Mortgages are taken out by buyers who are purchasing homes. Purchasing a home is still one of the greatest achievements in one’s lifetime. A home will guarantee an individual a fixed asset and a permanent security throughout his or her lifetime. It is therefore vital to purchase a home as opposed to paying rent or leasing out a home which will not return any investment value. Record low rates are making this possible for more people than ever, but will the credit markets loosen up?
The problem with mortgages
As much as a mortgage will help an individual realize his or her dreams of owning a home, one should keep in mind that a mortgage is a loan taken out from a bank and in some way, it has to be refunded. The law tends to protect banks so much when it comes to mortgages to the point that it (the bank) has sole discretion over the transaction to do what it has to do so that the money lent is retrieved.
The bank has the right to the remedy of foreclosure and what this means is that the bank can take over the house purchased and resells it so as to recover the proceeds. This remedy is very severe to the point that the bank does not owe the borrower any money even after the resale.
Well, the main reason why default in payment occurs is that the banks state huge percentages on interests that accrue to the mortgage loan to a point that what is paid at the end is bizarre and much higher than what was given. This has therefore sent a huge outcry from borrowers to the point that a unanimous agreement has been reached to ensure that borrowers are not exploited and taken advantage of by banks due to their needs and wants.
The solution to high interest rates
It has therefore become inevitable to reduce the high interest rates that accrue with mortgage loans. Therefore, what has come as a surprise is that even 30 year mortgage interest rates have reached an all time low of 3.79%. It all first started when 30 year interest rates hit 5%. It then hit 4% and then moved to 3.8%. When everyone thought that it would not go further down, it hit 3.79% and no one knows how low it will go from here.
The rationale for this is that most potential homeowners end up losing their houses to banks due to the simple fact that they were late in payment. This in fact should not be confused with refusal to pay; it is mere lateness and the measures taken are too hostile for these people. Therefore, reducing the interest rates that accrue to the mortgage is an important step to ensure that homeowners do in fact remain homeowners.