A Penny Saved

According to the Mortgage Advice Bureau(via Guardian Unlimited) the number of mortgages for greater than 100% of the assessed value of the home is on the rise.

Mortgage Advice Bureau (MAB) said homebuyers opting for a 100% mortgage rose by 21% last year, while those opting to borrow more than the worth of their property grew by a half.

I don’t know about you, but that’s scary. Taking out a mortgage for greater than the value of your home is just asking for trouble.  While it may seem like a quick fix to a shortage of funds, it can mean a quick shortage in living arrangements if you’re not careful.

What contributes to this rise in >100% mortgages?

It said many first-time buyers find it impossible to save towards a deposit and that 100% mortgages were often the only way to get on the housing ladder.

Ouch.  The woe is me sets in.   “The world wants to keep me down and I can’t afford a down payment.”  Well, let me say that the reason that you can’t find the money for a down payment is one of two things.

Either you have horrible saving habits, or you are living beyond your means.  Of course there is the possibility that you are trying to buy more house than you can afford as well.  But mostly, it comes down to living beyond your means.  Stop trying to keep up with the Joneses!  Find yourself a nice house with a mortgage payment you can afford and a down payment that is do-able.

Your chances of defaulting on the loan increase many fold if you get above about 90% of the homes value.  Yes, the home may appreciate.  In fact it probably will appreciate.  But you can’t count on what it’ll be worth in the future.  What you can count on is extra added on to your payment for escrow, insurance, Private Mortgage Insurance, and maybe some points too.

And what happens when something breaks and needs repair?  Where are you going to get the money for that if you can’t come up with the money for a down payment?

Don’t be silly.  If you can’t afford the down payment, you can’t afford the house.

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