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 ...
I saw a two-brm condo Friday in Ocean Baech. View of the waves crashing into the rocks. $595,000. The fourth floor was $1.2 mill. If you buy the $595 and take a five-year fixed at 1.95%, you're on the ocean for relatively low cost and far below $5,000 per month.
Asset...wrong!!! A liability, never an asset.
Homes are only assets when others are living in them and paying YOU rent or lease...
pay option loans aren't always that bad of an idea if you pay them right. i got a much lower interest rate to go with the pay option.. i just don't pay the lowest amount.
however, if something came up (job loss, injury, wife overspends for Christmas, etc) and i couldn't afford to pay the normal amount, i have the option of paying significantly less until i'm caught back up.
Many people today are thinking as if the house value is what they set the price or what comps used to go for. The value of the house is what someone is willing to pay for your hosue when you sell it. Until then it's just paper gains or losses.
Good grief! Maybe he wanted to live in a new highrise in the heart of the downtown. Two bedrooms in decent neighborhoods are in the 12 to 1400 range in most of San Diego. Out in the 'burbs, they're around a grand.
As is any investment. The disadvantage is Housing is not as liquid as most investments. The question is why doesn't he have his house on the market right now if he can no longer afford the payments.
This is just what I mean, though. What happens when five years are up and the interest rate re-adjusts? Suddenly, your payment doubles and what seemed like an awesome idea five years ago is looking pretty nasty.
ARMs allow people to buy big, fancy houses, but the inescapable problem is that they are buying more house than they can afford.
Cleverness does not equate with wisdom. While having a good time he forgot what is important in favor of what was urgent. Biggest. Moron. Ever.
What a punk. Maybe a little less world travel and Toyota Avalon-buying, and a little more self-restraint would have been advisable.
If you can't get a loan you like, rent it out or sell and move down. Most likely, if you keep your powder dry (fico score low) you will do all right for the 5-10 years after. Why give money to the bank, you don't have to?
There are alot of ID10T codes like him out there.
If your net payment after Income taxes is less than you could rent what you need, and you buy at the right size for your lifestyle, and don't expect double digit appreciation, your HOME is an asset. Life is more than money.
I think the exact opposite is most likely (I work in mutual funds). The threat of inflation is too great right now that the Fed can't afford to lower rates for some time. The housing market is affecting the aggregate market, making the situation worse.
I happened to read a USA Today article this morning about this very issue.
I just bought a beautiful used Avalon (2002) for $7500...of course, I was only trying to impress myself...
Hang in there! You will be able to get HIS shortly!!
Some one has to bring the facts of life. It's a bad time to be a seller. However a good time for buyers and investors.
I don't play the rates watch usually. If the rates are up, the values are down and vis a versa. Doesn't that make the payment in the same range?
California's become a member's only club. People just keep trading up like a Ponzi Scheme (as someone else said). What I am absolutely dumbfounded about is why, with massive gains, more people don't pack up and move to the Midwest or East coast. I know my brother-in-law is beginning to think about moving his family to the Midwest. They're tired of the gang-creep and the disintegrating culture out there. They could live extremely well if they decide to move.
Have you seen this idiot?
The world infamous wanna be investor flipper disaster.
http://iamfacingforeclosure.com/
Casey Serin: I'm a 24 yr old real estate investor from Sacramento CA. After going to a few seminars I bought 8 houses in 8 months in 4 states with no money down looking to fix 'n flip. I made some mistakes and fell flat on my face with $2.2 million in debt and facing foreclosure.
He said he does not have the $11K to pay the early payment penalty. What an ass.
If you can't get a loan you like, rent it out or sell and move down. Most likely, if you keep your powder dry (fico score low) you will do all right for the 5-10 years after. Why give money to the bank, you don't have to?
Spoken just like a salesman.
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