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Beware of these home loans.(mortgage brokers and lenders are luring the borrowers to accept more risk)
These days, it can be easy to get a mortgage even for a home that seems financially out of reach. And homeowners can tap home-equity loans to finance everything from a Lexus to a trip to Las Vegas. But this is not such a good thing.
Many loans that mortgage brokers and lenders are pushing increase the odds of foreclosure by allowing borrowers to accept more risk than they can manage, especially if home prices level off or if interest rates increase. That's because some loans, such as interest-only mortgages, keep monthly payments artificially low at first but can skyrocket to unaffordable levels later on.
Widespread defaults haven't occurred because the loans are relatively new, home prices have continued to rise, and interest rates have remained low. But regulators are paying close attention to the rapid growth of nontraditional mortgages, which in states like California and Nevada made up more than half of new mortgages in recent months. In May, banking agencies issued guidelines to rein in the use of some unconventional home-equity loans and may soon do the same for first mortgages. Here are some of the riskiest mortgages, and why we don't recommend them:
Interest-only mortgages. After 3, 5, or 10 years of paying only interest on your loan, monthly payments can jump 25 percent when principal is added to the bill. Because most of these mortgages have adjustable rates, ...
- LOWER INTEREST RATES MAKE HOME EQUITY LOANS ATTRACTIVE.(MONEYWISE)
- Newspaper article from: The Cincinnati Post (Cincinnati, OH) March 20, 2001 700+ words
...With the scary turmoil in the stock market, odds are that the Federal Reserve will be reducing interest rates again. That would make home equity loans especially attractive if you're in need of a little cash about now. Most home equity lines...
- N.C. bill to ease fee, rate caps suspended in lawmaker limbo. (North Carolina;...
- Magazine article from: American Banker Hornblass, Jonathan S. July 7, 1995 700+ words
North Carolina legislators seem likely to reject a bill that would remove or reduce limits on interest rates and fees for home equity loans and credit cards. The measure is one in a growing string of legislative moves by states to loosen...
- Home Equity Loans Can Take the Bite Out of Borrowing: For lower interest rates...
- Magazine article from: Armed Forces Comptroller September 22, 2001 700+ words
...But beware of penalty fees and teaser interest rates. If you are late with a payment...loan, the interest you pay on home equity loans is tax deductible. (However, you...A word of caution, however: Home equity loans and lines of credit put your home on...
- Dual Interest Rates Allow Penalties For Prepayment of Home Equity Loans
- Newspaper article from: The Washington Post Benny L. Kass December 14, 1996 700+ words
...limit of your loan. The second reason for favoring home equity loans is that the interest paid on the loan is usually tax deductible...These lenders are now offering two plans: one at regular interest rates, with no prepayment penalties, and one at a lower interest...
- CONSUMER CREDIT SHIFTING TO HOME EQUITY LOANS
- Newspaper article from: The Journal Record GLORIA WEINSTEIN August 28, 1987 700+ words
...Second, home equity loans aren't cheap...Third, most home equity loans carry variable interest rates that will fluctuate...upper limits, on interest rates, you could be...are using home equity loans responsibly. The...
- Home Equity Loans Cutting Installment Debt, Data Show
- Newspaper article from: The Washington Post Nancy L. Ross March 11, 1987 700+ words
...debts at lower interest rates and finance purchases...substitution of home equity loans for more traditional...percent. Most home equity loans carry variable interest rates that are one or...interest on home equity loans remains deductible...
- Home equity loans cut installment debt
- Newspaper article from: Chicago Sun-Times March 15, 1987 700+ words
...debts at lower interest rates and finance purchases...substitution of home equity loans for more traditional...primarily home equity loans, in the opinion...percent. Most home equity loans carry variable interest rates that are one or...
- First Union says loan sales will give it competitive edge.(contract with...
- Magazine article from: American Banker Talley, Karen June 3, 1997 700+ words
...Freddie Mac to securitize home equity loans. Executives at the banking...risky. The results: "lower interest rates that we can pass on to borrowers...involved $227 million of home equity loans that carry interest rates between 7% and 16.5...