Thursday, September 11, 2014

Crazy finance ideas

We've been plugging away at paying our mortgage for 2 1/2 years now. Recently our mortgage company has started sending us advertisements that we should take advantage of the low interest rates and the equity of our home. Never mind that we still have tons of money owed.

The advertisement says we could receive $50,000 to use for
*long overdue home improvements
*save towards a college fund
*buy a new car or truck
*consolidate all of our current debt.

The advertisement makes very clear that there will be closing costs but they would help us with the whole process. Notice that it is worded that we would receive $, not that we would be in debt that many more $.

All this seems absolutely crazy to me. We are making headway paying off our mortgage and we would go backwards another $50,000? I could understand if you really needed to make home improvements and had no other way. But our house was brand new when we moved in, we shouldn't need to do any major home improvements already. And why would I jeopardize the place that I live in order to have a new car or truck? Thankfully we don't have debt besides our mortgage so that one is out.

But what seems absolutely the worst for me is their suggestion to refinance to save towards college. Maybe if you needed to pay for your own college now, but to save for the future? Be more in debt so that you have dollars saved for college? And if you are doing this for your children that is even more crazy.

You hear stories on the news all the time that people just owed a few thousand more and lost their job or couldn't pay their taxes and lose their house. How would people feel if that happened after they did an offer like this years ago?

Add in that our taxes just increased which means our mortgage payment just went up. We are very close to having $10,000 of the principal that we borrowed paid off. I will celebrate when we get that far.

I've never taken any financial courses or read very many books on finances, but all these sorts of advertisements end up in our shredder.

1 comment:

Susan said...

A budget/finance book from the early 80's advocated a lot of the things that Dave Ramsey is apparently talking about today. (I say "apparently" because I've never read any of his stuff. I've just heard about him from others.) The author of that 30-yr-old book said that the day would come when reverse mortgages would be common. He predicted the more-obvious situation where elderly folks draw-down the equity in their homes to get cash for living expenses. But it's gone even further with how common home-equity loans are. And I keep thinking of how this fellow knew it was coming. When I initially read that, it sounded nutsy. People want to pay off their loans; people want to get out of debt. Who would borrow against the value of their house?! Well, a lot of people will NOW.