Monday, September 3, 2007

Subprime mortages = Darwinism at work

U-J and I bought a house a little less than a year ago. Before we started looking seriously at houses, we sat down and did a little math. We took what we both made, subtracted out monthly expenses, looked at what was left over, and decided how much of that we wanted to spend a month on a house. We took that number, plugged it into a mortgage calculator and determined what maximum price house we could afford. We only looked at houses that were at or below that price. Simple, no?

Could we have purchased a bigger, fancier house than the one we have? Sure. It's called a subprime mortgage. For the same monthly payment we make now ,we could have a house that cost twice what our costs. Problem is that the low payment only lasts for a few years and then the payment skyrockets.

Poor owners of subprime mortgages, they were tricked! Why were they "tricked"? Because they were greedy, stupid, wanted to keep up with the Joneses--take your pick. Again, it goes back to the need for instant gratification.

Who wants to work and save for years to buy a $500,000 home when you can get one now for the low monthly mortgage of $1000 a month? Sure, the payment is going to quadruple in 2 years, but that is 2 years from now. In the meantime, we can use all that extra money to buy 65" plasma TVs and new furniture, go to Disney World--life is good!

Then when the 2 years of living high is up, subprime mortgage owners face foreclosure. And I'm supposed to feel sorry for them and want the government to help them out. Sorry, that is as likely to happen as me stopping a lion from preying on the slowest, weakest gazelle in the herd.

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