Designed explicitly for relocating and transferring employees, the relocation mortgage (relo) is a form of alternative mortgage product. Corporations take advantage of these loans included in the signing or employment package for upper-level employees. Relo mortgages make the moving process more comfortable and economical.
Understanding Relocation Mortgages
Relocation mortgages often involve financial contributions by the employer as part of the package. These contributions can include subsidies to cover closing costs, interest rate buy-downs, and below-market interest rates.
The lender may provide a passionate staff of home loan consultants trained to address the requirements of transferring employees that are buying or selling a home. This can result in faster and cheaper loan processing.
Employee Moving with Relocation Mortgages
Some data shows an employee who relocates for their work probably will transfer repeatedly at predictable time intervals, frequently several relocations in five years. An employer is unlikely to help with an employee's relocation unless they anticipate tenure at the newest location of a year or longer. As a result, these buyers might be less likely to refinance early in the life span of the loan.
Also, employer subsidies generally lower the borrower's monthly payment and decrease the borrower's sensitivity to rate-related refinancing during the time of the support, which will be usually early in living of the loan.
If interest rates rise, prepayments tend to remain relatively faster after the very first a couple of years due to the natural cycles of relocation among these borrowers. A decline in interest rates may cause the employer to encourage the employee to refinance the loan through forced refinancing clauses.
For more details check out moving loans.
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