Mortgages And Banking

 Mortgages offered today are better corresponding the requirements and power of consumers than the ones written prior to the crises. The options that used to make consumer go off the beam are no more being presented. One example is ARM (adjustable rate mortgage) option which allowed consumers to pay monthly repayment that did not include the interest portion in the beginning. Consequently, the size of repayments was tending to go upward towards the end of the term period. Another example is interest-only mortgage in which the monthly repayment consists of only interest part and principal amount has to be paid at some particular date that is agreed earlier. Although it is still offered, the cost is so high that consumers rarely decide on it. So the better choices made today are not due to the wise decisions taken on part of consumers but, arguably, due to the kind of products being offered in the market.

 The options like sub-prime mortgages that rarely care about the credit worthiness of consumers are completely gone. Now, only those who actually qualify get the loans. However, better decisions made due to the restricted options and stringent qualification requirements are being enjoyed at the expense of those who deserve the loans truly but can't get it due to revised policies. Like, today, many self-employed find it difficult to borrow. But the factors that lead to the bad decisions are still here. Main reasons why consumers made bad decisions were lack of understanding and poor guidance. Borrowers lack information and understanding as mortgages are too complex to be understood easily especially when you are exposed to them only once in your life. Consumers make decisions about mortgages once and lack of familiarity leads to awful assessments.

 Uninformed consumers seek advice from loan providers that only worsen the situation. Loan providers, instead of considering making loyal trade, tend to show proclivity towards one-off transactions. The sole resolution of mortgage broker is to get the deal passed. They don't adore to explain the pro and cons of a specific type of mortgage. Rather their laser beam focus is on the profits they would earn selling the deal not necessarily the right one. On part of the banks; disclosures are made to help customers make their decisions efficiently. Fundamental purpose of these efforts is to provide users with APR (Annual Percentage Rate) so that they could compare different mortgages with ease. But the underlying principle for the calculation of APR assumes mortgage to be longer term. Thus APR known cannot be used in unrelated cases where borrower seeks short term loans.

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