Taking a loan against your equity.

NEW -> Contingent Buyer Assistance Program
Surfer,



I think you should take Bix's advice and stay put, especially if you love the home. This market is extremely volitale. I am not sure if you were paying attention to the EURO/Dollar exchange today, but Euro was trading at 1.44 this morning and than the dollar surged to where the EURO dropped to 1.39. The U.S. government can just push a button and let the dollar rally and make Gold fall like a rock. This game is rigged i tell ya.



I did bet against the dollar in '08... and ending the year with a loss. I am sure glad that i didn't take equity out of my home to invest in gold, silver, and oil this year. As Graph can testify, I am even more glad that I did not borrow money from my house to buy Chinese stocks. Whew!!! Thank the Lord!



Good luck!
 
"Blah? you bears are all too conservative with your money. You need to take risks to make money. How do you think people become rich? RISK! And, this is a no brainer, 4.75% interest is nothing when you can way better returns elsewhere.

So? QHsurfer, yank as much money as you can, then PM me. I can beat those lousy money market funds and those over-hyped commodities all day long."





Graphrix,



I would be interested to know how you think money is to be made during the next two to three years while the world economy transitions to one not so driven and overleveraged by credit debt. The way I see it, we are presently in some "horse lattitudes" and I can't discern the origin of the next gust. The flag on the mast is completely limp.



I know you scan a lot of financial sources, so your barometer is finely tuned!
 
6/12 LHE at Hustler.

15/30 LHE and 20/40 E/O at Hollywood Park.

8/16 LHE at Hawaiian Gardens.



My ROI is truely sickening since I "unretired". These people have no idea what they are doing and are literally alergic to money.
 
QHSurfer,



Sounds like you are short on cash and worried about your income. Selling now will give you the strongest cash position, and you can have all the money to play, invest, and speculate. Most likely, you will find a similar property with a nice discount in a year or two.
 
If you really think real estate will decline or stay flat for the next five years, feel free to sell your house.

If you're insecure about your finances, borrow 100k or 200k at a rate lower than 5%. It will give you a decent cash cushion.



We're going through some hard economic times right now. It's a very good idea to have 6-12 months living expenses in an asset that is more liquid than real estate.

I think it's called diversification.



I know a family who sold their home for a pretty significant profit in 2006. They were thinking of buying another home, but then both parents became unemployed.

Although they are upset about their employment situation, they don't feel the "hardship" because they have so much cash.
 
I don know how much good this will do QH, cuz it might just irritate him more than anything else, but here goes.



My guess is the <em>"100% paid off"</em> is more accurately 100% paid for.

My guess is that it would be unseemly to sell the property because the person who paid for the property would be pissed.

A person who invests with borrowed money on a depreciating asset is not the same person who pays off or pays for re with cash.

The respondents to the original and subsequent posts have, in various manners, expressed the opinion that investing with borrowed money, leverage, is not a wise on a depreciating asset. QH, although temporarily acknowedging this, later kept changing the scenario to more accurately describe how the borrwed money might be invested. What QH is failing to undestand is that it is way less important how the money is invested than it is how the original capital is obtained.

QH - My advice is: instead of coming up with get rich quick schemes, listen to and follow the example of the person who paid for the property. His or her example is way more valuable than doubling in 2009.
 
I was thinking a little bit more about Surfer's situation. Obviously for Surfer to sell the home would be the best scenario to truly lock in the equity. I guess we are debating the second best case scenario if Surfer did not want to sell his home for personal and emotional reasons and he has little cash saved outside of his home. If Surfer, takes out $200,000 loan against the house and puts the entire amount into a money market fund that pays 4% rate that i have seen lately, he has the security of knowing that $200,000 cash is removed from the house. At 4.75 30 year fixed his monthly mortgage payment would be $1056, which would be easily affordable for some one making the average income living in Irvine.



Now, I believe that Awgee and Irvine Renter said in the past that mortgage rates are almost certainly going to reach 9 - 12% in the near future. If this is the case wouldn't money market fund rates also pay 8 - 10%? I believe during the last hyper-inflation in the late 70's you can put your money in a money market fund get a return of 18%. If we go through hyper-inflation, which i think is more likely, you are golden as money market rates will pay 10% in this situation and borrowed at 4.75%. If we go through deflation, and money market rate continues to stay under 0-2% for the next couple of years, you can just pay off the entire $200,000 that you borrowed against your house, with very little loss. I agree, it is a bit crazy to put the entire $200,000 into gold, which i don't consider safe at all. If i were to do something like this, I would put the entire loan in a money market fund.



There is one thing i know for sure. The only way you get to borrow money at these incredible low rates, is against your real estate that you own. If you are renter and you don't own any real estate, you cannot goto to the bank to borrow $200,000 at 30 year fixed for 4.75%. If I do not own any real estate and goto the bank and ask them to borrow $200,000 fixed at 4.75% to fund my internet start up business with a stellar business plan, they will surely laugh at me and show me the door.



There is definitely some truth what Graph said about the Super Rich. They know the secret to leverage the debt and make more money than their borrowing cost.



Heck, if mortgage rates drop to 3.5% first quarter next year... and my property doesn't sell at the price of my liking, I may do this myself.
 
If you have a sound investment opportunity elsewhere that will earn you more than the 4-5% opportunity cost (interest), take as much of it out as you want.



A 100% owned home is a good amount of *wealth*. But if you want the opportunity to generate *cash flow* to convert into more *wealth*, I'd say GO FOR IT!!!!



Some might say theres NOTHING to invest your money in, but I say it takes more time to find.



Others might say you'll lose money, but I say to diversify your portfolio into low, medium, and high risk positions.



You can probably use some of the equity at real estate fire sales (auctions).
 
LOL, I just stumbled upon this thread. QH, I would take all the money out and borrow as much as I can from the bank on top of it. Clean out your savings and cash advance your credit cards too. Then open a brokerage account and apply for 4X margin. After that I would invest it into 10x ultra etfs.



Good luck.
 
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