patrick.net

I have a modest house--far lower than the median for my city--and a very nice older Porsche out front. It's my hobby and keeping it in top shape is a labor of love. I paid cash for it, and have a terrific LTV on my modest house, which was well within my income restrictions when I bought it almost ten years ago. (You should have seen a real estate agent I talked to last week glance around my house when he heard my income. He said I could easily move into something twice as nice--well, twice as expensive anyway.)

But my current relatively small and older house gets the job done just fine, and the Porsche (also relatively small and older) is a somewhat irrational hobby.

Just saying, don't judge people's financial decisions by nice-car, crummy house metrics. You have no idea what the numbers behind it are.

HELOC's given between 2003-2006 are mind blowing cheap. I know, cause I have two lines prime - 1% and Prime -1.25%. Effectively, prime rate is around 3% cost me less than 2% and 1.75% and is subject to deduction against passive rental income.

0% car financing is not really 0% financing, they are subsidized into the cost of the vehicle. I negotiate the cost of the vehicle stripping out the portion of the 0% financing and pay them with HELOC subsequently.

I currently max out my HELOC because in all honesty they are tremendous deals. At the same time, I max them out and put them into equities, not luxory.

We just posted the same article a few minutes apart! :-) In any case, yours is the original NYTimes article with better pictures so I'm going to delete mine.

I find it crazy that the default rates are so high that collection agencies won't even buy them for more than $500. These are loans that are probably $100K or higher and people won't pay more than 5 cents on the dollar.

I find it infuriating that the people who had no responsibility made out like bandits and got free money while the entire country has to suffer a great recession just to pay for their excesses.

@mersenne - I think I would recongize the 'older' Porsche for what it is. I know a lot of folks who have labor of love cars (and have myself been known to do the same). I am referring to the obvious, just drove it off the lot, clearly don't have the 'usual' means to pay luxury purchase using funny money. I don't really care except for the fraud involved. I guess HELOCs have no strings as to what you can spend them on - but when *I* had one it was to restore my 100 year old house. I put every penny into the house, not toys and lifestyle.

@ SF ace - your post indicates you actually pay yours. I have no complaints. I.e. you didn't buy a fancy new toy car and then default on your HELOC. I am not against borrowing money cheap.

@lyoungblood - I suspect most didn't really plan to default, but common sense would tell anyone with a brain that house 'values' do not go up 10-20% a year forever. That's however what they told themselves, at least.

Banks should not (and regulations should not) allow people to use "Home Equity Lines of Credit" for anything but "home improvement". I.e. not for cars, TVs, vacations, etc. Just an opinion.