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Tuesday, July 10, 2007

Subprime: Paying For Money Can Buy Bad Environment

Our government runs on debt (but it also prints money). Corporations get loans to expand. Rich people look for the most attractive interest rate. But if you are living paycheck to paycheck, is signing for a high interest mortgage loan in your best interest? Many desperately want the title "Home Owner." It is a matter of self image and self worth. And God knows, if you can, getting a mortgage is better than paying rent, but...

Foreclosure kills any benefits that might accrue from mortgage interest deductions and the equity acquired over time. Foreclosures are going through the roof (pun intended) in the richest majority black county in the country, Prince George's. Subprime lending rates are the culprit. But the desire for the title drives people to sign anything, just like a struggling musician trying to make it to the big time. Except when the chickens come home to roost, it can end in bankruptcy, destroyed marriages and devastated families.

Maybe that young couple should get a $400 per month efficiency apartment (or a single-wide), save $2,000 per month for 10 years, and then pay cash for the house and save two-thirds on the cost of money. Instead of paying $600,000 for a $200,000 home on a 30-year mortgage, pay cash and save $400,000. A simplistic example but you get the idea. Take the savings and start your own business or see the world.

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