Interest-only Mortgages Have Their PitfallsWritten by Charles Essmeier
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that doesn’t build equity would seem to be a bad idea. Equity has long been used as a last resort source of funding for emergencies. And yet, with price of homes rising so quickly these days, many buyers don’t seem to care. Equity can be built two ways – either through paying down principal or by an increase in market value of home. If value of your home increases, so does your equity, even if you are only paying interest on mortgage. This is great, so long as home prices continue to increase. But what if prices fall?
There are potential problems with interest-only financing. Interest-only mortgages have variable interest rates. If interest rates rise, mortgage payments will increase. If payments increase beyond level of affordability, homeowners could be forced to sell their homes. This could lead to a glut in housing market, causing prices to fall. Owners wishing to sell could find that they owe more money than their home is worth and that they have no equity.
The interest-only mortgage is a useful tool to help people buy a home they otherwise might not be able to afford. Prospective home buyers should consider whether taking out such a mortgage is a good idea, or whether they might be better off buying a less expensive home.
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a Website devoted to debt consolidation information and HomeEquityHelp.net, a site devoted to information on home equity loans.
| | Minimum Credit Card Payments to RiseWritten by Charles Essmeier
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find this impossible to do, as they are already paying as much as they can. What solutions are available?
The usual common sense rules of credit card use apply here. Stop using your credit cards. See if you can consolidate your debt on another credit card with lower interest. See if you can cut out some unnecessary expenses in order to free up some more money to pay your balance. Consider a home equity loan to consolidate your debt. Call your card issuing bank and see if they can work out repayment plan or lower your interest rate. There are numerous solutions available, but card holders need to be aware that minimum payment is rising, and it isn’t going to come back down. By charging a 4% minimum, credit card issuing banks are hoping that consumers will pay off their debt a bit sooner and that fewer consumers will find themselves in a situation where filing for bankruptcy is only solution. And once October comes around, even filing for bankruptcy will be more difficult. Credit card holders with large balances on their accounts should give considerable thought to reducing their debt now, as payment options and requirements are going to be more strict from now on.
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation and credit counseling, and StructuredSettlementHelp.com, a site devoted to information regarding structured settlements.
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