“Cash Out Refinance to Invest the Money in the Stock Market”

Joe,

I think that what we lack in our country is education on the basics of investment, and checking what someone says with a second opinion.  Nothing wrong with investing in equities if you know what you are doing.  The word "KNOW"is important.  A

Joe, Excellent point to your post. Taking money or equity out of your home to invest in the stock market is never a good move at all. Stock market is a big gamble these days to begin with and why take out home equity! 

Joe - the advisers I know would never advocate such a thing.  Those who would should lose their license.

Joe, you do know the answer. It's never a good idea to cash out equity in a home and invest in stock ... to suggest a senior citizen do it ... double shameful.

Joe, some are more interested in the commission check than the interest of those who ther are representing.  Some of these people have actually rationalized to themselves that they are giving good advice.  Funny though very few of them have actually taken their own money invested it in the same manor they are advising others too.

Hi Joe, I think that we all know the answer to the "Why" that you ask.  Makes you wonder it they feel guilty about their actions.

 

Joe, This is not a wealthy woman and for someone to give her advice like that is just wrong. The stock market is a lot like gambling, only do it if you have plenty in other places and can afford to lose it if thing don't go your way.

Joe-Obviously the recommendation for her to invest in the market came at the wrong time and wrong time in her life too bad.

It's unfortunate that there are professionals in our industry that provide self-serving counsel.  The magnitude of the impact we can have (Realtors and Lenders) is far too significant to take this lightly.  I'm in this for the long haul and there's never a wrong time to do the right thing.  Thanks for sharing the story Joe.

They are not told about the risk factor. I saw the same type of behavior with california investors back in the bubble. They would refi their homes every year to pull out "equity" to buy more often with negative am loans. The "investment gurus" would always use the term no brainer. Porblem was the one doing the refi and investing were the no brainers becasue they were taking from a low risk investment, their home, and putting into a high risk investment. 

Simply predators.  I remember during the uncontrollable optimism of the real estate craze in 2005-2008 novice investors were cashing out their 401ks and paying big penalties and taxes to access capital to buy more property which inevitably crashed

That's shameless.

Sales people like that are justification for yet more scrutiny of the financial industry.  Though, you also need consumers who are able to think and make good decisions.

Joe - I hope that you are able to persude this lady not to take the course of action.

Joe Petrowsky the root of the financial fiasco was - homes were ATM machines when the prices were going up crazily! And people go with the flow! What can we do?

I had a friend that tried to refinance recently and didn't get the full money, but she got her credit cards paid and a student loan paid as well.

For anyone to either take their equity and invest in today's crooked manipulated stock market must be a good mark to purchase the Brooklyn bridge. So many people left their stocks ride and Re financed their homes for lower interest some fixed some adjustable and those many either broke even or lost money by the time they paid the points. Most banks and Wall Street companies are running on over leveraged derivatives and when the new asset backed system comes on line and dump the fiat dollars and then the CDS and derivatives are called the market will tumble. The bubble is about to implode again, all the regulatory instruments like glass segal act removed the players can operate the market to benefit their pocket books will loose big time. You might as well refinance and put the money on the craps table.

Good morning Joe,

I'm so glad this post was featured! I always get upset when I hear stories like this. So many people have used their homes as a constant ATM machine. I like Praful Thakkar feel this has been the root of the problem. Prices go up ridiculously and people cash money out...only problem.... when prices go down..they are left holding the bag.

What a shame that homeowners actually go along with these ideas.  Using home equity to dabble in the stock market is NOT a smart move.

As one ages there should be more reason to err on the side of caution. But when there is a buck to be made the advice will be contrary!

Joe Petrowsky - I have seen so many friends that have lost their shirts over the last few years because they took out the equity on their homes. Each has regretted it because that money is now long gone and they are stuck with a high mortgage. Especially in your senior years, you may never be able to live mortgage free. How sad.