Okay, so that's not an earth-shaking title. But I'm a reasonably smart guy. I can do basic math. (I can even do advanced, pretty crazy math, sometimes.) I'm familiar with contracts and the concept of compounding interest. So I know that the difference between online mortgage calculators and what people actually end up paying differs by more than it should.
We've recently gone through another round of media sensationalism regarding the 'sub-prime' lending market. Thousands of people foreclosing as their ARM loans started jumping up a point or two and they really shouldn't have qualified even at the lower, initial rate. Was it too easy for them to get the loans? Did predatory lenders sign them up just to get their commissions? (Or, as the media would sometimes lead you to believe -- sign them up to get the home when they have to foreclose? But that's not likely correct, because most of the folks who sign up these loans turn them around and sell them in blocks to larger institutions.)
Of course, the answers to those questions are all yes -- yes, people pushed them into bigger loans than they could afford. Yes, it was too easy for them to get those loans. But the biggest problem is just that people buy into it!
We get pushed towards all kinds of bad things. Pushed towards to much of any good thing, more often. Eat too many Twinkies. Buy on credit. Buy a house bigger than you can afford.
It seems to me that it all extends from the same, basic roots of greed and ignorance.
The particular problem with home mortgages is that the ignorance is especially great. The reams of documentation loan brokers shove at unsuspecting buyers is enough to guarantee that they will never really read or comprehend it all.
This post is sponsored by a company that offers information related to home mortgages and offers the following links: Remortgage and secured loans. A mortgage is a type of secured loan -- any loan where you offer collateral, or something to guarantee the lender that he will get his money back. Credit cards are typically unsecured loans, so the interest rate is higher.
There are tons of places that offer information on loans. What I'd really like to see, though, is one of those places that claims to have banks competing for our loans, and presents a thoroughly user-centric summary of the various offers. I want a web 2.0, interactive summary of the APRs, initial out-of-pocket, monthly payment, total lifetime payment, and penalties or adjustments that could come along the way.
Is that so much to ask?