Is Your Home An Asset or Debt Trap?

[LuxLiving]

Re: Is Your Home An Asset or Debt Trap?

cptacek, are you the one who is the mortgage holder? Will you be receiving compensation for your 1/2 when the house sells?? Will they or are they strictly a roomate w/no stake in the house itself?

If you're the roommate and the other person holds the mortgage are you protected with some type of contract for your portion or are you merely renting a room from them?

[cptacek]

Re: Is Your Home An Asset or Debt Trap?

I own the house (well, I'm the one that has the mortgage. The bank still "owns" the house). She is paying rent to me (which comes out to about half the mortgage) and she is paying for half the utilities. I have the major upkeep to worry about, keeping the roof in good shape, the grass mowed, the filters clean, etc. But, I was going to live here by myself (and did live by myself for 5 years before moving here), so having a cool roommate and getting half the mortgage and half the utilities paid by her is great, I think.

[LivingAlmostLarge]

Re: Is Your Home An Asset or Debt Trap?

Debt trap

[Ima saver]

Re: Is Your Home An Asset or Debt Trap?

My house is an asset and I am very proud of it. My husband built the house himself, plus i make no mortgage payments and pay no interest. Since my taxes are only $2300, I sure could not rent for that little per year.

[jIM_Ohio]

Re: Is Your Home An Asset or Debt Trap?

This type of loan makes every home a debt trap!! I am not a chicken little sky is falling housing bubble person, but this sort of widespread exotic mortgage product lending with no due diligence on the part of the banks to make sure the person is suitable for the product may result in serious problems for our economy in the very near future. Remember the savings and loan debacle!! The internet stock bubble!! When will we all learn just to be conservatively prosperous!!

http://www.businessweek.com/magazine...eek+exclusives

It is about leverage. A home is not an investment. But it is where most people's net worth is (because most people do not invest). So a house becomes forced savings, which should only be accessed when the asset is SOLD.

I would much prefer to own my home free and clear, When that happens by age 50, I'll have ~$2550 of free cash flow I do not have now. But owning my home free and clear is not the #1 financial goal... it may not even be in top 5.

In the meantime, I put my money to work for me. If I earn 11-15% in my 401k (which I put 10% of income to) and my HELOC is 8% (without tax deduction), it makes sense to make that HELOC payment and contribute to investments. I could lower 401k to 6% to own house sooner, but is that the BEST return?

If the HELOC is used for something consumable- bad idea
If HELOC is used to add a room to house- GREAT idea
If HELOC is used to improve house- OK idea
In my case, HELOC was part of purchase agreement for the house
If HELOC is used as emergency fund, I could see that as a good idea.
If HELOC is used to pay medical expenses, I see that as a good use of emergency fund.

Money needs to work for me so I don't have to work for money.

[loanstar]

Our parents wouldn't think of buying furniture with money borrowed against their home. So why is this form of borrowing becoming so popular? Three events have converged to create this dangerous trend.

perhaps our parents are wiser. also they were not exposed to today's preditory advertising tactics, we just have to be strong and ignore the bait!

[Caoineag]

Honestly, the reason I want a house is so that I can have the type of environment I want. So definitely not an asset, but I wouldn't categorize it as a debt trap since even with massive repairs, the house would just equal rent and you have to live somewhere.