2007-07-06 17:12:48.203638+00 by Dan Lyke 2 comments
A new way to tap equity without going into debt: Homeowners can sell a share of future appreciation. I'm already confused by people buying buying Bay Area rentals with negative amortization mortgages (because rental prices won't support a real mortgage). This seems like a smart hedge for homeowners, but I wonder at how they're selling this to investors.
[ related topics: Bay Area Economics Real Estate ]
comments in ascending chronological order (reverse):
#Comment Re: made: 2007-07-07 11:04:35.350799+00 by: meuon
Insane.
#Comment Re: The Banker is Not My Friend made: 2007-07-07 12:30:31.772015+00 by: m
There are a lot of "new" consumer mortgage instruments. Zero interest, no down payment, and as Dan points out, the negative amortization -- the going deeper into debt mortgage. I have no doubt that there exist individuals with unique financial circumstances that can make the use of such instruments viable.
But, not many of us have the rock solid surety of a trust fund starting payments in five years, or some such similar guaranteed of future income. The new fantasy mortgages at best, lead to years of financial anxiety. The loss of a job, illness or injury, or perhaps simply a failure in the projected rate of growth of income, can result in a default, and the loss of a home.
Home ownership is costly. Maintenance brutalizes time and money. There are frequent unexpected expenses. If a person or couple can not, or will not, save enough for a decent down payment in this current low rental cost/ high purchase price market, then perhaps they would be better off not owning a house.
Above all, remember that the banker is not my friend, and he is not likely to be your friend either.