Mortgage Concerns are Growing

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I am so thankful that I own a home and that I have a fixed rate mortgage. Everyday I watch the news and they are painting an increasingly dismal picture for new home buyers and home owners with variable rate mortgages. Those people are stuck in a very undesirable position. I saw a story on the news where a family’s payment had gone from $1,475 to $2,100 a month in the past to years. They have a variable interest rate that went from 6.25% to 10.25%. In previous years the answer would have been simple. You refinance and you get a fixed rate mortgage. As a result of the large number of people defaulting on mortgages, many banks have drastically tightened their mortgage lending requirements. The news story did not talk about the credit history of the family, but it did say that their banker had been turned down by 160 lending institutions. The home’s owner is worried. He does not know how much longer he can keep making his payments. If things don’t change, he could soon join the growing ranks of people losing their homes to foreclosure.

So - pay yourself first. The recommendation is that you save 10% of your net pay. If you cannot start that big then try even 2% or 3%. The key is to make it automatic. Have the amount you are saving deducted from your paycheck or from your checking account into a savings account. This is one separate account or maybe several if you are saving for multiple goals. Make it difficult to access this money. Do not have an ATM card for this account. Use a bank that is out of town or across town from where you normally do your banking. Or use an Internet bank such as IngDirect or EmigrantBank.

Tags: foreclosure, subprime lenders, mortgages, home loans, variable rate mortgages