We don't think of our alleged heroes as being self important narcissists, but such a case can be made for the FED and our Medical community. When it comes to COVID-19, the lack of hundreds or even thousands of clinical trials devoted to any and all methods of reducing the risk of death or serious health issues from COVID-19 does not seem to be a priority to our vaccine centric Medical Heroes. Home Quarantine could prove to be an incredible opportunity to do all sorts of Clinical trials to see if there are any early treatment protocols that can fend off a weeks later dangerous outcome.
When it comes to Mortgage forbearance, the Fed is dishing out money at zero percent to banks who in turn are offering very low interest rates to those who "qualify". Meanwhile Jane and Joe Homeowner are in arrears on homes they have accrued home equity in at an equivalent to double, triple, or even higher ratios than the amount of forbearance they owe. Why can't a forbearance homeowner have the option of trading off of their increase home equity to square off their COVID-19 related forbearance?
There are homeowners with half a million dollars of home equity that the FED won't tap into so the homeowner could be paid a modest interest rate of say 4%, and in turn that equity could be re distributed to other homeowners at 5% or 6% who didn't qualify for a super low interest rate. Why can't a homeowner with plenty of home equity create home equity loan opportunities through their local bank to those who do not qualify for a conventional home equity loan?
Most don't realize that a private loan of $100,000 at 9.9% can cost 10 to 12 times more in interest rate charges than if that person could have tapped into a Home Equity line of credit at 4% because the private loan is charging interest on the full amount of the loan from day one, whereas the Home Equity line of credit only charges interest on the amount being used.
Example: A $100,000 private loan at 9.9% costs 825 dollars per month in interest only. However, a $100,000 Home Equity line of credit at 4% in which the homeowner would like to tap $3,000 dollars per month would cost 10 dollars in interest rate charges the first month, 20 dollars the second month, 30 dollars the third month and so on, it would take approximately 12 months until the same amount of interest was charged on the Home Equity line of credit as was being charged in just the first month on the private loan. But even after 12 months, the actual interest charge is still only around 120 dollars per month as compared to the 825 dollars per month on the private loan. So after one year, the interest rate difference is still more than six times.
Just as importantly, the higher interest rate charges from the get go mean the total amount of the loan that is actually available to the loanee is going to be considerably less, as much as 30,000 dollars less after two years when loan costs are added in!
While there is definite risk to having homeowners live off of their own home equity line of credit, there are many benefits to homeowners who are looking and planning for their future and don't want to be forced into a knee-jerk decision all at once, which is what could happen to 3 million homeowners in the late months of 2021. For those who would argue that the homeowner had plenty of time to plan for what to do during the forbearance period, that is not a fair assessment. One cannot easily plan a future when the present is in turmoil.
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