Posted on 08/21/2007 8:18:53 AM PDT by Hydroshock
Two years ago, my wife and I sat at a long conference table in a mortgage-title office in Bethesda. Sitting next to us: our real estate agent, who drew up our bid on a townhouse in Germantown two days after showing it to us. We didn't get an inspection, and I don't recall going back for a second look. We had to act fast or someone else would get it.
Our bid won the house -- our very own first home -- and now we had to close the deal. The owners sat across the table. They seemed more nervous than we did, perhaps fearing we would have second thoughts -- about our risky interest-only mortgage, about seeing them walk away with a $120,000 profit, about buying a house just as "bubble" was entering the regional lexicon.
They signed. We signed. Price tag: $459,275.
And then, as the saying sort of goes, the stuff hit the fan. The sizzling home market almost immediately began to cool off, which my wife and I sort of ignored. Interest rates started to creep up, and we sort of blew that off, too. We have time. This too shall pass. No worries. Life is good! We bought a flat-panel television, took a nice vacation, bought a dog, hired him a daily dog-walker, and then we got pregnant. We have time. This too shall pass.
(Excerpt) Read more at washingtonpost.com ...
Wow, just the kind of people who are so well hated around here. How does the Post find them?
That was a long article that could have been shortened to one sentence: “We are greedy and bad with money.” Surely the blame lies elsewhere though. /s
My wife and I were faced with a similar situation a couple years ago. We walked. It took little thought and no effort.
Geez! How does this guy think he’s getting anywhere by having an interest only loan?
And who pays for someone to walk their dog? Why have a dog if you can’t even take it for a walk?
“And who pays for someone to walk their dog?”
It was probably a trend in their McNeighborhood.
Katie Couric is on the national news?
Yes. The mortgage was a mistake. So too were the flat-panel television, the nice vacation, dog, daily dog-walker, and the pregnancy. A fool and his money...
that must be a typo. If she were on the national news, surely someone would have seen it.
Uncle Sam? Can I borrow some money? We’re a little short this month.
The Money for his Daily Dog-walker could have gone to the PRINCIPAL on his loan, something he’s now most likely UPSIDE-DOWN on!
Since when did idiot financial planning on YOUR PART, become a crisis on MY PART??
What he’s telling us is he FAILED to do his due dilligence, and now he wants to blame someone else (Real Estate Agent,, Mortgage Broker) for it???
Not necessarily. The writer and his wife make a lot of money and the mortgage doesn’t reset until 2010.
An interesting point here. Many people may just walk away from their homes and figure it was just paying rent. The problem with this is the IRS will send you a tax bill. The bank will send you a 1099 and a copy goes to the IRS. If the value of the house is $400,000, you get a tax bill on that amount. Be careful if you decide to walk away from your home.
Apparently this guys job is to screw up his life then write about it in a national newspaper. No wonder he is so clueless about his money.
Why do people continually believe that they “need” very nice things that they cannot afford?
The definition of “need” sure has changed in the last 30 years. I’m convinced that if real incomes of every American suddenly quadrupled in a year with 0% inflation, there would be even more people getting divorced over money problems and going bankrupt than there are now. People would just “need” to spend 4 times more than they are now.
By then they will be many thousand of dollars upside dwon on their loan. Can’t refi that way.
Was it the dog or the dog-walker that got michael and his wife pregnant? It must be a comfort to his wife that he will really share the labor pains. What a putz.
The borrower is servant to the lender.
These folks are off their rocker, anyone who is willing to hand you money with a mere signature in return is expecting to make a nice chunk of change off of that signature..
On the bright side though, flat panel TV’s are really cheap on the used market...LOL!
“Interest rates started to creep up...”
It wasn’t the interest only loan, it was the adjustable mortgage rate that is killing them.
If they got a fixed interest only loan they’d be sitting pretty.
Of course they should save and prepare. The main reason IMHO to do an interest-only loan is to invest the difference and build wealth - that should go without saying in this case.
They have three years. A problem could occur, but this sounds more like media hype than anything - it will be 2010 before they even have to start worrying. I’m not sure what their income is, but they have a lot of time to save up a nice chunk of money by then.
Actually, investing that money would be better than paying principal over the long-term. Paying principal on a 30 year amortized mortgage doesn’t make a hill of beans difference in a soft market - you still only pay a few hundred to principal anyway. Why NOT do interest only?
The problem is that they have no reserves, no rainy-day fund - and that would have still been true with a 30 year fixed mortgage.
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