So much for doing whatever it takes to keep the farm.
According to an Associated Press piece, "The proliferation of no-money-down home loans over the past few years, coupled with the current housing downturn, is giving rise to a new mentality: People will risk losing their homes while doing everything to keep their credit cards."
This could be one of the reasons why credit card delinquencies have not soared the way that subprime loan delinquencies have: People are paying the credit cards first. Assuming that most people aren't letting their mortgages lapse while they splurge on big screen TVs and iPhones, this is probably the right thing to do in a lot of cases.
People were sucked into the idea of buying homes with Adjustable rate mortgages in part because of the cliche that "home ownership is the most common path to wealth" and similar ideas. But in reality, owning a home you can't afford is a path to disaster, and a lot of people would have been better off renting until they had saved enough to get a more conventional mortgage.
As painful as losing a home is, the flexibility provided by consumer credit is more important for many families: In the event of a medical emergency, or a simple need for food, a credit card is a lot more helpful than a house with a mortgage greater than its value.
Keep the credit cards or the house? Credit cards!
Posted Sep 12th 2007 6:03PM by Zac Bissonnette
Filed under: Personal finance, Housing
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Reader Comments (Page 1 of 1)
9-12-2007 @ 8:31PM
Felipe said...
This is the most Stupid artical.
9-13-2007 @ 12:30AM
THETMANXKL2 said...
CREDIT CARDS WILL BEGIN TO GET SCARCE I THINK SOON ENOUGH. THAT'S GOOD. THAT'S VERY GOOD. WE NEED TO LOWER OUR TRADE DEFECIT, WE HAVE TO CUT BACK ON OUR SPENDING. WHY DOES THAT NOTION RATTLE THE FINANCIAL SECTOR? BECAUSE THAT MEANS NO MORE BULLCRAP IN THE STOCK MARKET, OR THE CREDIT MARKET. THAT MEANS YOU EARN A BUCK BY ACTUALLY WORKING FOR IT. UNITED STATES WILL HAVE TO CORRECT IT'S BEHAIVIOR. THAT'S THE WAY IT IS AND IT SHOULD BE.
9-14-2007 @ 7:56PM
Warren said...
Pay off the house and the credit cards (then cancel them) and actually enjoy your debt and stress free life. It's the right path.
9-28-2007 @ 7:34PM
KAE said...
My apartment complex now allows us to pay our rent with a credit card! That's just a disaster waiting to happen for some people. Now they don't even have to have the money to pay the rent, just charge it!
10-13-2007 @ 6:47AM
metoobear said...
this is just another sign of the times. the house IS worth more if the value has gone up.
a cerdit card is another enemy to the wallet
10-26-2007 @ 7:16PM
Andrew Harmon said...
I know from experience bad credit can be fixed by nothing more than buying properties. Nothing is more American than to buy, sell and juggle. Credit is not even a real real problem to anyone who understands leverage. Smart people won't be idiots. Money is what its all about and knowing how leverage works will keep us all going forward towards a better life. Keep it straight, it is about money!
Drew