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Mortgages
We Americans have come to believe that owning a home is a God-given right. We have trained our children to expect to begin their married life in a home it took our parents a lifetime to save for! Additionally, during the last thirty-five to forty years, and especially the years 1960 to 1980, a home purchased with a fixed interest rate was the safest an surest way to build personal net worth and equity.
Beginning in 1983, however, the "rules of the game" changed; inflation slowed down and interest rates went up - a direct reversal of these two factors from the previous twenty years. It has taken a while for our society to recognize this, and I don't believe we have, as yet, accepted it.
When considering the purchase of a home, we should apply the same four criteria as for undertaking any debt. However, the economic criteria are very difficult to nail downin today's economic environment. Even in period 1960 to 1980, there was not a guaranteed way to pay the debt except for returning the home back to the lending institution.
My counsel to yound couples who are considering the purchase of a home is never to become so attached to the home that they could not give it up if the debt could not be paid. Jobs are not nearly as secure today as they were in the past. Inflation is certainly not a sure thing, and fixed low interest rates may very well be a thing of the past.
The psychological burden of home mortgage debt is more severe than most people think, especially if a woman whose center of influence and security is in her home is involved. Studies have shown that having mortgage debt is a stressful factor and that degree of stress relates to the amount of the mortgage.
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This
article is adapted from Master your money
