One of the predictable consequences of the bursting real estate bubble and foreclosure crisis is that real estate prices in many parts of the United States have shown a downward trend. As subprime mortgages fall into foreclosure, more and more homes are listed on the market, home prices have fallen, and homeowners believe that the net value of their homes has been wiped out.
When this happens in large-scale areas of the credit easing era, homeowners may find that the tens or hundreds of thousands of dollars they owe at home surpass their value. No one wants to pay more for items, whether it is a house, a car or a pair of pants. It's not worth it but the temptation to get out of these families is increasing.
But it seems that few homeowners realize that they always have to pay more for their house, and that depending on the amount of rent they actually borrow, anything can be considered too much. First, the mortgage loan consists of a small portion of the principal and a larger interest expense; second, the bank does not actually lend any money that was not created out of thin air.
For example, consider buying a $150,000 house and a 30-year fixed-rate loan with 6% interest. The homeowners may feel that they have already paid $ 150,000 for the house, but this is only the client - above the original $ 150,000, they will only need to pay more than $ 173,000 in bank interest, the total P + I costs nearly 323,000 US dollars.
With higher-value housing, the interest portion of debt climbs even higher. Under the same conditions as in the previous example, the homeowner will pay over US$521,000 in interest for the home purchased at US$450,000, increasing the cost of his $450,000 home to nearly US$1 million.
Therefore, when the value of a home falls, it is illogical for homeowners to consider abandoning the home alone. They may feel that they are paying "more than it's worth," but they already plan to do so when they buy a mortgage loan and agree to pay the bank interest. A decline in the value of the property will not change their bad trade unless the transaction is made slightly worse.
A $100,000 decline in a $450,000 house is not an alarming thing because the total expenditure of the property will be close to $1 million. Homeowners should ask themselves that once they apply for a mortgage, no matter how much they want to spend on a house worth less than half, it is likely that they will never value the bank's housing charges.
There may be many reasons for abandoning a property, and the current decline in value may consider giving up. However, homeowners should not regard the fairness of loss as a major consideration in relinquishing their housing; after all, their mortgage loan is said to let them pay two or three times the value of the house - the value of losing tens of thousands of dollars will not change this now. Happening.
The spread of suburbs, increased transportation costs, financial difficulties, and rising crime rates as a result of the foreclosure crisis can be seen as more important reasons for homeowners leaving an area and forcing their homes into foreclosure. Feeling that they "paid too much" for their house is not a good excuse because they have agreed to pay too much for applying for a mortgage loan when purchasing a home.
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Orignal From: Mortgages - You are always worth more than home
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