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Mortgages and Personal Responsibility

Homeowners these days deal with their financial responsibilities differently than prior generations. People today happily sign up for super-sized mortgage loans, skimp on their down payment and points, and have an unholy appetite for creative financing tricks to lower monthly payments that include interest only loans, option Adjustable Rate Mortgages (ARM), and negative amortization loans. Does anyone just pay down their mortgage to zero anymore, or does everyone refinance every few years until they sell the home or die? A national survey of homeowners, surprisingly, found that the majority of homeowners in the United States plan to pay off their mortgages within a specific timeline; and an equally surprising number of homeowners, nearly 30 percent, already have paid off their home mortgages.

What is surprising about this survey is the means by which most homeowners are managing their mortgage loans. For instance, nearly 40 percent of homeowners surveyed stated they have paid off more than half of the home’s original mortgage loan, including their first, and second mortgages, along with their home equity lines of credit. The next third state they have paid off the mortgage debt completely; 47 percent of these homeowners are above the age of 50. Another 38 percent surveyed state that they will be fully paid sometime in the next 10 years. Only 4 percent of homeowners surveyed state they do not expect or plan to pay off their mortgages; these homeowners simply haven’t thought about it. Another 6 percent surveyed state they will pay of their debts by selling their home.

Contrary to reports being waved by Alan Greenspan, chairman of the Federal Reserve, Americans are not the irresponsible credit addicts endangering the US economy that doomsayers claim. This is not to say that in the near future many Americans won’t find themselves in hot water because they made poor choices when it came time to sign for their mortgage loans. A couple of interest-rate hikes down the road, hundreds of thousands of Americans with interest only and option adjustable rate mortgage loans will find themselves deep in hot water. Many of these homeowners will be facing foreclosure because they can’t afford their payments and do not qualify for refinancing.

Those who are able will most likely refinance mortgages to fixed interest rate loans with shorter terms. Whatever happens, people in the near future will be taking their mortgage loan responsibilities much more seriously; most homeowners already are. This fact is being reflected in the rate of foreclosures and payment delinquency in the United States today.

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