Historically, you paid your mortgage before you paid anything else. That kept a roof over your head and tended to be a bright spot on your credit report even if other accounts had been allowed to slide. Now, however, that trend is changing. In fact, according to SmartCredit.com president of consumer education John Ulzheimer, consumers are now opting to pay their credit card bills instead of their mortgages in many cases. Ulzheimer cites a perception of leniency on the part of home lenders as the cause of this shift. While credit card companies are assessing penalties and hiking rates for late payments, banks appear to be less likely, at least in the short term, to penalize delinquent borrowers. “It’s taking forever for mortgage lenders to foreclose on and actually evict consumers,” says Ulzheimer and, in fact, some analysts believe that taking a “break” on your mortgage to pay down credit card debt might be the best way to get back on track financially, since you may be able to make up the mortgage payments later and, according to a TransUnion study released earlier this year, consumers who are behind only on their home loans are considered “less risky” than those “delinquent on multiple smaller loans.”
Of course, not all debt advisors agree on this. For example, Bankrate.com’s Steve Bucci is unequivocal in his take on paying credit debt versus a mortgage, saying simply “No, no, no!” Bucci reminds readers that credit card debt is unsecured, while a mortgage is collateralized by the roof over your head. So if you can pay the mortgage, you should, he argues, saying that “the unsecured creditor needs to make so much noise in your life that you pay to get rid of them, [while] the mortgage lender will just quietly take your house and put you out on the street”.
What do you think? Credit cards or mortgage? Neither, both or some compromise?
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