Sub Prime Lessons

If there’s something that we should learn from the sub prime crisis is that we can’t afford not to plan for the future. So many people took out very affordable mortgage loans while interest rates were dirt cheap and figured they are set. But the reality of the matter is that situations change and interest rates fluctuate. Suddenly people with non fixed rates found their monthly payments rise drastically making them extremely difficult to cope with. It is a good idea to go with a fixed rate as a measure of protecting yourself from future rate increases. Many people fear such a step thinking they will loose out if rates go down. I suggest you try to get a fixed rate and look into the possibility of a mortgage refinance should the situation warrant it. Another thing to keep in mind is that even if you reach a point where you find it hard to pay your monthly payment, be sure to find the proper solution and not dive into the difficult cycle of debt. For instance many people apply for a payday loan and use the money to make a mortgage payment. I believe this is wrong. A payday loan should be used to bridge a short gap for an unexpected expense. If you reach a point where you can’t make mortgage payments you are better off with a longer term solution.