The number of house owners lagging behind by at least one mortgage payment is increasing regularly due to the higher interest rates supplemented with the falling market for houses. The evils of debt financing can be done away with if the resources of homeowners and investors are used together to stop foreclosure and make investments beneficial for the society while the home owner also enjoys a better position
.
People are hopelessly optimistic when they believe that they will be able to manage their missed payments by some loan program which would allow for low credit scores as well. The reality is that the best of plans offer interest rates ranging from 11-20%. and origination fees of 5-7% with the existence of low ratios of loan-to-value 50-65%. Before the homeowner knows, these factors would work against him as he waits for the mortgage broker to find him a deal custom made for him.
How long does the victim hope not to miss a payment even if he obtains a mortgage scheme suitable for him. He won’t be able to save up for the emergency fund and therefore, cannot lay guards for any future hardship. Obviously, one does not expect him to run lucky for a couple of years without the needs of repair in the house or medical condition. High mortgage in the absence of emergency fund wont see him through in such a situation.
Mortgage servicing frauds exist to create havoc in lives of owners with lots of equity who managed new debts. The features of this fraud include high equity and payments and low credit scores. Homeowners should protect themselves from these features.
Equity investing can solve most of these problems and debt need not be required for mortgage loan. For equity investing, the owner needs to find an investor from the same region who had access to cash- personal or third party to invest in the property. Such investors in a few years after venturing into real estate can help many homes escape foreclosure.
This method has lots of benefits over a home owner applying for more debt.
- The first and foremost benefit is that the home owner can still stay in his house. The owner pays a monthly sum to the investor who benefits as well from the income resulting in creation of a mini economy while reducing debt financing. The owner can buy the house back over the years and this is only possible because the investor bought the house to stop foreclosure.
- Equity financing allows more freedom to the homeowner than debt financing. In case of a hardship, the owner would not be able to meet the expenses as there would be no loan to pay thousands of dollars. Such a situation makes the feeling of staying in the house as that of a prison as foreclosure can not be stopped due to little equity nor can the house be sold. Thats why, home owners do not prefer such debt financed houses.
- The relation between the victim and the new investor is another marked difference between the two modes of financing. In case of debt financing, the person helping you at the servicing company keeps changing and therefore, desired level of trust and comfort can not be established. Equity financing can reduce chances of quick foreclosure or slow down the collection plans of the creditor.
The best part is interacting with a human being in case of equity financing instead of an IVRS facility of some corporation which affects coming to any form of understanding during emergency.
The homeowner therefore, instead of choosing debt financing and obtaining new loan, should prefer equity investment as the latter would benefit the entire community. In debt financing, the company representative is unidentifiable each time and they have no concern for the community's benefit but rather, applies sinister tactics like mortgage servicing fraud to worsen the hard lives of victims. But equity investment see people keeping the money in local economy where everyone shares responsibilities equally instead of just causing more and more suffering for the borrower.
Gus Taperman holds a Bachelor's degree in Commerce and completed his master's in Business Administration . He is working as writer and financial consultant to find a Personal loans, Debt consolidation, home equity loans at cheap rates visit www.taperman.com