Oh man

[c3pomeara]

This if for those of you in California, and those of you that are Californian at heart... well, not really.

I'm in love with http://www.irvinehousingblog.com/ . It's like the worst real estate porn ever. HELOC abuse (Home Equity Loan, something something) after HELOC abuse with

Comments

[handstil]

HAHAHA, awesome.
My ex and his wife just bought a house that was purchased by it's former tenants for 365k, for 210k. They said it's the saddest thing ever to tour peoples foreclosed homes with them sitting there watching tv while you talk about their 30k pool, etc.
Ugh.

[c3pomeara]

I read these accounts of people that took 400K out of their houses, after only putting 3% down to begin with and wonder WHERE DID IT GO???

Then I remember it went into everything, and this is why California is so fiscally fucked.

[nongamer]

i got a $60,000 heloc (home equity line of credit) when i only had maybe $7,000 of my loan paid off. in retrospect it was completely ridiculous because it acts just like a credit card but the interest is something right around the prime rate AND its tax deductible.

fortunately i sold my condo last summer so i was able to pay it off and now i don't expect to have any equity to borrow against on the new house for like 20 years.

[c3pomeara]

So, if it is like a credit card but with prime rate interest and a tax deduction (what is tax deductible about it?), it makes more sense.

I guess I don't understand borrowing against equity at all. I think this is because I spent my whole 20s making no money and not spending any in a (successful!) attempt to stay out of student loan debt. To me, a mortgage looks like a way to pay off a big investment over time, and at around the time you retire: no more loan!

[nongamer]

It's tax deductible because it's considered mortgage interest. Up to a certain amount it's deductible regardless of how you use the money, but beyond that limit you have to use it for home improvements.

My HELOC was Prime + 1/2, but credit unions were offering Prime - 1/2. So for the last few years the interest was hovering around 6%, which was more like 4% with the tax deduction.

[varanus]

I was reading somewhere (bad academic! no citation!) that this whole mess is going to make those of us who weren't part of it/just starting out so gun-shy that the real economy will take longer to recover than it did from the Great Depression. Makes sense to me, since my current plans are to sock all of my money in a firesafe buried in the yard and never spend a dime til I retire. Just like grandma used to do.

[c3pomeara]

The articles that say this seem to be basing their information primarily on the "lost decade" in Japan. I guess that assumes that Americans will follow the spending habits of the Japanese... who knows though?