"Hi. I'm a dumba$$."
Posted on 12/11/2006 8:58:01 AM PST by Doghouse Riley
EVERY day, Will Hertzberg owns a little less of his three-bedroom house in Corona. Like hundreds of thousands of other homeowners around the state, Hertzberg has a mortgage that lets him choose how much he pays each month. Like many of them, he always chooses to pay as little as possible.....But his debt is swelling, and his mortgage company controls his fate.
"I am rather screwed," he said.
....
Hertzberg bought his house 11 years ago for $129,995..... Comparable homes in his neighborhood fetch more than $400,000...... Over the years he has taken out $190,000 in cash through refinancings......Hertzberg's home equity paid off his credit cards, financed trips around the world that allowed him to indulge his passion for photography, bought a $32,000 Toyota Avalon and enabled some lousy investments. "Free money always has the unfortunate effect of making people go overboard," said Hertzberg, whose living room is strewn with financial publications including American Cash Flow Journal and Donald Trump's "How to Get Rich." "You'd be surprised how fast $190,000 can go."
(Excerpt) Read more at latimes.com ...
Problem is, I bet his home does not even fetch $400K any more, certainly when the spring dumping of homes for sale comes in 2007.
he screwed himself. his house is supposed to be his home, not his money bag. his multiple refinancings are what did him in, that and his neglect of his existing debt.
the problem is that the money industry will support him - if he goes bankrupe they lose, so they'll try to get the government to bail this loser out.
Just a hint, trust people, not soulless companies.
Are we to feel sorry for this person?
My belief (and it is a belief, not a fact, not provable, so don't ask): That we will see RTC II. That, for a small amount, say $2500 (rolled into the refi loan) the gov't will allow homeowners to change to a 40-year loan, for $5000 (again, rolled into the refi loan) change to a 50-year loan. These securities will be packaged into tranches and sold as "new" government 40 and 50 year bonds, with US government self-insurance against default. And the game will go on.
He owes 319,000 and has a value of 400,000 if I read corretly. That's 80% loan to value and not bad. It's usually the 100% loans and having to sell or recast their loan that has many people upside down.
This guy could get a 90% loan and party on for another year or so. He's the type of fool to do it.
It's not the negative amortization that's the problem. It's spending all the money on liabilities and making what ever the bad investment was. If he has taken out 190,000, he should have three houses by now.
If you buy a 400,000 house and pay the negam loan payment and your add another 15,000 to your principle. You don't have a problem if you have 80% loan to value or better or if the home appreciates.
If he doesn't have to sell, he can wait out the market and recast. However, I hope he has kept his credit score up.
I'm sorry but it does not. Unless you're an idiot like Hertzberg.
And, to prove he's an idiot, if all this money was "free," why does he find himself in such dire financial straits today?
Holy. Crap.
APf
Last year, 1 in 5 loan applicants got one.
In the first eight months of 2006, even as the real estate market began to weaken amid fears of a downturn, the appeal increased again. Nearly 1 in 3 California loan applicants are now choosing them. The state boasts about 580,000 active pay option mortgages, about half the U.S. total. . .
2003 - 0.8% of loans
2005 - 20% of loans
2006 - 33% of loans
!!!! Econ101 is going to be a hard lesson for some.
The sub-prime industry is going to implode, taking many with it.
"Hi. I'm a dumba$$."
You seem smart on refi's, etc. Let me ask you this, I bought a home for $183k, paid on it for a couple of years and then took out a $20k heloc to pay for home improvements/remodeling. No, we're not buying cars, vacations, Play Station 3's, etc. We're spending it on improvements, a little at a time. Pay down or pay off what we spent then start another improvement/remodel.
I believe it is a pretty prudent thing to do if you don't have the cash to pay for the improvements.
What do you think?
Thanks for your thoughts,
SZ
LOL, might help if had a J. O. B. !! :)
Start with your goals. Why are you improving your home? How much longer do you espect to live there? Is your retirement secure against 30-40 years of cost of living and medical spend doiwn requirmentrs. And the questions go on and on.
When your overall situation is clear, then you should consider alternatives and make a decision.
HELOC rates are usually higher and more volitile on the adjustment.
I'm having trouble figuring out why the Times is still printing these articles now that we have a new congress and all this will be fixed in short order.
The usual rate of return on home improvement is negative, but it depends on the type of improvement and your housing market.
On the other hand, for a lot of people this sort of thing tends to pay off greatly in terms of comfort, much more so than other material goods. A nice bath and kitchen for $20K is a lasting, daily benefit, while a new car for that much is here today and gone tomorrow.
What, after all, is money for ?
My oldest daughter & hubby bought a home 5 years ago for $160K and have managed to motgage it the hilt and now owe $475K and its street value is about $400K.
I'm a little slow, cuz I ain't quite figered how they're gonna dig themselves out of that hole.
I just bought a beautiful used Avalon (2002) for $7500...of course, I was only trying to impress myself...
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