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Don't use your home like an ATM.

By Wayne B. Pruner

Real Estate Agent with Oregon First

April 06, 2007 06:27 AM

Don't use your home like an ATM.

By Wayne B. Pruner

http://www.yourhomeinportlandoregon.com/

Wayne's Portland Oregon area Real Estate blog

www.activerain.com/waynepruner

I have noticed a trend here in Portland Oregon, however, I suspect that is happening elsewhere also. People are refinancing the equity in their homes and spending it on every day living expenses. When the local real estate market takes a big jump, they refinance. I know of people who have done this two or three times. This shortsightedness can have long-term effects. I believe that one of your paramount financial goals is to have no personal mortgage payments when you retire on a fixed income. At retirement, your quality of life will be diminished if you have to take mortgage payments and everyday living expenses from a fixed income.

I know many people over the age of 50 who are getting 30 year mortgages. How comfortable are you going to be, if you have a house payment of $2500.00, or more, plus property taxes, when you are 75 years old? People are going to be into debt well into their old age.

The only valid reason to tap into your equity is to remodel your house, because you are going to live there for a long time and the family needs more space. If you do refinance to pay off high interest purchases and credit card bills, you had better change your spending habits so you don't get in that situation again.

Credit is very easy to get nowadays. People need to exercise the fiscal responsibility to manage credit properly.

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George W. Miller

Keller Williams Realty - Naugatuck, CT

Naugatuck and Beacon Falls Real Estate

Amen

Apr 06, 2007 06:52 AM

No Longer Active

Real Estate - Fallon, MT

Ain't that the truth.... It is certainly not a gratifying thought to think the conservative saver will get stuck paying for these big spenders through higher taxes or our own reduced social security checks.

Apr 06, 2007 07:19 AM

Dave Cheatham

INC Financial - Bartlett, IL

wow. not a good way of looking at things. In my thought it is good to take a loan for 90% ltv and use the money to make money. To many people I saw when working with retired folks where they had a vault that they could not open. House rich and cash poor. If done right and starting att he right time people can be able to pay for thier house if they wnated to, but not need to. It is about how do we create more wealth in a place where we can not count on the government or the big compnay anymore.

We never should have to start with.

Apr 06, 2007 08:31 AM

Chris Hendricks

Walnut Creek, CA

Different investors have different thresholds for risk. Tapping equity to invest is a strategy that involves risk-- and there are people who will accept that risk. Some will succeed and some will fail. Virtually everyone that taps equity to pay for everyday living expenses is making a short-term lifestyle decision at the expense of a longer-term lifestyle decision. Neither is necessarily right or wrong-- just different levels of risk.

Apr 06, 2007 08:39 AM

Wayne B. Pruner

Oregon First - Tigard, OR

Tigard Oregon Homes for Sale, Realtor, GRI

I new Dave was a mortgage guy before I looked at his profile. A few people can make his approach work. Most can't. I used Dave's approach to buy more property, not to buy cars or vacations. I may be somewhat of a dinosaur in that I can remember high interest rates. I also got my first house when you needed 20% down and good credit. Period. There was not as many loans as there are available now. It instilled a disciplined approach to investing with me. I like to reach out and be able to touch my investments.

Chris is right. Different people have different levels of risk.

I can elaborate on my point further. Credit is so easy to get now, that some people are just churning it over and over. They think that credit is a basic entitlement. Most people need to manage their credit better at an earlier stage in life.

Apr 06, 2007 09:07 AM

Mike Jaquish

Realty Arts - Cary, NC

919-880-2769 Cary, NC, Real Estate

Wayne,

I agree. Consuming equity to buy baubles and non-durables is really high-risk behavior.

I like equity. I like security. I can't remember the last time I thought, "Gee. I wish I had more debt."

Apr 06, 2007 12:54 PM

It does depend o the person. It is not right for everyone. Just like any other time you work with a person with their money; you must see what their temperament is like.

I am not just a Mortgage guy. I am a financial advisor. I was that before I did Mortgages.

So I think it is wise for use not to make statements that say it is wrong to use equity. It can be worng for some people.

So at times you are right and other times off a bit. at least that is my opinion.

Apr 07, 2007 05:31 AM

Don't use your home like an ATM.

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Wayne B. Pruner

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