Moving employees is a challenge. Regardless of the situation, it’s stressful and sometimes even heartbreaking to uproot a family and move them somewhere else where they don’t know anyone. Explaining the process and making it as easy as possible for your employees is crucial.
If you don’t understand what a relocation mortgage is, it’ll be much harder for you to explain it to them when the time comes. Read through this quick guide so you can better serve the employees who serve you.
What is a relocation mortgage?
Simply put, through a relocation mortgage you can offer financial aid to the employees during a relocation. In most cases, these are included as a part of a relocation package for upper-level employees. This is an effective support plan for employees who need to relocate frequently. The frequency can be around two to three times in a five-year period.
How exactly does a relocation home loan help employees?
It provides the extra cash that employees may need during relocation and helps them to make the best decision for themselves and their families. This is more helpful if their new location is far away.
In some cases, an employee may need to buy that perfect home before it’s sold off to someone else. They may also need some extra money during the process of relocation. This may be due to some additional work needed in the current home prior to sale or in the future home. Some employees also prefer to take advantage of the relocation feature in their current home loan by paying some extra charges.
As an employer, you can try provide the best counsel and help them in finding the top moving companies. But for employees not experienced with moving, handling the extra financial needs can be a challenge. The supply of extra cash to handle emergencies can go a long way in supporting the employees during a stressful period and easing the overall transition.
The Features of Relocation Mortgages
Once you know the goals behind offering the mortgage package, you can point out the main features it needs to have. One thing is, it can be difficult for inexperienced employees to estimate the total relocation costs upfront. The mortgage package should offer comprehensive coverage so that the employee need not dig into his or her own pockets for any surplus amounts.
Here are some standout features that employers should consider.
- You can consider subsiding the relo to cover the closing costs involved during a real estate transaction and the interest rate buydowns. These can be a part of the employer’s financial contributions. Closing costs are usually around 2 to 5 percent of the loan value. This way, the employees need not include it in the loan.
- The mortgage can be offered at lower basis points with respect to the current market rates. This helps to reduce the monthly payment of the borrower. In case the interest rates decline, the employee can be encouraged to refinance the loan.
- Relocation mortgages can also supplement as bridging loans for the employees. In an ideal scenario, the selling of the old property should happen at the same time as buying the new one. However, such perfect timing doesn’t always happen. A bridging loan can give the employees additional time to sell the existing home. This can be anywhere between 6 to 12 months.
- The mortgage should also cover the house-hunting expenses. This includes expenses towards short-term house hunting trips including lodging, transportation, and meals. In some cases, childcare expenses are also included. This way, the parents can house-hunt with the children resting safely at home.
- For employees relocating outside the country, expatriation assistance can also be considered. Overseas trips for house hunting, complex logistics, obtaining visas for the family, finding suitable schools for the children are some of the considerations.
- The lender can also offer the service of home loan consultants and real estate agents to assist the employee in the buying and selling process. This can speed up the entire process and also reduce the overall loan processing time. Also, mortgage requirements can vary between employees. So it’s important to choose a lender who offers flexible mortgage options.
- Unlike a relocation bonus, the employee can get tax breaks from a relocation mortgage. However, the details of mortgage interest tax deductions are often misunderstood. Make sure the necessary details are communicated to the employees and offer them the necessary guidance for handling the taxes correctly.
- Last but not least the overall mortgage experience should be simple, transparent, and timely for the employees. With a smooth process and proven best practices, the employee will be able to settle into their new location at the earliest possible convenience.
Incorporating a Relocation Mortgage in Your Policy
Ideally, the relocation policy should be aimed at making the entire transfer process simple and attractive for the employees. A typical relocation mortgage package may not have all the elements that can lead to the best results for an employee. If you think incorporating a relocation mortgage in your relocation policy can give you an edge over your competitors, you should plan to include it.
It goes without saying, the well-being of the employee is directly related to the success of the company. At the same time, protecting your company’s bottom line is also necessary. In many ways, balancing the two aspects can be challenging. We’re here to help you choose the right lenders for a mortgage and ensure the best experience for the employees.
ARC Relocation has a wide range of experience related to relocation mortgages, and seen them incorporated into the relocation policies across a wide range of industries. We can provide all the details to help you to frame the correct policy while avoiding the common pitfalls.
Final Thoughts
Placing the right talent at the right location is a key factor in building your business. To boost productivity and performance, the process of relocation should be managed carefully. In that context, a relocation mortgage can be an effective way to motivate the employees.
If you’re looking for the best relocation mortgage solutions for your employees, get in touch with us. Our experts can guide you through the fundamentals of relocation mortgages and the best variable options.