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The Single-Family Home Tax Shelter Myth
- Thread starter Martin Gale
- Start date
From Mav :"When you factor in inflation, real estate prices have been steadily declining as a whole since the 1950's. "
NAR
"Since 1968, the national median existing-home price has increased an average of 6.4 percent per year. However, that includes a period of high inflation. A better frame of reference is in relation to the overall rate of inflation. Home prices typically have increased 1.5 percentage points faster than the rate of inflation, as measured by the Consumer Price Index."
NAR
"Since 1968, the national median existing-home price has increased an average of 6.4 percent per year. However, that includes a period of high inflation. A better frame of reference is in relation to the overall rate of inflation. Home prices typically have increased 1.5 percentage points faster than the rate of inflation, as measured by the Consumer Price Index."
Quote from Covertibility:
From Mav :"When you factor in inflation, real estate prices have been steadily declining as a whole since the 1950's. "
NAR
"Since 1968, the national median existing-home price has increased an average of 6.4 percent per year. However, that includes a period of high inflation. A better frame of reference is in relation to the overall rate of inflation. Home prices typically have increased 1.5 percentage points faster than the rate of inflation, as measured by the Consumer Price Index."
I have seen several studies all within 100 to 200 basis points of this number. Of course this is making the assumption you actually believe the inflation numbers our government uses to report which maybe very much on the low side. Also, once you factor in property taxes, insurance and home repairs, there is no way you stay above that 1.5% number. Do the math.
Quote from winter:
I know I will be sorry for asking but what is your definition of un-conventional?
It really varies depending on the lender. But usually an unconvential loan is one in which the borrower does not qualify for a convential loan due to credit score, income, debt to income ratio, or possibly lien or judgment against the person.
Now before you are quick to say, well, that's not most people, think again. Many large banks now will refuse to offer you a convential loan if your credit score drops below 650. Unconvential loans will actually go from 700 in some rare casses down to 450. More and more people are falling into this category every day. Because of the high credit risk, there are all sorts of terms and provisions written into their loan agreements.
Quote from Maverick74:
That is not wrong. I followed up in a later post that these provisions are written into the loan agreement. It is 100% true. You need to have your loan to value ratio brought up to a certain level. This has now been indoctrinated on many new loan structures. I only have about 40 friends that are in the business. Many high risk loans, including interest only and variable loans carry these provisions. I further stated that if these provisions are not in your loan contract, then the bank cannot re-write the terms of the loans. Next....
You must have overlooked this entire post, so I'm re-posting it here:
Here's your original quote. Note the "banks usually require...". Now, when you say "banks", I take this to mean the nationwide banks and mortgage companies like Citigroup, Countrywide (who I believe is the largest mortgage lender in the country), etc etc. I don't take this to mean some rinky dink little bank somewhere.
That said, I am on safe ground to say that the VAST MAJORITY of mortgage loans originated by nationwide and large lenders do not contain a clause of the type that you mention. Period. Your statement is false.
There are loans that are "negative amortization" types of loans, where the borrower makes a payment less than what is necessary, with the difference being added monthly to the mortgage balance. This type of mortgage over time could conceivably grow to well over 110% of value, at which point the mortgage lender could fully amortize the loan. But not foreclose.
Stop and think about the logistical nightmare these lenders would have to actually implement your ridiculous idea. They would have to conduct an appraisal on every house that they though "might" have dropped in value enough that the mortgage would be over 100% of value. Pleeze! Ain't gonna happen with ANY of the nationwide lenders. As long as they are receiving their payment they are happy campers. And if they are not receiving the payment it makes no difference to them what the value of the property is, they foreclose.
Interesting enough, there are numerous programs around which are 100% loans...starting with VA loans, and then going right down the list to conventional and subprime type programs. Even the FHA loans are nearly 100% loans, and permit the gifting of the downpayment. Doesn't seem to worrying ANY of the nationwide lenders who make these types of loans.
Now, is there any lender anywhere who has a mortgage of the type you claim? I called my favorite mortgage broker here in town to ask if there is anyone, anyplace that can call a loan if the value of the property drops. The answer? NOPE! He deals by the way with several hundred different mortgage lenders.
Now, there are loans that have a balloon clause...meaning the loan is due and payable in a shorter term, perhaps 5, 7, or 15 years for instance. If the borrower needed to refi at that time, and his property had dropped in value, he might now be able to refi the entire amount. But that's a completely different example than what you are citing.
Perhaps what you should do is provide a link that describes your program.
OldTrader
Do you have any evidence to back up these assertions or are you just making this stuff up as you go along?Quote from Maverick74:
It really varies depending on the lender. But usually an unconvential loan is one in which the borrower does not qualify for a convential loan due to credit score, income, debt to income ratio, or possibly lien or judgment against the person.
Now before you are quick to say, well, that's not most people, think again. Many large banks now will refuse to offer you a convential loan if your credit score drops below 650. Unconvential loans will actually go from 700 in some rare casses down to 450. More and more people are falling into this category every day. Because of the high credit risk, there are all sorts of terms and provisions written into their loan agreements.
Oldtrader,
I never said they did, I said they could. Legally it's written into the provisions. I have also asked around and found it rarely happens. My statement did say they did this but rather could do this.
I never said they did, I said they could. Legally it's written into the provisions. I have also asked around and found it rarely happens. My statement did say they did this but rather could do this.
Quote from winter:
Do you have any evidence to back up these assertions or are you just making this stuff up as you go along?
Are you serious? You never heard of sub-prime lenders? You think John Doe with a 550 credit score is going to walk into Bank of America and secure a loan. LOL. I guess anything is possible.
Quote from Maverick74:
Oldtrader,
I never said they did, I said they could. Legally it's written into the provisions. I have also asked around and found it rarely happens. My statement did say they did this but rather could do this.
No, it is not written into the mortgage either. You're completely wrong. Not at any of the nationwide mortgage companies or FNMA document type loans.
But if you insist on continuing on with this claim, please provide a link to a source that shows this.
OldTrader