Mortgages - Rates, Loans, Lenders and Information 

Americans are Paying Off More Credit Card Debt

As interest rates rise, an interesting trend has emerged where Americans are paying off more credit card debt. Usually, Americans tend to just pay off enough debt to borrow more as the credit card companies will attest to. Here is an article explaining more on the situation.

The credit card industry presumes, based on happy experience, that Americans will borrow more money each quarter to support their spending habits, regardless of the direction of interest rates, and that enough consumers will be happy simply to pay off just enough debt to allow them to borrow more. But last quarter MBNA, to its apparent shock, found that "results were further impacted by unexpectedly high payment volumes from U.S. credit card customers," and that "the payment volumes were particularly higher on accounts with higher interest rates."

In other words, customers didn't respond to rising rates by continuing to pay the minimum and going deeper into debt; they paid down the principal more rapidly than expected. A detailed breakdown of MBNA's business shows that between the fourth quarter of 2004 and the first quarter of 2005 (i.e., between Dec. 31, 2004, and March 31, 2005) domestic credit card loan receivables—balances outstanding—fell from $13.9 billion to $10.9 billion in the U.S. alone. Meanwhile, U.S.-managed loans—balances outstanding plus receivables that MBNA has securitized and sold—fell sharply from $80.2 billion to $74.8 billion, down 6.7 percent. Dig into Capital One's report and you can see inklings of something similar. In the first quarter, Capital One's U.S. card-loans receivable fell to $46.6 billion from $48.6 billion in the fourth quarter of 2004—a 4 percent decline.

Paying off Your Mortgage

Paying off your mortgage may not be the best thing to do. As you make payments on your home and your home appreciates due to market conditions, you will build home equity. The question now becomes:

Would you ever willingly tie up your money in a non-liquid investment yielding a ZERO rate of return?

Mortgages - Rates, Loans, Lenders and Information

A mortgage is a device used to create a lien on real estate by contract. The mortgage is an instrument that the borrower (called the mortgagor) uses to pledge real property to the lender (called the mortgagee) as security for a debt, also called hypothecation. The mortgage instrument contains two parts, the mortgage, which is the pledge, and the note, which is the actual evidence of the debt and promise to repay (sometimes called a promissory note). To protect the lender, a mortgage is recorded in the public records creating a lien (when there are multiple liens, order of recording determines priority).