Any opinon on the mortgage brokers
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[quote=Biasedrecruiter]
Joe; you make some good points but do you ALWAYS have to be so rude?
Are you in sales?
[/quote]I am ALWAYS rude? Or do I just call 'em like I see 'em?
I suppose I just get a little tired of some of the nonsense certain folks try to pass off as sound advice on this board.
Why do you ask if I'm in sales? Do you figure I must be in management since I'm so 'rude'?
[quote=htowntiger]
The money in the account earns 0% rate of return. What planet are you from?!! If a house is worth $100,000 at the beginning of the loan, and is sold for $175,000 ten years later, how on earth can you say there is a 0% return?!!
So you made $75,000, what you fail to understand is that you will make that same $75,000 if your house is fully mortgaged. The money invested in the home is not making any money. The home has appreciated in price, the mortgage has no effect on that.
[/quote]That all sounds great on the 'surface'. However, you are failing to account for the ongoing cost of capital over the years where you pay interest but don't build equity.
Too, if real estate values were to decline markedly, the I/O "buyer" will end up with negative equity, while at least someone making payments on a traditional amortizing mortgage stands a chance of having equity.
[quote=htowntiger]
The money in the account earns 0% rate of return. What planet are you from?!! If a house is worth $100,000 at the beginning of the loan, and is sold for $175,000 ten years later, how on earth can you say there is a 0% return?!!
So you made $75,000, what you fail to understand is that you will make that same $75,000 if your house is fully mortgaged. The money invested in the home is not making any money. The home has appreciated in price, the mortgage has no effect on that.[/quote]
No, you WON'T make the same amount of money if your house is fully mortgaged. The additional interest you will pay for that full mortgage will eat into your profits over the years. What the mortgage is "making" is the interest rate that it is costing you, less any potential tax benefit. You may get a deduction if you can itemize, but it's a deduction...not a credit, so it's never dollar for dollar.
If you're advocating that clients keep their homes fully mortgaged (leveraged), I believe you are traveling down a dangerous path.
[quote=Indyone][quote=htowntiger]
The money in the account earns 0% rate of return. What planet are you from?!! If a house is worth $100,000 at the beginning of the loan, and is sold for $175,000 ten years later, how on earth can you say there is a 0% return?!!
So you made $75,000, what you fail to understand is that you will make that same $75,000 if your house is fully mortgaged. The money invested in the home is not making any money. The home has appreciated in price, the mortgage has no effect on that.[/quote]
No, you WON'T make the same amount of money if your house is fully mortgaged. The additional interest you will pay for that full mortgage will eat into your profits over the years. What the mortgage is "making" is the interest rate that it is costing you, less any potential tax benefit. You may get a deduction if you can itemize, but it's a deduction...not a credit, so it's never dollar for dollar.
If you're advocating that clients keep their homes fully mortgaged (leveraged), I believe you are traveling down a dangerous path.
[/quote]Exactly my point Indy. At best their arguments are seriously flawed. At worst this could amount to financial malpractice.
However, I rather doubt they care, as long as they get to collect the commish paid when the client invests in their 'conservative side fund'. Just my guess.....
Taking out inflation, houses do get about a 0% increase in value, whereas bonds average 5% and stocks average 7+% (all accounting for inflation.) Read Rich Dad, or just consider for yourself, a house you're living in is being consumed, and if you're not leveraged in it, you've got a lot of lost opportunity cost.
Ace
[quote=Ace Planner]Taking out inflation, houses do get about a 0% increase in value, whereas bonds average 5% and stocks average 7+% (all accounting for inflation.) Read Rich Dad, or just consider for yourself, a house you’re living in is being consumed, and if you’re not leveraged in it, you’ve got a lot of lost opportunity cost.
Ace[/quote]
0% assumes no rental income, which is true in many cases, but not factual for investment properties. If 0% were true, you'd be seeing 3-4% annual returns on REITS.
Borrowing 80% of the FMV at purchase is a lot different than what I see advocated here. I'm not Dave Ramsey...not all leverage is evil. I just see abuse here. 100% leverage can be a dangerous thing...particularly when a market is overheated.
Bonds average 5% return in excess of inflation?????
What planet do you live on?!?
I am not reccomending that people have no equity in a home, I just think people should think twice before they get in such a hurry to pay off their house.
[quote=htowntiger]
I am not reccomending that people have no equity in a home, I just think people should think twice before they get in such a hurry to pay off their house.
[/quote]We’re not talking about rushing to pay off our homes dude…these rocket scientists are suggesting we’re foolish to lock in historically low rates in a 30 yr fixed mortage when instead we can let our cost of capital float upward constantly for the last 2 years, build NO equity in the home, and then invest the extra cash flow in their high-comission “conservative side fund” (i.e. whole life insurance).
C’mon Joe, guys like that don’t deal with whole life and guarantees. They are much more likely to present an Equity Indexed Annuity, or better yet, a “Super Roth” VUL as an outstanding sidefund alternative–the next two product offerings that will give our industry a black eye(s), and test the mettle of the sellling broker’s E&O insurance.
[quote=Soothsayer]C’mon Joe, guys like that don’t deal with whole life and guarantees. They are much more likely to present an Equity Indexed Annuity, or better yet, a “Super Roth” VUL as an outstanding sidefund alternative–the next two product offerings that will give our industry a black eye(s), and test the mettle of the sellling broker’s E&O insurance. [/quote]
Exactly!
Just out of curiosity. Anybody out there try to prospect mortgage brokers for either clients, or a referral base?
[quote=younggunz]Just out of curiosity. Anybody out there try to prospect mortgage brokers for either clients, or a referral base? [/quote]
People taking out gigantic mortgages at the top of a real estate cycle wouldn't make good clients.
[quote=younggunz]Just out of curiosity. Anybody out there try to prospect mortgage brokers for either clients, or a referral base?
[/quote]
In my first hand experience, mortgage brokers will tell you a sweet tale about how they want to ‘help you grow your business’, gobble up all the referrals you give them and never return the favor…because they mostly deal with folks who are refinancing because they are strapped for cash, not someone who would make a good client.
Go back and re-read this thread. Price of Accredited Home Lenders on April 4, 2006: $51.55. Price today: $21.70.
It was most obvious. What annoys me is that the prices of various prime/alt-a/Passive RMBS! residential mortgage companies are in the toilet. Even though they are not exposed to subprime crap.
I think its healthy for the subprimers to get flushed away. NFI
especially was a disaster waiting to happen, and if you knew exactly
what an “I/O Strip” aka NIM aka Excess Cash flow security was, you
would run away screaming from NFI.
http://www.nfi-info.net