125% LTV 2nd: Good idea or bad?

Discussion in 'Credit Talk' started by jshimmer, Aug 8, 2003.

  1. too much

    too much Banned

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    There is no tax advantage to the original poster's proposal. He shouldn't be concerned with saving $1 on taxes when he's spending $10 in interest.

    He's trying to shuffle an overwhelming amount of debt around, and it's catching up with him. Taxes are the least of his problems. If he transfers more of it to his home in the form of a secured 2nd mortgage, he will end up suffering a lot worse in a few years.

    I gave an accurate answer. The answer had a lot less to do with tax advice, and a lot more to do with common sense.

    The original poster fancys himself as some sort of low-rent Donald Trump. He's trying to shuffle tiny amounts of debt and cash around, all in the hopes of getting over on the IRS and his lenders. It's all so pointless. He's paying $10 in interest to save $1 in taxes. If he really wanted to get ahead in life, he'd just file bankruptcy now and start over fresh without debt. Of course, that would require him to give up the irrigation system and other things he clearly cannot afford. Obviously, that's not an option... so the quicksand continues to pull him under.
     
  2. breeze

    breeze Well-Known Member

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    OK, thanks for the "answer." I think you really did clarify things.

     
  3. reddevil

    reddevil Well-Known Member

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    I'm looking at this thread and thinking that pretty much everyone here isn't exactly getting it.

    Too Much is wrong to have leapt to her conclusion.

    If a person owes $45K in unsecured debt and $235K on a $260K house, and makes $50K, they're in deep crap and should file.

    If a person owes $45K in unsecured debt and $235K on a $260K house, and makes $2M, they're in laughably good shape. I'd say they should rearrange their debt structure a little, but it makes pretty much no difference. So saying that a person "IS bankrupt" without considering income and expenses is not a reasonable conclusion.

    On the other hand, somewhere in between those two extremes, the person shades down through stages such as: perfectly reasonable shape, a little overextended, in trouble but not doomed yet, etc.

    And I personally think the original poster is a little further down that list than he wants to admit. Not so much because of the actual debt that he owes, but more because of the way he seems to be thinking about it.

    $45K in unsecured debt is NOT a good number for his income. BK books suggest that you should start considering BK if you owe 50% of your income in unsecured debt. He's not that far off.

    If he takes 10 years to pay off $45K, he has to live on less than 90% of his takehome for the full decade just to get rid of the money that he's spent that he didn't earn yet. That's not pleasant, and it takes some adjustment and some determination to deal with. Having been down that road myself, and having it end in BK, I am just kindly suggesting that he needs to think carefully about the choices he's making.

    None of the things he listed as "needing" fall onto my personal "need" category. And further, while he says that the borrowing was done to cut costs, he's paying 6-12% on CC debt - I doubt that he's making 6-12% net after taxes on the money he has in "savings" in today's economy. And finally, if paying off this debt would wipe out his savings, then he really doesn't have any savings in any case. He borrowed it. Just some thoughts.

    ------------

    To answer the dollar questions, though, at a 12% refinance, the refinancing doesn't work presuming that he can't find some way to deduct the interest above 100% value. And even if he can, the difference is, at best, so marginally small that it comes nowhere close to making up for the shortfalls. Which, to reiterate, are:

    1. Securitizing unsecured debt is in general a very bad idea. If something goes wrong, unsecured debt can be blown off. Secured debt can't. Either you pay it or you lose the property.

    2. Putting yourself in a position where you don't have enough equity in the house to allow you to sell it without additional out of pocket money is very dangerous. I shudder when I read about all the young kids on this board talking about how they just barely scraped together the money to pay the costs of an 80/20 loan. That's the mistake that put me on the path to BK. I overborrowed on my first house, and when my ex got sick and couldn't keep up her end of the payments, I couldn't afford to get out of it.

    It would be a bad idea even if the finances said he could save some money doing it. And the finances don't say that.

    So the answer to Breeze's question is, if ALL you care about is the monthly impact on your total costs, then of course you would convert. But you would be an idiot to only consider that one factor.
     
  4. tmitchell

    tmitchell Well-Known Member

    You really are a piece of work. Breeze, John, and myself have been around here alot longer than you have. I like to think we're respected members of this forum. We wouldn't have reached this status had we been "angry" at every person we disagreed with.

    You're just an angry little girl with no real life outside of this forum.

    You're not liked in the real world and you aren't liked here either now go away.
     
  5. marci

    marci Well-Known Member

    Re: Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?


    I'd like to learn more about this. What information do you base this statement on?



    _______

    John,

    I've been around long enough to read you give excellent personal finance advice on this board re credit repair and proper use of usecured debt to assist in credit repair. I think, though, you are leveraging a bit on the edge with your proposal. I would not secure unsecured debt to my home, ever. And certainly not leveraging what you are trying to on a salary of $130K.


    Also,

    The statement re taking an Expedition back to a $18,000 house in the hood was unnecessary. I don't think that what you are proposing is any smarter or "classier" than driving an Expedition in a poor urban community. And in your defense of your lifestyle, it's not fair to diss an entire class of people.


    Reddevil - that is a GREAT reply!
     
  6. iambroke

    iambroke Well-Known Member

    I think saying this OP need to file bankrupty is ludicrus!

    He makes 130k a year..he can pay his bills...

    I don't think he should take out more debt but work on the bills but filing bankruptcy is nothing to take so lightly! I and society does not want to pay for his debts unless they are something he just can't get out from (ie huge medical bills).

    It just makes NO sense to state someone should file bankruptcy when you don't know the entire picture. He may just need to learn how to budget and work on paying down the debt he already has.
     
  7. iambroke

    iambroke Well-Known Member

    Re: Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    It is a known fact....rates go up...people don't buy because the rates are high...therefore house prices drop in order to get more buyers...if the homes in your area drop then your home drops (appraisals use home recently sold in your area).
     
  8. too much

    too much Banned

    Re: Re: 125% LTV 2nd: Good idea or bad?

    You sure seem to foster a lot of anger toward this "little girl." As if my size and gender were an issue.

    Why does it matter how long you've been around "here?"

    What is your professional and personal financial experience? That's what matters.
     
  9. too much

    too much Banned

    Re: Re: 125% LTV 2nd: Good idea or bad?

    $130k is peanuts when $250k in mortgages, and $45k in CC debt is involved.

    Buy a calculator.
     
  10. marci

    marci Well-Known Member

    Re: Re: Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    I understand what you are saying. I do not understand how what you are saying is universal. Rates have been around 18% and people were still buying. Rates were around 8% and people were still buying like crazy in appreciating markets.

    I'd like to know what industry reports address this.
     
  11. galabar

    galabar Banned

    Re: Re: 125% LTV 2nd: Good idea or bad?

    To clarify, I don't think that the original poster should file for bankruptcy. I certainly think he has enough income to get himself out of this situation (if he adjusts his spending habits).

    --Galabar
     
  12. breeze

    breeze Well-Known Member

    Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    This individual is a troll.


     
  13. breeze

    breeze Well-Known Member

    Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    I don't believe you've told us yours.

    Ours are in previous posts.

     
  14. iambroke

    iambroke Well-Known Member

  15. too much

    too much Banned

    Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    Yes, I did.
     
  16. iambroke

    iambroke Well-Known Member

  17. marci

    marci Well-Known Member

  18. breeze

    breeze Well-Known Member

    Re: Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    May I ask where? Can you give me a link?

     
  19. alent1234

    alent1234 Well-Known Member

    Re: Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    I would talk to an accountant, but at $130k you are subject to the AMT and most deductions don't apply. I would guess that you are better off juggling around the 0% offers and not paying the interest on a home loan. Find a 2 cc's that you want to keep and put them in the sock drawer. And juggle your debt on 0% offers by always opening and closing accounts.

    Even if you are able to deduct interest, then you are still paying out more money than if you were paying 0% offers. You also mentioned furniture for 0% and 18 months? Is that Thomasville? I'm looking at buying some soon. Is it any good?
     
  20. too much

    too much Banned

    Re: Re: Re: Re: Re: Re: 125% LTV 2nd: Good idea or bad?

    Yes, you can.

    Yes, I can.
     

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