Understanding Realty
Interest Only and Credit Card Debt
Well, here is an example of the system that isn’t functioning as
intended: a mortgage loan that encourages paying off one debt, in
order to overspend ourselves with another debt. The interest only
mortgage and the credit card debt. As a borrowing nation, I believe
we’ve reached new levels.
It would seem that in this century we’ve managed to take every
form of credit possible, extend it to the limit, and then look at
them as if to say, "You mean you can’t pay?" What do these loan and
credit companies think they’re going to be facing, when the amount
of credit and mortgage they’re willing to extend, reaches beyond the
acceptable debt to income ratio? Why do they think these limits were
established in the first place?
More consumers than ever before owe massive credit card debt.
It’s the way to go, many college campus’ are overrun with
representatives from the major credit card companies, eager to
extend credit to the young hands of the college student. Are they as
ready to work with them when they can’t pay? No. What about the rest
of the crazed, spending public? How do they handle their credit
cards? Well, thanks to the interest only mortgage, we can now pay
off credit card debt we can’t afford, with a mortgage we can’t
afford. Now, that’s progressive thinking.
The interest only mortgage is now a tool for replacing
non-deductible over extended debt, with tax deductible over extended
debt, and consumers continue to be the ones to pay. This is not a
wise option, if you’re already spending more than your budget will
allow, how about cutting back? Did that ever occur to the mortgage
company? No, because they don’t make any money if you learn to spend
less.
As a fellow consumer, each of us should take the time to question
our spending habits. Is it wise or necessary? If the answer to
either question is no, then don’t spend. You don’t want to have to
make the decision between over the limit spending, and a nice, warm
bed, do you?
Okay, now here’s an interesting spin on an already risky product,
let’s give the bad credit crowd a chance to make an even worse
decision, and finance a home they can’t really afford and obviously
will have trouble making on time or dependable payments so they can
payoff credit card debt, only to charge it up again!
Sometimes, the products and situations that you see in the
everyday world of researching these loans, is truly amazing and this
is one of those situations. There are actually mortgage companies
that advertise these interest only mortgage options for the consumer
with the bad credit record to pay off any outstanding credit card
debt!
Now, what I’d like to know is why the mortgage company, in all
good faith, would want to take a risk such as this. It’s risky
financing for consumers with bad credit, when you’re financing with
good solid collateral, well within their means to pay. You take the
consumer and the mortgage loan outside those realms of operation,
and you’re just simply asking for a problem.
Maybe we should have an agency that’s known as the "mortgage
police" and when there’s a clear and evident violation of just good
sound common sense, a whistle blows, the computer locks up, and in
walks the mortgage police. I truly believe the consumer, if not the
mortgage company would be a lot better off; especially when the
consumer has time to really absorb the basic facts about interest
only mortgage, and the mess they can make of their finances; in the
case of the bad credit consumer, the further mess they can make of
their finances.
With all the government control that regulates the mortgage loan
industry, and all the statistics that are published about the
consumer with a bad credit rating, who do you suppose thought it
would be a good idea to give them an interest only mortgage, that
they more than likely will have further trouble paying? You wonder
if Alan Greenspan is aware of this situation, and if he takes it
into consideration when raising the prime interest rate? Do you
suppose there’s a number factor for the "really going to default on
these loans" segment of his equation that determines our prime
lending rate?
Let’s hope Alan uses more foresight and plain good business sense
than our mortgage loan brokers, especially the ones that came up
with this genius idea!
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