Mortgages, Home Equity Loans and secured loans backed up by your home, can put your property at risk if you are not careful. Why not try some simple math, then? It's easy enough. It is part of the preparation needed to be an expert "loan-taker", even when taking your first loan ever.
No Need To Be A Mathematician
The balance between your income and your spendings is a simple matter. However, thanks to modern credit tools, you can get into such a spending inferno that could end up in disaster, caused by the fact that you lose sight of that simple balance, on a monthly basis.
That Wonderful Little Piece Of Plastic
Credit cards are fantastic when you consider that you don't have to go around with cash and even pay for what you buy at the end of the month. The trouble comes when you start buying too much and have to refinance. That is a dangerous tool that must be used with extreme care. This fact alone can mean the turning point in the middle of a mortgage repayment or a home equity loan.
The Beginning Of The End
You have no equity left to lay your hands on, in order to pay off the credit card debt. Well, I don't need to go into detail of the inminent default and risk of losing your home, just because you let things get out of hand.
A Miscalculated Loan
It often happens that you take a loan with a shorter term because you think you can manage.
When you realize that, you also realize that a remortgage is of no use, because the rates have gone up. Even more so, there are fees to be paid for the remortgage to extend the loan period. So, you are stuck in the mud.
My Luck!
You might trust your luck to get an unsecured loan to pay for the swapping fees, but what about the increased interest? Even if you do get the unsecured loan, the monthly instalment has to be made, adding even more expenses to the one you have for the mortgage. This situation could be catalogued as jumping from the pan into the fire.
There is only one solution to this: Get a better job, an extra job, increase your income in such a way that you escape the claws of bankruptcy. or risk losing your home due to default.
It All Sounds Too Far-Fetched
Yes, it certainly does, but it is also quite probable. Surfing on the Net some weeks ago, I came across a survey on mortgage default. It states that, on average, 1,5% of mortgage borrowers run into default, with a high peak in the State of Ohio of more than double. These figures correspond to 2005, after a dramatic increase during the previous six years.
The Real Solution
Shop around carefully before finally applying for your mortgage. Write everything down: The cost of the loan, the monthly payment with a little allowance in case something unexpected arises, whether you can really afford the cost of the house you want to buy, everything you can think of. Ask the loan officer whatever you are not sure about.
What you must be sure about is that your home will remain yours. Get free quotes on-line, work out your budget for a typical month during the payment period, do this a dozen times or more but don't go for your first loan without finely calculated figures.
