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 ...
We have a couple of giant teardowns across from my house, and they couldn't be more soulless piles of drywall. Our house is a modest bungalow, but we love every bit of it and not only did we buy it affordable, but it's appreciated at a faster rate than the McMansions around us. We don't intend to move or "go big". Maybe a small addition - someday. But you're right - some people live in a house. I live in a home.
Why would anyone get a loan with a pre-payment penalty? There are so many people ready to loan money.
The rise of folks' getting pay-option loans is what suggests to me that the housing market still has a ways to fall. It may not CRASH, but it may sink 5-10% a year for years yet.
This guy should be put in handcuffs for fraud.
Best wishes.
He was given the freedom to choose... and he chose poorly. How is that a "soulless" corporation's fault?
Most of these folks plan on staying in the house 3 or more years.
If this guy sold for 390,000 he would have enough for the pre-pay and to downsize or buy another car : )
You are absolutely right. My wife and I would move, but her job is in animation, and there are essentially no such jobs other than here. (I love my job too and would hate to get a new boss, but I at least *could* without changing professions. She could not.)
Normally, I would say yes. I'm just not sure where we are going to go in 6 months. This could easily spiral out of control. Who knows what pressures the Dem congress will put on the Fed.
When you wrote recession in the summer, I immediately thought stagflation. I need to do more research on the current inflation pressures but I think the Fed has been late to the party and its going to cost us.
Using your equity to better a debt situation, once, is one thing. It can be quite smart done right. And once.
Doing it over and over again, and spending loads of it on other things, is bad.
Hey, I'm not saying that you haven't done well for yourself, but as I said earlier, you're a salesman. Your job is to put people in houses and the more expensive the house, the better for you. That's cool, that's your job. Whatever.
But, and you can call me old fashioned, I won't buy a house with a mortgage that is more than twice my salary. I believe that anything else inhibits savings and wealth accumulation.
Like I said earlier, there will be a day when the housing market flattens in California. It may be in the next couple years, it may be in the next decade. I don't know, I'm not a real estate speculator. There is no question, though, that it will flatten one day. When that day comes, I know this: all those people in those big, fancy houses that have ARMs are going to be in a world of hurt.
I know one other thing: I will never be that person.
You have to take care of your financial plan overall, not just deal with your home in a vacuum.
Read the whole article. The guy's an idiot who had a $129,000 home, a six-figure job and blew through all of his money on self-indulgence. Now, he's in his fifties and (waaahh!) he has no equity and can't make his payments. LOOOOOOSERRRR!
Of course.
I've found in my line of work that people in California are actually LIVING ON the cash they refi out, because on their own incomes they can't come close to affording their mortgage payment...they cash out 100 grand, live on it a couple years, then when the house appreciates another 100 grand...do it again. They actually use it for bills and such.
Also has a major part in explaining why/how people in high-cost areas tend to have MORE in savings than people in low cost areas, when one would expect the opposite.
He did commit fraud. He lied about income and stated he would live in at elast one of the homes.
Let me know the date the market will permanently flatten. I will make several adjustments.
My parents bought a home in 1963 for $13,000. It doubled 5 times and sold last year for 450,000
When we have a depression, the population drops, and people stop wanting to live by the ocean, I'll change my approach.
It's their money. All we can do is provide information and step aside.
It very well can work out for people.
However, real estate cannot forever appreciate at 4 times the rate of income going up. As it is, a normal young couple with 2 kids cannot afford to buy a home in CA, DC, most of New England, or most of Florida.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.