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Post by retiredat48 on Mar 18, 2021 1:57:02 GMT
Last April, early COVID, banks were offering Mortgage and HELOC forbearances for those impacted by covid.
I have two large HELOCs, with differing banks. I called inquiring. They asked if I had any hardships, such as owning a rental and nonpayment was happening. I said I did...renter had stopped payments (resumed mostly after stimulus checks received) and FL has non-eviction controls in place. Banks IMMEDIATELY, on-the-spot, granted three months forbearance--make no interest or principal payments, for next three months. No paperwork involved. I accepted offers.
When the expiration date approached, I received letters stating if I did nothing, made no contacts, they would AUTOMATICALLY EXTEND FOR ANOTHER THREE MONTHS. I made no contacts---they extended forbearances.
Ditto for next two periods--automatic extensions for 3 months. No inquiry as to hardship status. Nothing.
I called and inquired, as recent letter stated forbearances would end at one year anniversary. The sum of interest and principal to be added on to the back end of the HELOC (about 15 years down the road), paid as a balloon payment, AND I would not pay interest on the balloon amount. Which is fine by me.
But the loan officers stated they could also add on another three months forbearance. Again OK by me. I don't care if I ever pay...until the end of course. Offer accepted.
However, banks don't typically do things that are not in their interest. I have looked at this from various viewpoints, but can find no reason I should not continue forbearances.
Am I missing something?? Seems too good to be true. But I have not made a HELOC payment for almost a year now.
R48
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Post by richardsok on Mar 18, 2021 13:04:39 GMT
HI, R48 --
So, do I understand this right? You get "quik 'n ezy" forbearance going on a year now, with added interest tacked onto the end (and there'll be no interest on the added interest, right?) ..... but what's with the added principal also tacked on the end??
More generally, I understand your attitude of calculating old age and debt through a bookkeeper's green eyeshades and, yes, if the result of government policy leaves future dollars in tatters, then your thinking of "paying off with debased currency" does have a kind of validity to it.
OTOH, (A) I find a deep sense of satisfaction in paying down big debts, knowing my heirs (investment & finance illiterates, every one) will not be saddled with liabilities upon my demise (B) as I get deeper into age and still juggling debt, I cannot assume I will always be as lucid as I might be now. We all risk physical AND mental decrepitude. We just don't accept it, like a 12 year old kid can't fathom arthritis. Finally -- (C) as future risks & calamities cannot be known, I would rather face my last years with less debt, not more.
Anyway, that's just me. Good luck with your plan.
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Post by retiredat48 on Mar 18, 2021 18:14:39 GMT
HI, R48 -- So, do I understand this right? You get "quik 'n ezy" forbearance going on a year now, with added interest tacked onto the end (and there'll be no interest on the added interest, right?) ..... but what's with the added principal also tacked on the end?? R48 reply in bold...yes, the principal (each month not paid) is also added on to the end. And no interest on the balloon amount. At the extreme, if I were granted 15 years of forbearance, I would take it. Am I missing a flaw here? More generally, I understand your attitude of calculating old age and debt through a bookkeeper's green eyeshades and, yes, if the result of government policy leaves future dollars in tatters, then your thinking of "paying off with debased currency" does have a kind of validity to it. It is not relying on "debased currency" at all. It is all about being on the "right side" of the borrow versus lend equation. It is the extremely low interest rates now, that makes this so attractive. I pay 2.5% variable on one HELOC; 3% fixed on another. Over the long run, it is most likely the money invested will grow more than this on an annual basis. Further, inflation makes the payments less and less; and the HELOC interest for me is mostly deductible. Finally, no margin calls on HELOCs. OTOH, (A) I find a deep sense of satisfaction in paying down big debts, knowing my heirs (investment & finance illiterates, every one) will not be saddled with liabilities upon my demise Yes, all debt is a behavioral issue first. However, my adult kids realize the debt position, and how it is offset by the price increases of owning three homes, the huge market gains since I have been carrying HELOC loans (three decades plus); the use of HELOCs in creating ROTHs from Trad IRAs...and so on. To them, the HELOC is not a liability. (B) as I get deeper into age and still juggling debt, I cannot assume I will always be as lucid as I might be now. We all risk physical AND mental decrepitude. We just don't accept it, like a 12 year old kid can't fathom arthritis. Agree...that is why I have one daughter (executor) and son-in-law particularly astute about investing and asset management. Finally -- (C) as future risks & calamities cannot be known, I would rather face my last years with less debt, not more. Fair enough. That's why I have a very well balanced portfolio, a wide arrangement of asset types, fixed income, rental real estate income; soc security...etc.
But a key thing I think many fail to consider is this. We say it is OK for a 25 y/o, with limited assets, to have a mortgage, which is a huge, leveraged loan, yet it is OK. Yet a retiree with a million or two can't carry a mortgage or HELOC?? Further, what if you retire with 1.5 million, and it grows to 2.5 million. Is this not enough of a cushion to carry some HELOC debt, invested, to take advantage of current (artificially low rate) situation? Where's the risk? I can close out the positions immediately. Just like, is there a risk in taking a stimulus $2000 (free) check and injecting it into the market?
Anyway, that's just me. Good luck with your plan. Thanks...perhaps lunch next week; I'll call you.
R48
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Post by johntaylor on Apr 5, 2021 14:06:18 GMT
To me (zero debt long before Dave Ramsey), the above was interesting re bahavioral/psychological issues.
At age 88, John Templeton was buying Canadian Strips on margin with money borrowed from Japan at a very low rate (Forbes, Nov 12, 2001).
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Post by retiredat48 on Apr 6, 2021 5:03:57 GMT
To me (zero debt long before Dave Ramsey), the above was interesting re bahavioral/psychological issues. At age 88, John Templeton was buying Canadian Strips on margin with money borrowed from Japan at a very low rate ( Forbes, Nov 12, 2001). Yes, as I posted, things like margin or HELOC loans, with monies invested, are first of all behavioral things that one needs to come to grips with regarding themselves. But if one never outlines how this is done, many don't realize it is an option. In fact, for the truly young aggressive investor, if I had it to do over again, I would: 1) Yes, buy a big four bedroom colonial home like I did at age 23, with a mortgage, and then fill it with kids...and: 2) Borrow as much as possible, as early as possible, and invest it into 401.Ks or IRAs, using 100% stock based mutual funds/ETFs. Then proceed to pay off the loans over the next couple decades. Tax-free compounding over several decades does wonders to retiring early. R48 |
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Post by retiredat48 on Dec 14, 2021 21:01:32 GMT
This exchange was made last March:
richardsok replied above to me: More generally, I understand your attitude of calculating old age and debt through a bookkeeper's green eyeshades and, yes, if the result of government policy leaves future dollars in tatters, then your thinking of "paying off with debased currency" does have a kind of validity to it.
My reply then: It is not relying on "debased currency" at all. It is all about being on the "right side" of the borrow versus lend equation. It is the extremely low interest rates now, that makes this so attractive. I pay 2.5% variable on one HELOC; 3% fixed on another. Over the long run, it is most likely the money invested will grow more than this on an annual basis. Further, inflation makes the payments less and less; and the HELOC interest for me is mostly deductible. Finally, no margin calls on HELOCs.
My new reply: The HELOC forebearance program finally ended for me in October. And R, it seems your "debased currency" theme is becoming more and more a reality bonus. With inflation zooming, I now will likely take these HELOCs to my grave!
R48
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