Editorial: Mortgaging your future

Saturday, May 13, 2006 | 7:08 a.m.

Saturdays are usually the busiest day of the week for house-hunting, and there will be plenty of Las Vegans today who will find what they believe is their dream house. Of course, finding a way to pay for a new home is quite another matter.

We don't have to remind our readers that prices have taken off in the Las Vegas Valley, one of the hottest real estate markets in the United States. Just a few years ago Las Vegas was one of the best bargains in the country, particularly compared to housing markets along the West Coast. But, just like in most other regions of the country, real estate prices have gone up here as well, making it difficult for many people to afford a new home.

Creative - and risky - mortgage plans have sprung up, ostensibly to help people afford to pay for a home that they normally couldn't afford. Interest-only mortgages have been all the rage in the past year. With interest-only mortgages, these loans don't require immediate monthly payments toward the principal amount, a grace period that can be from three to seven years, depending on the lender. But once that grace period is over, people borrowing the money will have to make much higher monthly payments.

Now there is yet another home loan out there that is an alternative to the traditional 30-year mortgage - the 50-year mortgage. No, that's not a typo.

Yes, half-century loans are now an option. USA Today reported on this development last week, and one of the interesting nuggets of information from the newspaper's story is that mortgage experts cautioned that these half-century mortgages are best for those people who plan to stay in their homes for just five years.

The reason these mortgage experts say that staying in the homes for just five years is the best plan is because that is the period that the loan rate remains fixed. "If you're going to be there more than five years, you're gambling," Marc Savitt of the consumer protection committee for the National Association of Mortgage Brokers told USA Today. "You don't know what interest rates are going to be. I wouldn't do it."

One of the reasons so many people are desperate about getting into a home as soon as possible is that they fear that house prices will go up even more if they wait. Creative-financing options work for some people - particularly those who are wealthy - but for many others who aren't as well-off, it truly is a gamble.

We worry, then, that so many potential home buyers are willing to do just about anything to finance a home - no matter how risky it is.