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There's Equity to be Tapped into in that thar Piggy Bank

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moyomongoose

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Ever since Everette and Samantha Raccoon got their home paid off a couple a years ago, they thought that home would make a dandy piggy bank to use for equity to get loans to buy nice things...a "financing tool".
They wanted a brand new high price car...Simple...Take out a home equity loan to buy it.
A 32 foot boat would be nice...Nothing a 2nd mortgage can't take care of.
And a his and hers ski-doos...Just use that home as a piggy bank.

Only problem is...All it took was only one of those loans to go default, and now they are loosing their home they've been using as a credit piggy bank.
Ironically, they had their home paid off free and clear at one time.

Keywords

male 1,194,935, female 1,085,213, raccoon 36,731, piggy bank 11, mortgage 1, loan default 1, forclosure notice 1

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Type: Picture/Pinup

Published: 2 years, 9 months ago

Rating: General

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Kittzy

2 years, 9 months ago

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The first rule of home ownership is never get any type of load for stuff you don't actually need, or else you'll end up like the poor piggy bank

moyomongoose

2 years, 9 months ago

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@ Kittzy

So true.

My home has been paid off for the past 10 years, and I'm keeping it that way.
When I swore I'd never risk it by taking out a loan against it, I meant it..

KaoNocturatzu

2 years, 9 months ago

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I just purchased a home myself and I plan for this to be the last debt I have to pay off over time in my life too. As a rule I never buy anything I can't pay off on my own in reasonable time unless it's a major purchase like a home where saving up the normal way is unfeasible. Still it's good to have back up plans for survival until then (I just kept living in apartments with the lowest rent that served my needs. I moved every year since I started working).

After all, loans and credit are the way banks make money. Sure they buy things for you now, but by the time you pay it back, you just paid $700 for a $400 bike. Gotta be smart with Credit of any kind. that's rule number 1 when it comes to finance (and the reason why every lottery winner in history has ended up losing more than their life shortly after winning).

moyomongoose

2 years, 9 months ago

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@ KaoNocturatzu

Everyone complains about inflation...Loan interest will eat up an income faster than inflation will.

At at the beginning of a loan, 99% of a payment goes toward interest.

KaoNocturatzu

2 years, 9 months ago

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Edited 2 years, 9 months ago by Owner

@ moyomongoose

Yeah, I had to do a lot of negotiations and talking to my parents and experts to figure out the best way to minimize interest. Here in the US though you can get tax write offs on the interest you pay for a house loan, so you'll see some of that money return to you when you do your taxes, but since you have to pay extra taxes on the house itself based on its value, a lot of that money will generally go back towards paying for the house anyway. At least it won't be out of your pocket. And yes accounting for inflation is important before taking out a massive loan. It's a difficult decision to make, but interest is what ends up bankrupting people and that's always the fault of those who took out the loan without doing research.

Unfortunately, I find that most people who complain about these things tend to be people who read about these problems but haven't actually had to resolve them (or they ignored warnings from those who are well to do by taking advice from people who really don't know what they're talking about). Economics is predictable if you pay attention to the patterns that affect it and try to stay in demand (e,g, if IT is the hot job of the week or people NEED landscapers and general contractors, that's the skill that will pay well. We don't need 500 restaurant owners overcharging us for fake vegan food, nor do we need every homebodied game developer to get the world to buy their game fantasy), but no one can afford to be foolish and act like there's shortcuts to getting ahead in life. Regardless of education, regardless of skill set, the adage, "If you want something, you have to be willing to work for it" still applies to this day. As I said, there's never been a successful lottery winner.

moyomongoose

2 years, 9 months ago

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Edited 2 years, 9 months ago by Owner

@ moyomongoose

However, if you are able to pay above the required monthly payment, 100% of that extra amount goes toward the principal.
Example being, monthly payments are $300. Of the very first payment, $297 goes toward interest, and $3 goes toward principal (which changes around during the life of the loan). If you decide to pay $400 extra in addition to that first payment making it $700, $297 still goes for interest but $403 goes toward principal...And paying that extra amount reduces what will go toward interest on the following payments due to the loan amount being paid down sooner.

Still...The biggest saving is if you never need to borrow to begin with.

KaoNocturatzu

2 years, 9 months ago

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@ moyomongoose

Yep! My parents told me the same thing, putting $100 extra a month in principle will pay off the loan a lot faster. At my rate, I would be paying about $200,000 extra if I paid my mortgage off at the minimum every month. This is something I learned very quickly when paying off my student loans. In fact, I would just pick a round number and drop $1000 or so on the principle and if it was low enough, I'd clean it up entirely. Interest is how every bank and loan shark makes their money (unless they sell the loan but then the new debt collector is banking on the interest) and it's a great way to make easy money. Even normies like you and me can do it with enough capital to invest in lending money (course it's a risky venture cause you have to trust the person you're lending to will pay you back, which most people going for small time lenders won't). But you hit the nail on the head. Just be smart, pay your debts at a reasonable rate, and don't bite off more than you can chew, and you'll be fine. Everyone can do that cause it takes a VERY long time to apply for a home loan application or any kind of major loan and if you don't have the income to reasonably afford it, best to look for a better job first, or look for a cheaper home. Not everyone needs a McMansion. In fact 99% of people don't.

TheGroundedAviator

2 years, 9 months ago

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Nothing new.

moyomongoose

2 years, 9 months ago

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@ TheGroundedAviator

I've been hearing that a lot of people took mortgages on their homes to invest in things like the stock market and Kripto currency, and now those things are failing.

TheGroundedAviator

2 years, 9 months ago

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@ moyomongoose

Yeah, same.

GreenFur

2 years, 9 months ago

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@ moyomongoose

Or worse yet, folks fall onto the "Refinance for a lower rate" trap!
Three to five years down the line, some guys calls you up and says " hey, you seem to have established a great track record of paying back your loan, we want to offer you a great deal on refinancing that loan for a lower interest rate!" Sounds great, right? NOPE!
Refinancing puts you back at square one again! All those payments you made over the last three to five years are wiped out and you have a brand new $100,000 loan to pay off again! And they do this every three to five years! Which is why a lot of folks NEVER GET OUT OF DEBT! And end up losing their houses when the property values drop and they have more debt than the house is actually worth. A.K.A an underwater mortgage.

I remember my folks bought a house in the early 1970's for $14,000 on one acre. They Got a short term 60 month loan and played it off in three years. Interest rates back then were brutal! (25% apr) but they did it. My folks taught me to always pay CASH it's 100% down and NO monthly payments! Besides, you can usually get a great discount for cash up front.
The important thing is using credit wisely, make a small to modest purchase, pay it off in 60 days or less, I usually pay back $10-$20 over, posting a net positive balance on my account ( meaning they can't close the account for lack of activity) and will have to post a positive rating to the national credit reporting agencies!
Old school, but something to think about.
--GF

moyomongoose

2 years, 9 months ago

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@ GreenFur

Those finance companies and banks always got surprises up their sleeves.

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