Beware of mortgage over-indebtedness

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Most homeowners need a mortgage. Many homeowners increase the value of their mortgage in order to complete renovations. It’s normal.

We can assume that the mortgage industry is very profitable due to excessive advertising to attract customers. Advertising costs money, but if the profits from lending are significant, it’s a logical business strategy.

My opinion is that over the years banks have done a good job of screening mortgage applicants to determine their customers’ ability to make regular payments.

It was the banks’ way of ensuring that customers lived within their means.

My opinion is that the current tone of mortgage company advertising has changed. The way I read the ads is that the focus now seems to be on the value of your home.

There are lending standards, but after obtaining a mortgage, the personal situation may change. If you can’t meet the mortgage payments, you risk the lender taking possession of your home and putting it up for sale.

It doesn’t matter from the lender’s perspective because the value of the homes is high, so in virtually all cases the lender will get all of their funds back.

For the owner, it’s devastating – personally and financially. Your home is where you live, raise your children and meet your neighbors. Plus, for the most part, it’s your greatest asset.

Easy money for mortgages, as well as credit cards and other consumer goods, can end up hurting the borrower.

We encourage you to manage your mortgage and all your debts carefully.

Peter Watson of Watson Investments MBA, CFP®, RFP, CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted by www.watsoninvestments.com.

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