Cheap Mortgage Loans Present More Problems For Market

Cheap Mortgage Loans Present More Problems For Market



Cheap Mortgage Loans Present More Problems For Market
With the​ real estate market in​ a​ real funk,​ there have been many short term solutions attempted by lenders to​ gain more business .​
In short,​ banks are tightening up their standards and are having trouble finding lenders to​ take on​ the​ high payments associated with top notch interest rates .​
What has their solution of​ choice been? They want to​ entice people to​ get a​ mortgage loan with a​ significantly lower payment .​
Though this might sound like a​ good solution on​ the​ surface,​ it​ has created problems for borrowers and the​ entire market .​
Cheap mortgage loan offers are hurting people financially for the​ long term and they don’t even realize it .​
What are these cheap mortgage loans that have become so popular? They are presented in​ nice names that make people believe that they are getting a​ deal .​
If you​ ever hear any lender discussing an​ interest only loan or​ a​ loan with no down payment,​ then you​ can bet that something is​ up .​
There are a​ number of​ different names given to​ these mortgage loans and each one has its own ups and downs .​
You can bet that the​ ups are the​ aspects of​ the​ loans that are being presented to​ potential borrowers at​ the​ onset of​ the​ process .​
The problem with these loans is​ that they get people no closer to​ owning a​ home as​ they would be if​ they were renting a​ home .​
Unlike with renting,​ they have a​ huge loan on​ their back,​ though .​
That huge loan is​ just sitting there and all the​ person is​ paying is​ the​ interest .​
It might sound good on​ the​ surface by decreasing the​ payment substantially,​ but it​ weakens a​ person’s long term financial prospectus a​ great deal .​
The only person who benefits from such a​ deal is​ the​ banker .​
With these mortgage loans,​ a​ person can put themselves in​ significant danger and at​ great risk .​
What happens if​ you​ lose your job or​ something unexpected happens? Then,​ you​ are saddled with a​ loan that is​ too big for your bank account .​
In this case,​ foreclosure is​ eminent and your family will be left without a​ home .​
Beyond that,​ your credit will be wrecked to​ a​ point where it​ is​ nearly beyond repair .​
All of​ this is​ done while you​ aren’t even earning a​ bit of​ equity on​ the​ home .​
That is​ another problem with cheap mortgage loans like the​ interest only loan .​
a​ person ends up missing out on​ the​ inherent benefits of​ accrued equity in​ the​ home .​
Since the​ value of​ your home is​ also certainly going to​ increase over time,​ it​ makes plenty of​ sense to​ put your money into it .​
After all,​ this is​ basically a​ can’t miss investment .​
With a​ bit of​ equity built into the​ home,​ you​ also have a​ personal insurance policy should something terrible happen .​
You could always borrow money against your equity to​ pay off a​ large bill or​ make another investment .​
Other types of​ dangerous loans are longer term loans .​
These are gimmick mortgage loans which allow the​ home buyer to​ stretch his or​ her term over 40 or​ 50 years instead of​ the​ standard 30 year term .​
This makes the​ payment somewhat more affordable,​ but it​ costs a​ ton in​ interest payments .​
When you​ make a​ half century commitment,​ you​ are really just committing to​ paying a​ ton of​ interest to​ the​ bank .​
It makes no sense to​ put yourself in​ that situation,​ especially with the​ amount of​ uncertainty in​ today’s world .​
Most home buyers don’t know what they are doing tomorrow,​ much less 50 years down the​ road .​
How do these things impact the​ market on​ the​ whole? It simply weakens the​ borrowing base .​
When that happens,​ just about everyone suffers .​
People looking to​ sell their homes are left out to​ dry because there aren’t enough worthy buyers .​
Home builders hurt because people can’t afford the​ inflated interest rates .​
The market will ultimately suffer when these people can no longer afford to​ keep up their cheap mortgage loans .​
When that happens,​ banks and lenders lose their profits,​ interest rates begin to​ rise,​ and the​ entire system collapses upon itself .​
Though there are checks and balances in​ place to​ avoid a​ complete collapse,​ the​ slight loss of​ market productivity has long term negative consequences .​
Smart borrowers will stick to​ the​ standard mortgage loans and leave the​ gimmicks at​ home .​
There is​ nothing good about paying a​ ton of​ interest to​ the​ bank when that money could be put to​ a​ much better use .​
Instead of​ sacrificing your long term financial foundation for smaller payments,​ try to​ think about your situation with a​ broader scope .​
Securing a​ mortgage loan is​ part of​ securing your future .​
Don’t waste it​ by falling for cheap offers.




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