Wednesday, March 11, 2009

20% down

There has been a lot of discussion about how to fix the current economic mess but less about measures to prevent similar troubles in the future. Here is a suggestion. Prohibit more than 80% financing for real estate purchases. In other words require 20% down. This would probably reduce the home ownership rate but it is not sound public policy to maximize the home ownership rate at all costs. Many people are better off renting.

2 comments:

  1. How about also banning "teaser" rates that are so low that the balance owed actually increases at first?

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  2. There are other things that could be done of course. However the purpose of requiring 20% down is to protect the lenders (and the system)not the borrowers.

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