Pretending to be rich

Good post on people using home equity lines of credit (HELOC) to pretend they're rich. Insanity.


http://www.irvinehousingblog.com/2008/01/21/pretending/

"So how did these people manage their mortgage debt? They bought the property in December 2001 for $328,000, and they had a $307,263 first mortgage. They put just over $20,000 of their own money into the deal. One year later, they opened a $80,000 HELOC. In 2004, they refinanced for $490,000 taking out about $180,000. Hopefully, they paid off the HELOC, at least temporarily. Later that year, they took out a new $30,000 HELOC. Then in July of 2005, they refinanced again for $650,000 with a 1% Option ARM. They have owned the house for less than 4 years at this point, and they have withdrawn $342,737. I guess this wasn’t enough, because later in 2005, they took out three more HELOCs for $24,000, $82,000 and $24,000 respectively. This property has at least $650,000 in mortgage debt, and assuming they took out and spent the HELOC money (it would be a continuation of their pattern,) they have over $750,000 in debt to pay off."