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sub-prime mortgageIf you were a lender of mortgages, would you give out a loan to someone who doesn’t have any documentation to prove how much money they make? Would you provide a loan where the person isn’t even required to pay off the interest each year? How about a loan that would take 50 years to pay off? Reason dictates that these types of loans are horrible for both the borrower and the lender, but some of the major mortgage companies are continuing to offer unconventional loans which will likely never be paid off.

For several months a lot of the major mortgage lenders stopped providing some of the worst offenders in the sub-prime mortgage loan market. Very few companies were offering option payment loans, 50 year mortgages, and interest only loans with a massive balloon payment at the end of the term. It seemed that the mortgage market had returned to sound statistics and reasoning as to whether or not to originate a loan, but as the real estate market decline very few people were buying homes and thus very few people were taking out mortgages. The volume of mortgages that the real estate industry has seen has shrunk dramatically, leading some mortgage companies to desperate measures to originate new loans.

Many of the mortgage companies which were hit the hardest by the collapse of the sub-prime lending market are now offering the same types of loans which got them into that mess in the first place because they’re so desperate to generate any type of new mortgages they can. Countrywide Home Loans is sending out mailers with offers for a $511,000 jumbo mortgage to refinance or remortgage your home. According to the LA Times, aI I number of other mortgage companies are sending out flyers for option payment loans, which are loans in which the customer is not even required to pay off the interest each year! If you’re in brittian, consider a buy to let mortgage.

Just because these loans are becoming available again does not mean you have any business taking them out. You might get initially a low payment for the first few months, but after that the rate will adjust upward and you’ll be paying much more in the long run. Stick to a conventional 15 or 30 year fixed mortgage, pay your payments each month, and you won’t have any surprises along the way.



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