Estate Planning

Credit Cards
Today we all tend to use terms like "credit", "debt", and "borrow" almost as if they are the same.

Home Loan
When considering the purchase of a home, we should apply the four criteria as for undertaking any debt loan.

Debt Consolidation
The financial area of debt is clouded with more emotion, misunderstanding, and poor teaching than...

Home Loans

Criteria for undertaking a home loan

When considering the purchase of a home, we should apply the four criteria as for undertaking any debt loan.

First of all, does it make economic sense to incur a home loan? To determine this, there are two rules to follow:

* The cost to borrow (after-tax interest) must be less than the economic benefit received (interest, yeild, and/or growth in value). And, there must be a guaranteed way of repayment.

Second, are both spouses free from any anxiety regarding this home loan? The rule indicates that there must be unity between the spouses.

Third, can the home loan be undertaken with peace of mind? The rule is that if I experience any lack of peace when I picture myself taking on this home loan, I do not enter into the debt.

Fourth, I ask myself, what personal goals and values am I meeting with this home loan that can be met in no other way?

I believe these criteria are practical, pragmatic, and biblical and should be applied unemotionally to every debt loan opportunity. My counsel to young couples who are considering the purchase of a home is never to become so attached to the home that they could not give it up if the debt could not be paid.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.

The question of whether or not to pay off the mortgage, if that is an option, is really an economic, psychological decision. Economically, it may not make sense to pay off a low interest rate mortgage, even if one has the funds to do so. However, psychologically, it may be, by far, the best course. Again, I would remind you that finances are nothing more than a resource to accomplish other goals and objectives - they are never an end in themselves. Therefore, even if it does not make economic sense to pay off a mortgage, there may be higher priority goals and objectives that need to be met. Money then becomes merely the resource to meet those goals. The decision does not have to be always an economic one. That counsel is, of course, good for all decisions.

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