« Bail Out

December 6, 2007

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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 article and good comments about the situation from MarketWatch.

http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/

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