Posted on 09/22/2006 8:47:25 PM PDT by churchillbuff
This is a good point. The message set by government today - and surprisingly, it's a message the the GOP Congress hasn't withdrawn -- is that you pay for what your appetite wants, not what your wallet can afford. The whole notion of self-restraint and self-discipline has been abandoned by the federal government, and that example has an effect on public attitudes and habits, I'm sure.
Meanwhile, state governments, with lotteries and heavy ad campaigns, teach people to blow their hard-earned money on impossible fantasies.
Sure. LIBOR is actually a acronym for London Interbank Offered Rate. As credit markets have evolved to being international in nature the LIBOR has become the primary index. Other indexes are short term Treasuries based or COFI (cost of funds index) or COSI (actually an internal institution index).
LIBOR is a rate established daily, so it's the shortest term index available. It's a volatile rate compared to other indices; it changes fast, both up and down. It reflects more world market rates than US rates. I would guess 90% of prime ARMS (good credit) are LIBOR.
Prime is a rate internal to the US. If you look up a definition it will say it's the rate that banks give their best customers. This is no longer true; businesses, for example, can get a much better rate. Prime is now primarily a consumer rate, primarily used for credit cards and lines of credit, especially home equity lines of credit (HELOC).
Prime is based upon the discount rate, the one rate the Fed controls. That's the rate the Fed charges for overnight loans to banks, used primarily for meeting reserve requirements. For at least the past 10 years the prime has been at 3% over the discount rate. If the Fed moves up 1/4 point, the prime moves up 1/4 point.
ARMs and HELOCs are financial tools, much like a hammer and a saw are construction tools. They can be very useful and beneficial or incredibly destructive. They aren't inherently bad or evil.
If you have an ARM based upon LIBOR you are in good company. If your HELOC is Prime based you are in good company.
That's probably not the rate you're paying, though...variable rate loans, which both ARMs and HELOCs are, have two components, the index (which is Prime and LIBOR) and a margin, which is added on to the index. A typical ARM margin would be 2.25%, so if LIBOR is at 3% your fully indexed rate is 5.25%. Note that fully indexed rate can be higher or lower than your start rate. If you margin on your ARM is higher than 2.25%-2.5%, then it's entirely possible you got gouged on your rate. On HELOCs you should be paying Prime flat, perhaps .25% above or below.
I hope this answered your question.
I thought it was our ill treatment of Castro & Chavez but who am I to say .......
Regardless of whether you have money in it or not, you are going to be held accountable by your creditors. Hence if you buy a house and it's value declines you have lost money whether you have equity or not.
That was exactly my point. When you lose money in the stock market it may suck, but at least you don't end up in debt and it's not particularly unusual for a stock to lose 25% of it's value. It happens and you try to pick a better stock next time. If housing prices do the same thing however it's a calamity.
Talk about your "vain attempts:" projecting your worship of your shiny metal god onto my behavior is mostly sad, but entirely funny.
Perform your due diligence before you sign on the dotted line.
If the brokers are breaking the law, prosecute them. If not, you've got to cover your own ass because nobody else is going to do it for you.
Exactly. The whole thing is castles built on air. How on earth do people find a real estate market only 11% of the population can afford to be a good investment?
If it was just fools running rampant, let them eat cake. The real problem is that when the whole house of cards inevitably comes down, those who made a killing making dishonest loans will turn around to the government (us) with their hands out. Our taxes will go up.
That is what has unhinged these real estate markets: the near certainty that the lenders will never be allowed to fail.
And then all the legitimate uses for interest only ARMs (typically renovators) will be thrown out. We will all be saddled with strict federally-mandated guidelines on one side and even more buy-a-house welfare on the other.
Dear John: Who twisted your arm and made you sign those documents? Who made you accept the deal? Did you actually think interest rates would always stay that low, for the next 30 years till you paid your house off? Dear John: Shut up. You signed the deal. Live with it. Just as with car salesmen, you could have always walked away from the deal. Your fault. Accept the responsibility for it.
"Socialism does that. Socialist places tend to be nice places to live - for the rich and the poor, but not for the middle class."
Very well said!
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
Son is buying a home in SouthLake Texas, the price seems ok but high taxes.
Be careful you don't get what you pray for.
Health care costs so much for many reasons, the top three being that those who get it via their employment, overuse and misuse it, modern medicine ( drugs, machines, testing ) costs a LOT of money today, and law suits.
No, we aren't "turning into Mexico" and such hyperbole is of no help whatsoever.
Always was, always will be.
ROTFLOL......you have NO idea what you're talking about.
We've done so for the second apartment and the house we now live in. And when we move, we'll do it again.
If someone bought a house for $15,000 50+ years ago and that was also beyond their means, as people buying houses beyond their means today, there was also no way for them to pay off the mortgage.
Forecloses, BTW, were rampant, in the mid to late 19th century, in the mid and far west.
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