Posted by Tom – IN on July 16, 2001 at 13:24:01:
Tim, Mark said it good. Listen to him.
125 % LTV - Posted by timW
Posted by timW on July 16, 2001 at 07:08:57:
I have a question regarding 125 % LTV? We have a lot of credit card debt? I was thinking about doing a 125 % LTV on my home? Would this be a good ideal??? Also is the 25% above the value of my home tax deductible?
Thanks
Tim
Re: 125 % LTV - Posted by KatieFL
Posted by KatieFL on July 16, 2001 at 22:02:56:
I also agree with everybody else who posted. I am an investor and an agent, and from both ways I see what happens sometimes to people who were promised to cut their debt payments by mortgage companies trying to make some money. I just sold a house as an agent, the owners of which did not plan to move for a long time and needed some debts paid. But as already was said, things change. They had to move out of state. The problem was that they owed $18K more on the house than it’s worth. First of all, you can’t sell a house if underlying mortgages are not paid off. So we went through a long battle with mortgage companies to discount the loans and take the liens off. It was either that or foreclosure. Well, they discounted by $1,000, so now these people have to pay $17K for a long time for a house that they used to live in. Not a good idea.
The problem is that you would end up paying those credit card debts for the next 30 years, whereas most likely you could pay them off a lot sooner.
Katie
Tax Deduction - Posted by TJ
Posted by TJ on July 16, 2001 at 20:15:05:
The borrowed amount above the value of your home (the 25% part) is NOT legally tax deductible.
Re: 125 % LTV - Posted by CurtNY
Posted by CurtNY on July 16, 2001 at 12:54:35:
Tim,
I agree with everyone below. The 125% can be very dangerous. Have you already cut up all your credit cards, put together a monthly budget and stuck to it? If you haven’t done these simple things, once you consolidate your credit card debt, you’re just going to rack them back up. You need to makes some lifestyle changes. You might look into a credit consolidation company. I suggest doing a search for them on the web, they can usually lower your interest rates, and get your debt paid off within 4-5 years. Make sure you use a non-profit organization, there are companies out there that will take advantage of your situation, do your homework. Best of luck to you.
CurtNY
Can you say motivated seller? - Posted by Stew(NE)
Posted by Stew(NE) on July 16, 2001 at 12:38:20:
We look for motivated seller, we don’t try to become them. Run to the bookstore and get a book called “Rich Dad, Poor Dad”.
I Agree With Mark - Posted by phil fernandez
Posted by phil fernandez on July 16, 2001 at 10:23:02:
Tim,
Don’t risk your house on a 125% LTV mortgage. It’s hard to look into the future when appreciation of property values are involved, but it might take the property 10 or 15 years to appreciate enough for you to get even with the balance on this 125% mortgage. Or worse yet, what if property values decline in your area. It’s happened before.
As Mark states, the key is to make some serious financial lifestyle changes to get your balances on your credit cards down.
Don’t do it by risking your house.
Re: 125 % LTV - Posted by Mark-NC
Posted by Mark-NC on July 16, 2001 at 07:40:49:
Tim,
Although it sounds like an easy way out and you have given yourself a justification of a tax deduction. I would not do it.
Just think about it, you are turning unsecured debt into secured debt from one of the most important assets you have. As an investor I run into many of these type of homes where the seller becomes motivated because the payments make it harder to keep up. I have seen many people get hurt doing this same thing.
At first it may not be a problem but what if something happens, say you can’t make these payments or you have to get transferred for your Job. What are you going to do? You won’t be able to sell the house because it is over leveraged. You will be stuck and in many cases it is a disaster waiting to happen.
And if you think about it you will be paying for years on items that you probably don’t even own any more. In my opinion that is one of the worst things you could do with that money especially when it is secured to your home. It’s not that you shouldn’t pay it, it’s just the fact that you need to come up with a serious plan or lifstyle change to reduce the debt.
The absolute only way I would use that money is to use it for a deal that I could make some quick cash with and pay it back off. And I would be reluctant to do that because it is too easy to make money in this business with out borrowing money.
Just my opinion.
Mark