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Bail Out?
By Daphne | December 6, 2007
Bail out?
Should the government bail out the people who have adjustable rate mortgages? I had an adjustable rate mortgage and I was fortunate because when it adjusted, it went down. I did refinance though for a 20-year instead of a 30-year product because refinancing for a 30-year mortgage made me think that I was moving backwards. I had already made about six years of payments.
I know that home prices have escalated and consumerism on both sides made people think that they were getting a great deal on a home rather than renting. Also, some people were taken advantage of because of their age or credit situation.
In order for people to reap any benefits from the mortgage bail out they must live in their homes. An adjustable rate mortgage has its benefits but in any case you need to make sure you can make the payments. I knew that my mortgage could only increase by a certain amount based on current interest rates and also that there were no penalties for prepayment after a certain time, which meant that I could refinance without a penalty after a certain point.
Not everyone is so lucky or has a good enough credit history to get a better interest rate.
Besides, just because someone is going to loan you $350,000 doesn’t mean you have to use it all, because you have to pay it all. If possible use only a fraction of what is available to you to use because otherwise the increase in payment could be hundreds of dollars more if your rate adjusts.
If you had bad credit and made your mortgage payment on time and took out an “exotic” loan then you are eligible for the mortgage bailout. Doesn’t seem fair does it? Especially if you saved to make a down payment or had good credit and were able to get a better rate. Even though everyone needs a place to live with the costs and prices of homes even in the downturn, maybe home ownership isn’t for everyone. The dream of home ownership has become a nightmare for some.
Here is a great commentary and good comments about the situation from MarketWatch.
Topics: December 2007 |
December 6th, 2007 at 6:51 pm
Sorry,
A bailout is wrong. Buying a home is a decsion based on your expected income growth and the lender’s trust in you. It is not a right. It is an investment with inherent risks. People who allocate resources poorly need to readjust their living styles. No matter if they are rich or poor.
I have to rent in order to try to save for an eventual 20% downpaymet as people used to. I worked 6 years to save for graduate school. I gave up on having a family, and drive an old car. Why should I help a homeowener and banker retain a nicer home and a nicer car when they can fire me. Make the pain apparent to all.
December 10th, 2007 at 12:16 pm
I agree that a bail out is wrong. It is more important for people to save. People need to prioritize. If you are only earning a certain amount in order to buy something you need to save and make sure you can make the payments if it is a large ticket item like a house or car. This is an idea that is foreign to many people today - they want it now and pay later.
In the case of a mortgage bail out we will have to pay for it later.