Daily Investment Tips

In Warren Buffet 2011 Letter to Berkshire Hathaway Shareholders, Warren Buffet made an interesting forecast on the direction of the  USA housing market.

The sage of Omaha suggested a housing recovery will likely begin within the next year, which would help the economy and several Berkshire subsidiaries, including ones that make carpets and bricks.

If Buffet is right then expect a pick up of mortgages and a rise in house prices going into 2011 & 2012.

written by Constantine Njeru \\ tags: Amp, Berkshire Hathaway, Berkshire Hathaway Shareholders, Bricks, Carpets, Direction, Economy, House Prices, Housing Market, Mortgages, Sage Of Omaha, Subsidiaries, Us Housing Market, Warren Buffet

The popular wisdom when it comes to home ownership is that taking a mortgage and buying a house is better than renting. After all at the end of the mortgage the house is yours! But I strongly believe this is a Myth! If you consider the following advantages of renting instead of taking a mortgage.

1. Renting Can save you money

Depending on certain markets where the monthly rent is lower than the monthly mortgage payments. A smart renter can take the money they save by renting and invest it somewhere else. The saved money can be used to invest in stocks, bonds and other vehicles that have a better rate of return.

2. Location

In buying a home you are locked into the area, for better or for worse. While by renting you retain the freedom to move around.

3. Liquidity

Buying a house is buying into an illiquid asset. If you find yourself in an emergency, e.g a divorce or medical bill, you won’t be able to sell the house immediately. To make a sale you may need to take a fire sale at a lower price to get the money you need.

4. Interest Payment.

If you calculate the the total interest plus principal to be paid during the life of the mortgage you will see the final cost will be 2 to 3 times the original price.

5. Spendthrift

One unique element in growth of mortgages in the last few decades is the growth of mortgage refinance. Banks promised mortgages owner they can always tap into their equity to get more loans to travel, shop and buy cars. Mortgages have allowed home owners to treat the house like an ATM machine. Home owners were always drawing money from their equity to live a larger, bigger lifestyle. Without a mortgage many would have exercised restrain in their spending.

written by Constantine Njeru \\ tags: Atm Machine, Buy Cars, Buying A Home, Buying A House, Fire Sale, Home Ownership, Interest Payment, Liquidity, Medical Bill, Monthly Mortgage Payments, Mortgage Banks, Mortgage Refinance, Mortgages, Myth, Other Vehicles, Popular Wisdom, Rate Of Return, Renter, Spendthrift, Stocks Bonds

Mortgage owners who cant keep up with monthly payments are making a drastic decision by walking away from their mortgages. Mortgage companies refer to it as strategic default.

Walking away from a mortgage can be in your own best financial interest, after all big real estate companies do this every day. But before you make that decision make sure you are familiar with your states rules on mortgage defaults. Some states are pro borrowers while others are pro lenders.

Some Risks and Cost associated with walking away from a mortgage

1. In certain states, a borrower can be sued and personal assets can be subject to a deficiency judgment.
2. Once a mortgage goes into default, a borrower’s credit rating is severely tarnished, making it more expensive, if not impossible, to qualify for any new form of credit.
3. anything that involves a credit review, such as obtaining auto insurance or getting a new job, can be complicated.

Before you make the decision to walk away from your mortgage consider the above cost. Everything in life has risk

written by Constantine Njeru \\ tags: Auto Insurance, Borrowers, Credit Rating, Deficiency Judgment, Drastic Decision, Financial Interest, Insurance, Lenders, Mortgage Companies, Mortgage Defaults, Mortgage Mortgage, Mortgages, New Job, Personal Assets, Real Estate Companies, Risk