234)
on the customer retirement, you've got $4 million and you're hoping to retire in five years. It's a very different calculus.
Nate Reineke (13:44.8)
I just, know, Chelsea and you have a lot of clients on the cusp of retirement. I don't, have a lot less, but I recently spoke with a client of mine whose child is off to college. And you should have heard the conversation we had with the news going around for his college fund.
W. Ben (13:54.859)
Mm-hmm.
W. Ben (14:00.118)
Mm-hmm.
W. Ben (14:06.775)
Mm-hmm.
Nate Reineke (14:07.254)
I mean, spoiler alert, we took everything out of the market. It's like he had had all the money he needed for college. He's going to get 4 % on cash. College is tomorrow, you know, the only question was, well, I have one child that college is in a year. Should I leave it in this target date fund?
W. Ben (14:13.213)
fascinating.
Nate Reineke (14:29.55)
And the reality is, it's it's a reasonable idea to leave it in the Target Aid Fund. But he had all the money he needed. So we went through the pros and cons, he slept on it, emailed me the next morning, I'm taking it out.
W. Ben (14:33.196)
It's fine. It's fine. Yes.
W. Ben (14:42.071)
As Ben Utley says, when you cross the finish line, stop running. Yeah.
Nate Reineke (14:45.528)
Yeah, it's not always about return. This is behavioral economics, which the statisticians miss sometimes. Yeah.
W. Ben (14:53.045)
Yeah, yeah, that's that's very soft as my as my daughter would say that's qualitative, not quantitative data. Yeah.
Nate Reineke (14:58.604)
Yeah, yep. Okay, next question. Family medicine doctor in Rhode Island. Why?
W. Ben (15:06.711)
Ooh, ooh, I had not been there. Someday I hope to go to Rhode Island. I read a book about lighthouses and it was, I thought all about Rhode Island.
Nate Reineke (15:15.146)
Man I don't know. I like places with good food. Well, I wonder what the foods like Okay, why do index funds weight more stocks to larger companies
W. Ben (15:20.159)
If we answer your question, will you fly me out to answer it in person? Because I want that.
W. Ben (15:33.529)
Hmm. That is like, why does water flow downhill? It's so obvious and yet you never think about it. Right? You want to take that one or you want me to?
Nate Reineke (15:39.246)
you
Nate Reineke (15:42.818)
Mm-hmm.
Nate Reineke (15:46.262)
Yeah, I mean, can start. think there's several reasons, but the main reason that I think of is just market representation. I mean, that's kind of what an index fund is. It represents the whole market. So if you have a big company, you're going to have a big stake in that company inside your index fund. That's just how it works. it's designed that way. That's right. Yeah.
W. Ben (15:57.9)
Yeah. Yes.
W. Ben (16:11.488)
It's kind of how it works. So it depends on the index. So the standard importers 500, believe it or not, there's a standard importers 400 and a standard importers 600, right? So those are what we call market cap weighted indexes. So market cap weighted means that the big guys get the lion's share of the money. So let's imagine that we have an index fund and we only have two companies. And one of these companies is worth $9 trillion.
and one is worth $1 trillion. A market cap weighted portfolio would be invested 90 % in the larger one and 10 % in the smaller one. And when we look at the S &P 500, there are 500 names in that index, but the largest seven of them have the greatest representation, the greatest concentration that we have ever seen. And don't quote me on this, but I imagine it's at least a quarter.
So like if you, if you put your money in there, you're getting like 25, 30 some odd percent all in those seven, you know, brilliant tech stocks, including in Nvidia and, uh, know, Microsoft, Netflix, Amazon, that kind of stuff. And these stocks that are very appreciated. So. You know, there's a, some talk on the internet right now about how much risk there is and having that focused concentration in the S and P 500 versus, you know, a more.
Nate Reineke (17:32.973)
Yeah.
W. Ben (17:36.335)
broadly diversified index like, like the Wilshire, you know, or, you know, having something that's put together like a DFA fund where instead of buying 500 names, they buy, you know, the top quartile of names. So, you know, it just goes on and on. You can slice it so many different ways. So that's market cap weighted. All right. So most people have heard of the Dow Jones industrial average. Well, that is not a market cap weighted index. It's price weighted. Right.
And so you don't get the same concentration in there. And I'm not going to go into it, but let's say that it is truly an average rather than more of an index. It's just how they put them together. And can I go on? Cause I have one more thing to throw out there. Okay. So, another way to do this is to evenly weight and ignore the market capitalization. So in that case, like, let's say that you're focused on the hundred biggest names rather than having a market cap weight.
Nate Reineke (18:10.594)
Mm-hmm.
Nate Reineke (18:15.154)
huh.
Nate Reineke (18:19.863)
Yeah, yeah.
W. Ben (18:35.407)
You could have an evenly weighted portfolio where if you put a dollar in there, you're getting a penny of Microsoft, a penny of Amazon, a penny of Netflix and a penny of that company that's been added the index that you've never heard of before. Right. But still a big company. don't know. Maybe they, maybe it's a diaper service, right? It could be anything. so that's evenly weighted. problem with, with even weighted indexes is that in order to keep them evenly weighted, they have to sell the winners.
Nate Reineke (18:52.106)
Mm-hmm, right.
W. Ben (19:05.113)
and buy the losers, which is a good thing. But every time you sell, you're recognizing a capital gain. Right? So as Nvidia keeps pumping itself up over time, every time it goes up, they have to sell it and buy some more of something else. And as a result, it's less tax efficient to have a portfolio that's put together that way or an index that's put together that way. But by the same token, an index that's composed that way has a greater representation of small cap stocks.
and small caps have had a historical track record of outperforming large caps. So in this even weight index, we would expect better performance than a market cap weighted index. And in fact, we have seen that, but there's a tax cost to be had there.
Nate Reineke (19:48.138)
Mm-hmm. So this is a, we don't have a script, but this is a bit off script. I've been thinking about the S &P 500 because we get a lot of new families that we see and I just see it all the time. mean, there are whole portfolios in the S &P 500. And I've been thinking about this a lot. I think the idea, someone wants to buy a,
W. Ben (19:56.421)
Yeah.
W. Ben (20:10.235)
That's correct.
Nate Reineke (20:18.072)
capitalization weighted indexed. Right? And if they want to buy that and one of the benefits are, guess, used to be a benefit would be lower volatility. So you have this big company, Disney. It's pretty stable. This is the blue chip stock thing. It's like this big company, it's stable. And you look in the S &P 500 and now the big companies are tech companies like Nvidia, and they don't feel all that stable anymore.
W. Ben (20:32.057)
Thank you.
Mm-hmm.
W. Ben (20:41.519)
Mm-hmm.
W. Ben (20:44.954)
Yes.
Nate Reineke (20:45.582)
And I think that people miss that. They buy the S &P 500. I think they know a little bit about it, but it just feels like, I'm gonna say a dirty word, the safe thing to do. Oh my, safe. Yeah. it, Yeah, right. That is the feeling I get from them. What do you think about that?
W. Ben (20:57.947)
Safe.
Go- okay, stop- I'm sorry, you have to stop. Go wash your mouth, that was soap.
W. Ben (21:13.809)
Well, I think it sucks. So, there is a whole world of stocks out there to invest in. And, if we look at historic market valuations, which nobody looks at that, right. That's somebody who's buying, you know, VTI and chill or VTSAX and chill or VOO and chill. They're not thinking about market valuation. The United States is, is the most expensive market on the planet right now. Right.
Nate Reineke (21:15.925)
Yeah.
W. Ben (21:43.181)
as measured by what we call the Cape 10 ratio or the Schiller PE ratio. And if you don't know what that is, it's okay, but just understand that there are reasons not to dump everything in the S &P. But by that metric, which is, you know, that's the go-to metric evaluation, other countries in the world have a much better valuation. Like the US is like 3X what the average and the low valuations are. And so
Valuation has everything to do with forward-looking performance or performance expectations. It's kind of like this. you buy a rental home and you get it for a steal, right? When you go to sell it, there's a lot of upside, right? And then when you get rent on it, your yield is higher because you're basing that yield on a lower basis. Whereas if you go out you pay top dollar for a rental property, you can expect the capital appreciation return of that rental property to be kind of
Meh, right? And you might have a hard time selling it for a good price. So what you pay for the asset has everything to do with how it performs in the future. And when you're buying a stock, you're buying earnings, you're buying the potential to receive a dividend. That's how stocks work. And so if you're paying a high valuation, you're paying a lot for that stock and you should expect a lower return when you buy a more expensive security.
Boom. And so there's a world of cheap stocks out there. This is an excellent time to be diversifying internationally. And depending on which side you're on with what's going on the news, we're going through some unheralded changes here. And I would think that if you like what's happening, if you don't like what's happening, change is a matter of fact. And there's going to be some opportunities there. And there could be fallout. So diversification, think, is your friend in changing environments.
I think it sucks to load everything up on the S &P and I don't do it and I wouldn't recommend it.
Nate Reineke (23:39.638)
Yeah, all right, good. Last question here. We are moving cities and buying our forever home. Should we pay for points on our mortgage? So this doesn't sound like a new doctor house. This sounds like a physician that's probably owned a house before. Yeah, probably. yeah.
W. Ben (24:02.961)
A mature, a mature physician. Distinguished professor, perhaps.
Nate Reineke (24:08.91)
Yeah, this isn't like that. I think we want to stay here for 10 years. This is like, this is it. And you know, it's interesting. The buying points is about as close as I tend to get to trying to guess what's going to happen with interest rates. And I'm saying guess because that's what it is. And when I go through this answer, remember that moment when I said guess, but the reason to buy points.
W. Ben (24:26.749)
Mm-hmm.
That's a guess.
Nate Reineke (24:37.944)
There's two reasons really, would be how long will you hold the mortgage if you're gonna hold it for a long time, you want to get a low rate. Okay, so you can enjoy that low rate and get your money back, because it costs money to pay the mortgage broker points and get your lower rate.
W. Ben (24:47.294)
Mm-hmm.
W. Ben (24:52.062)
Mm-hmm.
Nate Reineke (24:57.376)
And then the second reason, which isn't the best, but you think rates will go down in the future, then you wouldn't buy points. So if you think rates are going to go up, you might buy points.
W. Ben (25:08.576)
Okay, so you are steeped in the language of home mortgages in what you do, because this is your specialization. So I'm gonna back the truck up for just a second and talk about points. Okay, so when you go get a mortgage, there's an origination fee. That's what you pay the person who's helping you get the loan, right? That's a sales charge. And then there are things you can do to mess around with the rate. And one of the things that you can do is you can pay extra upfront
Nate Reineke (25:12.449)
huh.
Yeah, yeah, zoom out a little bit. Yeah.
W. Ben (25:36.819)
to get a lower rate over time. And that's known as paying points. It's also known as buying down the rate. Okay. So I just went through this, you know, the listeners know that I just bought my forever home, same size as my last home, just, all on one floor. And when it came time, I did not pay points. In fact, I took a higher rate than, than was expected and I got a rebate at closing. Right. So I went the opposite of points for a couple of reasons. One, I knew I was going to pay it off. Right. So I kind of don't care what the interest rate is at all.
Nate Reineke (26:03.992)
Mm-hmm.
W. Ben (26:06.528)
Cause I had the mortgage for less than a year, right? So charge me 8%, 9%, I don't care. Just don't charge me upfront to create the loan. So that's, that's one reason. The other thing is I'm never going to move from this house. Right. I've been thinking about this house, this neighborhood, this state, this city forever. And my best friend lives over the back fence, not moving. Right. So, um, I didn't pay points. The last time I advised someone to pay points is back when points were sub 3%. And I was like, you know, I think we're never going to see these rates again.
Nate Reineke (26:18.798)
Mm-hmm.
W. Ben (26:36.635)
If you're going to keep your mortgage for a long time, you might as well buy down because it'd be a good investment. You'll be buying down an already low rate. But you know, right now with the rates being in 6.97%, it's entirely possible that rates could come down by a point, right? And if they do.
Nate Reineke (26:50.328)
Especially, especially if you have several years. Like if you're gonna stay in the house forever and maybe you pay it off in the next 15 years, it's not like the rates have to come down in the next year for you to win your bet, right? That's right.
W. Ben (27:05.185)
That's right. And sometime in the next two, three, four years, maybe in the decade, if you're going to be there. Right. So you're going to get another bite at the apple. You're going to get a chance to refinance and take a lower rate. And on a big house rates only have to come down like a half a percentage point or to make sense. Right. So that's, think that that is the big consideration here. you know, paying points is not bad, but I certainly wouldn't do it today. And the higher rates go, the less I would be likely to pay points.
Nate Reineke (27:34.442)
Agreed. Yeah, we're on the same page there. This is what I'd say when you're talking to your mortgage broker. Okay. They are always going to tell you rates will come down. At least unless it's in the 3 % range like we had a really, really low rates. Every mortgage broker I've ever spoken with in the last few years as rates have gone up has said next year we think rates are going to come down. The next six months we think rates are going to come down. That is they're drinking their own Kool-Aid so they may believe it, but that is a sales ploy.
W. Ben (27:49.417)
in
W. Ben (28:02.282)
Yeah.
Nate Reineke (28:04.336)
to get you to get the mortgage and worry about it later. But in reality, in the last 30 years, we're about at average. mean, maybe slightly above average. 1995 to 2005, that decade, we were about where we are today, that whole decade.
W. Ben (28:21.861)
And we're also pre-programmed to expect lower rates. mean, when, when, when Volcker was in the fed back in the eighties, you know, mortgage rates were like 18%. Right. And so for the last 40, almost 50 years, we've seen rates gradually come down, come down, come down. And so everybody expects that they'll keep going down except for lately. Right. And then there's, you know, the mortgage broker has some skin in the game here.
Because if you get a rate at 7 % and they think, rates will come down by half a percentage point, guess what? When they re-originate that mortgage, they're gonna get the full commission again, right? And that's not bad if the breakeven works out for you.
Nate Reineke (29:03.82)
Yeah, there's an element too that I've seen when I worked at the Big Ubel Bank that the mortgage broker is offering points to just make it look like the rates lower. If you don't understand what's going on, you say, they gave me six and a half. And all of a sudden you're paying $25,000 to get that six and a half percent.
W. Ben (29:14.847)
Yes. Yep.
W. Ben (29:22.434)
Yeah, and you don't ever look at that. I didn't even think of that. You're absolutely correct. When you compare apples to oranges, you get three quotes and three different brokers and ones that have to a full percentage point lower, you have to go, oh, why is this? Because it's a marketable good. It should be kind of the same rate from broker to broker. And the only difference is origination fees and some of the closing costs you can negotiate.
Nate Reineke (29:26.466)
Yep. Mm-hmm.
Nate Reineke (29:37.526)
Yeah.
Nate Reineke (29:47.212)
Yeah. so when you're getting a mortgage for your forever home or your first home, it would be a good idea to talk to somebody that is not getting a commission check in this process. So not your real estate agent who desperately wants you to get approved for this mortgage so that they can get you to buy a house, not your mortgage broker who is basically a salesperson. talk to someone else, call your dad, call your mom.
W. Ben (30:15.521)
Yeah.
Nate Reineke (30:16.664)
Whoever's the money person in your house or for our clients that call me and this is mainly has to do with you and a lot less with the market and whatever mortgage rates are. I have given people advice from buying down their rates to taking an adjustable rate mortgage in the last two years. I mean, it just, it's all over the mat. It's totally dependent on you and your situation.
W. Ben (30:27.349)
Yeah. Yep.
W. Ben (30:38.166)
Yeah, it's all over the map.
W. Ben (30:42.838)
Yep. Okay. Well, with that, think I'm to take us out. So as you're thinking about buying or refinancing your forever home, we hope this is going to be so cheesy. Sorry, Nate. We hope that the Physician Family Financial Advisors podcast will be your forever home of getting news and digestion and inspiration about all things personal finance.
Nate Reineke (30:45.166)
All right.
Nate Reineke (30:54.062)
you
W. Ben (31:08.384)
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