Since a mortgage is a loan that is used to purchase real estate... what percentage do you own when the entire purchase is financed? 0%! That's right ! Nada! A mortgagee usually has an equitable interest secured by the deed, but we go right back to ZERO again! Sometimes it is compounded by a second trust or home equity line of credit. The problem is that a lot of folks thought the same thing! Think about this scenario! Would you buy a luxury $35000 car on a credit card? OK, but you would buy a home or the obligation on a 250K home with a 100% loan that you didn't even read the big print!
It is a no win situation with no way out! The only way it could possible ever work is if prices rose at exponential rates. That can never happen because that is tied to salaries and income. When has your salary made you more money than you can handle? So now, that mistake compounds others! You cannot sell a home for more money just because you owe more on a home. A home over the long term rises in value, but the rise is not predictable and varies locally and nationally. The old plan used to be when buying a home is to start small and perhaps trade up. Starter homes was the perfect place to raise some cash. Buy low, and sell high! The larger the down payment for your next home...allowed for a more manageable monthly payment that normally was cheaper than rent. You could create a nest egg for your retirement, and a shelter for your family. It all made sense! Buying a home was not about a flip or short term investment. It was for shelter. The purchase of a home without a plan should not tear a family and a neighborhood apart because there was no plan or thought given to the purchase. Before buying, decide what your needs are, define your goals, and does it fit your budget? What about your budget 2 years from now? Does it fit? If not, you are impulse buying!
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