In the word mortgage, the mort- is from the Latin word mori (via old french mort) for death and -gage is from the sense of that word meaning a pledge to forfeit something of value if a debt is not repaid. So mortgage is literally a death pledge.
For many decades, we
have come to believe that owning a home is a God-given right. We are expected to begin our married life with a home, without realising it took our parents
a lifetime to save for. Incidentally, during the last fourty-five to fifty years,
and especially the years 1960 to 1980, a home purchased with a fixed interest
rate was the safest and surest way to build personal net worth and equity.
Beginning
in 1983, however, the "rules of the game" changed; inflation slowed
down and interest rates went up - a direct reversal of these two factors from
the previous twenty years. It has taken a while for our society to recognize this,
and even longer, as yet, accepted it.
When
considering the purchase of a home, we should apply the same
three criteria as for undertaking any debt. However, the
economic criteria are very difficult to nail down in today's economic environment.
Even in the period 1960 to 1980, there was not a guaranteed way to pay the debt except
for returning the home back to the lending institution.
Jobs
are not nearly as secure today as they were in the past. Inflation is certainly
not a sure thing, and fixed low interest rates may very well be a thing of the
past.
The psychological
burden of home mortgage debt is more severe than most people think, especially
if a woman whose center of influence and security is in her home is involved.
Studies have shown that having mortgage debt is a stressful factor and that degree
of stress relates to the amount of the mortgage.
Calculate
your loan interest as well as your compounding interest with our calculators.
