Small Rates on Loans Present Big Problems in Market

The market has been up and down, and in attempt to stabalize, short term solutions have been implemented to increase business. Banks are becoming more selective and are experiencing difficulty locating lenders to accept high payments associated with the best mortgage rates. They want people to have low payments. Though this might sound great, it's havoc for borrowers, and ultimately, the entire market. Cheap mortgage loans hurt people over the long term and they don't even realize it.

Cheap loans are parallel to renting a house with a mortgage. Every month, all that is really getting paid is the interest. The only person who come out ahead is the banker. There is a lot of risk and danger for the unprepared consumer. A decrease in income could leave you with a loan you can't afford resulting in foreclosure. Your credit will not be spared and there will not be any equity on the home.

Other risky loans are longer term loans that stretch over 40 to 50 years instead of the standard 30 year term. Payments become more affordable, however interest payments skyrocket. A 50-year commitment amounts to a lot of interest - it makes no sense!

How does this impact the market in the big picture? It weakens the borrowing base. People start selling. Home builders can't afford the inflated interest rates. And when people can no longer afford when they thought was a great deal on a mortgage loans, banks and lenders lose their profits and interest rates rise.

Really evaluate your interest payments over the long haul and look at your long term financial wealth accumulation. There is no time for gimmicks with such an important purchase as your home.

Resources: Mortgage Calculator