Chicago Hispanics Losing Their Homes

We often hear the phrase “the American dream.” To many, this is the idea that, with a little hard work, anyone in this country can get a good job, obtain an education, raise a family and top it all off by becoming a homeowner. In the city of Chicago, the American dream is a reality for many people, especially Hispanics. Throughout the north, south and west sides, as well as the suburbs, Hispanics all throughout the city are homeowners and, in some cases, own multiple buildings. However, there are dangers that are creeping into many Hispanic neighborhoods. These dangers are costing families hundreds, even thousands of dollars, plus, more tragically, their American dream: their home.

In recent years, many homeowners have turned to refinancing their homes to ease financial woes. In addition, new homeowners have turned to mortgage plans with low initial interest rates so that their payments can start off low. There are big financial risks to refinancing a home or starting off as a homeowner with an interest rate that can later equal more money. Know the risks, be prepared financially, and choose the right mortgage and interest-rate option for you.

Chicago has seen a surge in the number of homes that have been foreclosed. This means that you no longer are able to keep up with your monthly payment, so the bank steps in and takes your home. In Chicago, foreclosures of homes is expected to reach 36,000, according to Crain’s Chicago Business. In many north side Hispanic neighborhoods, such as Avondale, foreclosures have jumped by 103 percent. These predominately Hispanic north side neighborhoods have been hit the hardest by foreclosures. Some experts agree that the cause of these foreclosures is the refinancing of homes under adjustable-rate mortgages. If you are going to move forward with the decision to refinance, or if you’re getting a variable interest rate that is not fixed, know all of your options. Read your paperwork and consult with your family and experts before making a decision.
When a person refinances, they typically do so for one of two reasons: to lower their current mortgage payment, or to obtain money as a way to ease financial strains. Those who refinance in order to lower monthly mortgage payments typically have stellar credit and refinance to take advantage of lower interest rates which equal a lower monthly payment. Those who refinance for cash are essentially borrowing a loan against the equity of their home. This means that you are taking a loan out on what you have already put toward your home. People refinance for money to help pay off other loans, credit card debt, medical bills and so on. Both of these options sound like a reasonable idea, but be sure that you are able to pay off higher payments in the long run.

Other factors that have contributed to people in the city losing their homes are adjustable-rate mortgages and interest-only loans. With ARM loans, you start off with low monthly payments and your payments increase every time there is an interest rate increase. Well, what was happening was that people could start off with a mortgage as low as $1,200 a month and in just a few years their mortgage would jump to $2,000 a month. Interest-only loans are those that you begin only paying off the interest initially, which is a low payment. However, when it’s time to start actually paying off your house – the principal – payments can jump by incredible amounts.

Overall, if you are ready for a home, weigh your financial options – will a fixed payment be more predictable and safer? Probably. Do you really need to refinance for $50,000? Remember, the best way to resolve financial worries is budgeting and knowing what you can afford.