How Debt Relief Affects Your Mortgage Choice

How Debt Relief Affects Your Mortgage Choice

How Debt Relief Affects Your Mortgage Choice
The interest only loan that you​ have available to​ you​ today,​ is​ the​ same one that many Americans since the​ early 20’s had available to​ them and used .​
So,​ your grandparents,​ or​ there parents perhaps may have looked for a​ bit of​ debt relief with the​ interest only loan themselves.
There were some differences in​ the​ loans from that time to​ now however .​
Let’s take a​ look at​ some of​ those differences .​
This may help us become better educated so we may more efficiently shop for these loans.
In the​ 20’s the​ interest only loan was more of​ a​ pure product,​ meaning that they were interest only for the​ loans life .​
So,​ only interest payments and no principal had been paid .​
This seemed to​ be a​ good system until the​ stock market crashed,​ and the​ Great Depression came along .​
This left a​ number of​ lending institutions with a​ mortgage that was foreclosed,​ and with no cash .​
At this point most lenders decided that it​ would be a​ better idea to​ just give out more traditional loans so that equity could be built up .​
This helped the​ homeowner have a​ sort of​ savings to​ build wealth in​ .​
It helped the​ bankers as​ well with their mortgage balances being less outstanding.
The interest only loan these days is​ not well suited for everybody,​ and can be a​ detriment to​ many homeowners,​ however for some it​ is​ a​ suitable match,​ for instance investors who will probably flip the​ property anyways,​ or​ others who will likely be moving sooner than later,​ and will have no ill effect of​ the​ fact that they’re not building any equity in​ the​ home.
Nowadays,​ when lenders offer the​ interest only loan,​ they’re required to​ ensure that no more than half of​ the​ loan can be applied to​ the​ interest only portion .​
This helps avoid the​ same tragedy that was faced in​ the​ 20’s and the​ stock market crash .​
This type of​ mortgage is​ more likely t be appealing to​ the​ compulsive shopper who insists on​ instant gratification,​ with no solid debt management skills.
As well as​ putting many borrowers in​ a​ position where they own a​ home,​ but really have no solid equity in​ it,​ it​ also puts them in​ a​ spot where they cannot eventually afford the​ payments when the​ principal portion of​ loan does kick in.
These types of​ loans,​ plus the​ booming of​ the​ real estate market has increased purchasing power,​ and allowed many wannabe homebuyers to​ make that dream come true .​
However,​ every bubble must eventually pop,​ and the​ mortgage companies must feel the​ affects as​ well.
On the​ flip side is​ the​ purchaser,​ who may not be able to​ withstand the​ consequences,​ should say the​ home is​ suddenly not worth the​ original amount of​ the​ loan.
The one that gets the​ most benefits out of​ this loan is​ by far the​ lender,​ and the​ risk goes mostly to​ the​ homeowner .​
Please practice responsible money skills,​ and be very selective on​ the​ type of​ mortgage that you​ choose to​ go with.

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