One day I was reading a very upsetting article about people getting into serious debt. Credit card payments are being made on time in place of mortgage payments by many people. Due to the current state of the housing market, mortgage payments are often being put on the back burner in favor of credit cards and other debt.
Normally, people wouldn’t act like this. Yet the problem is growing because uninformed individuals are more concerned with guarding their credit ratings than their homes.
Bills are generally paid in the following ways during times of economic growth and prosperity:
- Food and Utilities
- Car note
- Credit cards/student loans/other unsecured debt
Why The Change?
The current state of the economy has altered long-held beliefs. When homeowners are underwater on their mortgage, they are more likely to stop making payments altogether. Paying down a mortgage on a house that is worth less than what is due is seen by many as a waste of money.
People generally have a tendency to think just about what they need right now. Therefore, people are prioritizing the payment of their credit card, cable, and mobile phone bills because they utilize these services on a regular basis.
When you don’t pay your mortgage, it takes a long time to notice the consequences. Many people are able to stay in their homes for a year or more after the foreclosure has begun.
Mortgage payments tend to be the largest and most time-consuming of a household’s regular outlays of cash. Suppose a person has $1,000 in their bank account. He has the option of using the entire sum toward his $1,000 home payment or splitting it between his other outstanding debts.
It’s more likely that he’ll use a thousand bucks to settle his other recurring bills than the mortgage. Since this will allow him to cover more than one bill, he thinks it’s the greatest option. Take a look at these three arguments for why it’s best to pay off your mortgage first:
Mortgage Lenders Don’t Accept Partial Payments.
However, unlike mortgage lenders, auto financiers, credit card firms, and other lenders are willing to accept interim payments. The monthly mortgage payment must be made in whole to the lender.
If you are late with your mortgage payment even once, the next month you will be expected to pay double the usual amount. Consequently, it’s quite challenging to get back up to date on mortgage payments after they’ve fallen behind.
Mortgages Are Secured By The Loan.
Credit card debt is an example of a type of loan that is not collateralized by any specific asset. The consequences of being late on a credit card payment are not as dire as they would seem; you will not lose your house or car.
A credit card company’s legal options are limited to suing you and trying to have money from your paychecks garnished.
A mortgage loan is a form of secured debt, meaning that if you don’t make your payments, the lender can foreclose on your property to recoup their losses. The bank will eventually force you out of your home, and it could take as long as a year to do so.
Your Credit Score Is Most Significantly Impacted By Mortgage Payments.
Mortgage loans are the biggest loans that the majority of people ever take out. The biggest effect on your credit score comes from this installment loan. Your credit score may significantly decline if you default on your mortgage.
Your current credit limit on other revolving loans, including your credit card loan, will be decreased as a result. Making credit card payments in place of mortgage payments is ineffective because the ensuing mortgage default will reduce your credit limit.