No Real-Estate Bail-Outs with My Money

This article is going to seem cold, and maybe it is. But lately, as foreclosure rates have been soaring I've been hearing about quite a few politicians who want to help borrowers who got in over their heads with their mortgages. Many have ARMs and the rates on these have been increasing, making it tough for some to meet their payments. Across the country, mortgage delinquencies have been climbing sharply. The government shouldn't be bailing out these people en masse. Most knew what they were getting into and chose to ignore their situation or the market.

Let's go back several years, say four years ago. I bought my first house then. Before I purchased my house, I crunched all of the numbers to ensure that I could afford the mortgage payment along with my other expenses.

When I met with my mortgage broker, we discussed the different lending options. He wanted me to get an ARM. Rates on ARMs were historically low and a good percentage point or more lower than a 30 year fixed mortgages. "No one is doing a fixed mortgage anymore," he said. "They're out."

I asked him what would happen if rates started to rise. He told me that by then I would have sold my house. "The average homeowner only stays in the same house for 3-5 years," he said.

It was tempting. Get an ARM and I'd be able to afford a bigger house, a McMansion even. My payments would be so low the family could take a trip to Disney or even buy a gas-guzzling SUV. My wife would have plenty of money to decorate the house or do an addition.

I declined. He also wanted to offer me a much bigger mortgage on a small down-payment. He said most people put 10% or less down and used a home equity loan on top of their initial mortgage to ensure they weren't paying PMI.

"But wouldn't that cause your monthly payment to be higher?"

"Yes, but it's tax deductible and rates are so low, you might as well get as much as you can."

Ah okay. But if you can't pay the monthly mortgage fee it doesn't matter how low rates are or how much of a tax deduction you get.

I went with a smaller house and a fixed-rate mortgage. Instead of the trips to Disney we opted for smaller, local vacations. We didn't buy the slick SUV but stuck with a low-priced mini-van.

Once I bought the house the home equity offers started pouring in. You know the pitch. Get a home equity line, use it to improve your home, increase your home's value, and deduct the interest from the home equity on your taxes. Once again, it was tempting. A new kitchen would have been great; a new bathroom even better. Or maybe a family-room addition.

But I decided that more debt on top of what I had just taken on probably wasn't the better idea. We stuck with our older kitchen and our out-of-date bathrooms.

Maybe you see a pattern here.

Now, I hear about how the government wants to bail out everyone who took on too much debt, who made the wrong choices - using my money, my tax dollars. I'm sorry if it just doesn't go down well. There may be predatory lenders but even that term seems a bit like a cop-out. At what point does an individual become responsible for knowing how much they make and how much they can afford?

Call me heartless, but if you couldn't afford the house in the first place, why should I be the one to help bail you out.