Friday, May 22, 2009

Dr. Strangedebt - How I Learned to Stop Worrying and Love My HELOC



This post is brought to you by the Joneses.

Yeehaw!! I love my Home Equity Line of Credit - HELOC.

On the path to financial self destruction, I use my HELOC to buy cars, cool gadgets, vacations, consolidate credit card debt, etc. You name it, and I've spent borrowed money on it.

My friends all think I make $150,000 per year but I only make $50,000 but I'm not going to tell them. I'm living the high life, drinking Hennessey, weekends in Vegas, new car every couple years. I'm going to keep doing it too until I collapse under the wieght of all the debt and declare bankruptcy or I'm forced to sell my home and pay off my debts. Every time I go to the bank, they offer me more money and my rates keep going down so it frees me up to do more cool stuff with money I don't have. My house is making me rich because I can just keep getting more money because my house went up in value. I bought my house for $300,000 a few years ago, had a $250,000 mortgage, and now the house is worth $600,000 and I have a $480,000 HELOC. I'm lovin' it. I just keep making those interest only payments of $1500 per month and its all good.

Strange thing happened though, I went into the bank last week to increase my HELOC because my 2007 Lexus RX is getting a little old now and I really want a new one so I need a little bit of money ($25,000) to pay the difference between the trade in and the new car but the mortgage rep at the bank told me that there was no more money and that they wouldn't increase my HELOC - the nerve. I was pissed because I work hard and I deserve that new car. I told her that I was going to take my business elsewhere if she didn't find a way to do it. She laughed at me and wished me luck. I thought to myself 'that was a little strange - that's never happened before' and I went to another bank. I couldn't get an appointment for like a week and today when I went there, they laughed at me too.

I'm starting to get concerned because I can't put up with driving this old clunker around for much longer. Any advice for this poor soul!?

8 comments:

mohican said...

Believe it or not, there are thousands of people in your city who use money like this story depicts.

first_time_buyer said...

"Believe it or not, there are thousands of people in your city who use money like this story depicts."

Maybe.

But what about the bank part of the story? I dont think thats true, otherwise what would explain those sales off late. Any sane person who loves to live within his means looks like a complete idiot these days. I know patience is a virtue here, but its easily said than done.

jesse said...

Are HELOCs really becoming more difficult to get? I'm hearing mixed reports. Does anyone have knowledge from the bank side?

mohican said...

I am in contact with bank staff daily and this story is one being replayed weekly at your local bank branch.

The HELOC isn't necessarily 'difficult' to get if you have more than 25% equity in your house but for those who are already maxed, they are practicing a new behavior called "delaying gratification!"

Davieharely said...

I'm going to keep doing it too until I collapse under the wieght of all the debt and declare bankruptcy or I'm forced to sell my home and pay off my debts.replica watches

M- said...

Funny... I just bought somebody's "old" '07 RX a few weeks ago because it was getting too old and uncool for them and they wanted a new Mini...

RentingSucks said...

Any sane person who loves to live within his means looks like a complete idiot these days. I was just thinking that on the way into work today. Being prudent over the last 7 years or so makes you look like a risk averse chump.

This is taking much much longer to play out than I ever thought possible. The agressive dropping of interest rates is mostly to blame. I know people that got huge variable mortgages at prime minus a couple years ago were paying 1.6 percent before the last interest rate drop. Makes you look kinda stupid. Also means they aren't gonna get into any kind of trouble any time soon.

People that throttle up their finances to the max will eventually get it in the end but what about people that throttled up a little bit and are smart enough to stay away from the edge. It looks like right now they've got a LOT of room to maneuver even if they bought 2 or 3 years ago.

jesse said...

RentingSucks, you have to assume they will take this opportunity to decrease their leverage so when interest rates rebound they will not be as close to the precipice.

Low rates can only partially offset the overall decrease in income and decrease in leverage that Canada is now experiencing. Why are rates low? Overall, it's not a free lunch; it signals significant economic hardship.