This article briefly summerizes pitfalls of borrowing.
Want to buy those great shoes but just dont have the cash? No problem just charge it. Want to buy a home but dont have the cash? No problem - just charge it. Recognizing that the single largest impediment for most prospective home-purchasers is lack of a down payment, FT Mortgage has come up with The Down payment Card.

Mortgage borrowers can use this Visa card issued by FT Mortgage to make a down payment of 3 to 5 percent. They then get a loan for 95 to 97 percent of the purchase price. The mortgage loan plus the down payment from the Visa card equals 100 percent financing. The card carries an introductory rate for six months. And once escrow is closed, the borrower can use it like any other Visa card.

In theory, it works. It allows someone who has no cash to buy a home. But just because it makes it possible to buy a home this way does not mean its a wise thing to do. The buyer ends up with very little equity in his new home (only 3 to 5 percent) and some very large monthly payments. He will not only be paying his mortgage, but he also has a new credit card with a hefty balance.

Remember that the Visa cards introductory rate only lasts for six months. So those monthly payments will go even higher. And the new homeowner can now use that card to rack up more purchases the new home will inevitably need new drapes, carpets, dishes, etc., thereby increasing his debt even further.

This situation is a bankers dream and a borrowers nightmare. The bank knows that borrowers are loath to default on their home loans. So most likely the mortgage will be paid in a timely manner. But when cash runs short, borrowers will only make minimal payments on the Visa card. The balance on this high rate card will continue to snowball and the lender will make a large profit off the Visas high interest rate.

Borrowers should think long and hard about the real cost of this loan product. The credit may be easy to get, but very difficult to live with.Visit http://venturemall.tripod.com to find real estate solutions.

About the Author

Ajay Patole is a qualified management professional working as sales manager and runs a site 'Venturemall',a cool hangout to play money games,buy and sell in auctions,date and photochat.It is available at URL http://venturemall.tripod.com and newsletter to rediscover true colors of life at http://www.topica.com/lists/venturemall.Also he runs a community 'Venturecon', for entrepreneurs which is available at URL http://groups.msn.com/venturecon.