|
|
| *Loan,banking and credit>>>debt loan |
Do we need to pass a law banning "interest only" loans and other stay-in-debt-forever setups? |
If you can't afford the payments on a 30-year fixed, then the government needs to stop mortgage companies from "helping" these people with "interest-only" loans and "adjustable rate" mortgages. When one person defaults, it's his problem. But when a majority default, it's the economy's problem. No, because interest only loans have a couple of very specific purposes. I use them when people buy investment properties, or when they get a significant annual bonus that they can count on every year that they pay the principal of the loan with. There are no bad loans, just bad loan officers. Perhaps it would be better to spend money on educating people to take on a level of debt they can afford. Markets work best when left to their own devices. Its called a free market. We dont control out economy like China or Cuba does. The descion still lays in the hands of the homebuyers. If people are stupid enough to get themselves into situations they cant afford, thats their problem.Most people who get interest only loans have no problems.. I recently used an interest only bridge loan as a temporary device to move from one home to another. Why should that be outlawed? I have been in real estate 29 years here in Texas. In the late 80's and early 90's we saw the horrible effects of dishonest and incompetent loan practices. This time we did not have the overblown market in real estate some areas had so we also don't have quite the problem loan load some areas have. There are lots of laws already-enforce the ones we have. No, we do NOT want to stop such loans, since they make good sense for a certain portion of the population. If you are a home buyer who knows with decent certainty that you will only own the house for the period of time the ARM covers, why should you pay for the benefit of a thirty year fixed rate ? Yes, there ARE people like that. (Job transfers, etc.) The problem is that homebuyers can be downright naive, never looking past the amount of the initial monthly payment. When the other shoe falls, then they start to whine and complain. Remember, there ARE disclosure laws concerning the terms of mortgages. Every person who obtained such a mortgage signed all the documentation indicating they knew what they were contracting for in terms. About the only additional thing I would recommend is a required disclosure form provided by the mortgage lender indicating on ONE page in bold type a chronological disclosure of what will change in the payment/interest rate at a specified time. If borrowers can't understand THAT, then they deserve what they got. No. Interest only, adjustable APR, and other alternative loans are useful to investors and others in the real estate market. For example, I currently have an adjustable APR with a low rate for the 1st 5 years. I intend to sell the house before the lock-in rate expires (it's on the market now). The local market is also robust. Therefore, it made good business sense to take the extremely low interest rate for 5 years. What we *need* to do is clamp down on dishonest mortgage brokers. Like another person already said, Interest Only loans are great for a person who can afford to make payments above and beyond the minimum due. Their great for investors or people buying secondary or vacation home who have extra money to put towards the principal balance. They are not however for people who can barely cover the interest only payment and make ends meet. People fooled themselves into thinking they could buy more house than they can afford, and now that their interest rates are adjusting, and/or they're having to start paying principle and interest, they can't afford to pay the mortgage, and because they've not put any equity into the home, and the market has dropped since they purchased, they can't sell the home and pay off the debt. Many of them can't refinance either because the appraisals are coming in too low compared to when they purchased. I think the best advice is not to buy a house unless you can afford to put 20% down, have good credit, and can afford the monthly payment when principle and interest is combined. These adjustable rate mortgages most times have a "teaser" interest rate, and before you know it, your payment could have tripled or quadrupled and you're income has not. |
| Tags |
| education loan secured loan refinance loan loan rate sba loan debt loan cash loans bad credit mortgage best credit card business credit |
SiteMap--Copyright/IP Policy--Contact Webmaster--Resource of HR For personal non-commercial use only. |