Home loans ain't evil

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While the result of the sub prime crisis is devastating both for home owners as well as financial institutions, there is little better to increase your financial wellbeing than investing in your own property. The days that people just bought a house or condo cash in hand is long gone, and almost everyone relies on a home loan to get the purchase financed.

When it comes down to who is responsible for the current crisis, I think we all are to some extend. The sector for handing out home loans as if it were candy, even to people they very well knew wouldn't be able to repay their mortgage if the slightest would go wrong, but the people accepting the loans as well. If you disregard the small print - and I have no doubt that the conditions were in very small print somewhere in the midst of a pages long contract - or don't fully understand what you're getting into, you don't sign anything, period. People always assume a best case scenario, never a worst case. Sure enough, things sometimes do go wrong, and even in that case, you should somehow prepare for it.

Let's hope that with the current crisis affecting everyone - even those not related to real estate or finances - new regulations are put into effect. While it is a harsh lesson learned, it should open eyes for many as well: think before you leap. Know upfront what you can or can't handle financially and if you can't, don't attempt.

Getting your own property is a long term investment. You can continue to rent from others, paying quite some cash over several years and ending up with nothing to show for it. Or you can get a home loan after carefully considering the stipulations and your own abilities to meet those, and become an owner. The choice is up to you and while ownership may not be the best path to take for everyone involved, simply doing the calculations and projections together with your bank or mortgage institution will enlighten you and shed a light onto the complex systems of financing and mortgages. Don't let anyone press you into something you don't understand. Don't sign what you don't understand. Make sure you have some cash aside to cover periods when things ain't going so well.

A home loan is not necessarily the work of evil, an instrument of destruction, quite the contrary. It can allow you to expand your financial possibilities and resources, but... buyer beware.

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This page contains a single entry by ServMe published on April 12, 2008 12:01 PM.

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