"Getting a mortgage - ancient roots for a present fear"
When you pick up a pen to "sign on the dotted line" of a mortgage document, does
the pen shake a bit, reflecting a queasy feeling in your stomach? Or have you
ever seen a first time homebuyer whose long face and rapid heartbeat shows the
anxiety at becoming responsible for probably the biggest single investment of his/her
life?
Yes, we understand the emotional rollercoaster of "Buyer's Remorse" - been there
and done that. The time between getting the property under contract and the closing
on the deal is stressful for both buyer and seller. Even now, when it is relatively
so easy for a buyer to get a mortgage with almost nothing down, the fear of signing
the long-term financial commitment of a mortgage still exists.
Has it always been like this? First, look at the word itself. "Mortgage" literally
means a "dead" (mort) "pledge" (gage). It's similar to a pledge by a buyer in
an "agreement for deed", in which the seller retains the rights to the property,
with property rights considered "dead" to the borrower until the "pledge" is paid
off by the due date. The borrower lost everything if the pledge was not paid
on time. Is that still the case? It depends...
Let's consider what happened in times past to a mortgage, when historically the
negotiations about borrowing almost always heavily favored the lender or owner.
In ancient Greece, the first mortgages were stones or "horoi" which literally
were placed on the land. These "horoi" showed rough carvings of the tightfisted
terms of the time - usually one-sixth of the farmer's crop payable annually, and
in perpetuity, to his Athenian banker. In medieval times, one of the major issues
was whether the borrower or buyer was entitled to any rent or profit at all from
a property until the loan or "pledge" was paid off.
In early America home financing had been pretty much homesteading plus sweat
equity. While actual financing had been readily available before the Civil War,
the terms were steep: down payments of one-third to one half the purchase price,
with a relatively short payback period. When the Great Depression of the 1930's
hit, one solution to our nation's problems was seen by making major changes in
the real estate industry. President Roosevelt's New Deal programs created a number
of government-backed and insured home mortgage programs, many of which are still
in use. The Federal National Mortgage Association, set up in 1938 and known as
Fannie Mae, is one example. This organization helps lenders flourish by pooling
savings for easy transfer of mortgage money nationwide.
The great American housing boom began, but when the vets came home after WWII
the need for housing became overwhelming. The US government stepped in again and
in 1944 Congress enacted the Servicemen's Readjustment Act which offered ex-GI's
generous, low-interest payments with 30 year terms. A mortgage industry was born,
and prospered. The homesteading of the land was encouraged, and federal tax law
offered deductions for "interest on indebtedness" and local property taxes. These
benefits continue today.
The next time you have the opportunity to benefit from someone's ability to get
a mortgage - whether you are the buyer, owner, or seller - reflect on your good
fortune to live here in this country at this time in history. Real estate ownership
is worth the effort...and the anxiety.
(This article gratefully acknowledges the inspiration of a column in The Zac
Report of REMAX INTOWN)
Marge Coffing's tips come from almost 20 years experience in real estate investing.
She is available for private consulting either on-site or in
her office. |
