Tuesday, June 3, 2008

L'Idiot du Jour

It never ceases to amaze the stupidity people exhibit regarding money these days. Here is the latest example.

Question: I have two home loans totaling 100% financing. Both are variable rate, interest-only loans. The 80% loan is a 5-year ARM; the 20% loan is a home-equity loan in which the rate changes monthly. I have been in my $389,000 home since July 2004 and I am starting to have trouble making the payments, but I have not missed one yet.

The present value of my home is probably less than what I owe on it, but not greatly so. The only money I have available to continue to make the payments is my 401(k). Should I withdraw funds to stay in the house and sell it when the market turns around? Also, if I do, would the withdrawal be considered a hardship withdrawal in IRS terms?

Hmm where to begin with this one. First off amigo, your house is nowhere near $389K if you bought in July 2004. $350K is you're lucky. But that $350K is really $325K after you've paid all selling expenses which run about 7%. So your question is should I blow my retirement money on a house that is depreciating in value daily and in which I have $0 equity? My response back would be, is your IQ less than 45? Because only someone with such limited mental capacity would even think of asking such a question. The answer of course is send the lender your keys and walk away. You have nothing to lose. You've put $0 into your house, you walk away with $0. No harm no foul. Why on earth would you want to keep feeding this alligator month after month? Have you had drunk much NAR Kool-Aid that you still believe owning a house at any cost is a good idea? Are you so brainwashed into thinking that being a home "owner" means destroying your financial future?

And you gotta love the so-called exert's response. A bunch of nonsense about selling the sports car. As if that option is available to everyone. Oh shit why didn't I think of that. Instead of dipping into my 401k, I'll sell that Ferrari just sitting in the driveway collecting dust. No mention that perhaps this home "owner" shouldn't own anything more expensive than a Cappuccino maker since he obviously is not responsible enough to handle it.

Where do they get these financial writers from?

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