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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: t4texas who wrote (13763)	5/13/2004 9:54:05 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Some of these loans are a very good deal if done for the right reason at the right price. I just did a variable rate interest only loan tied to libor +1.75. That makes it 3% for me. Compared to the fixed 5% I was in interest rates will have to rise 2% before I start to lose. I really doubt that is going to happen. My interest expenses (for now) drop 40%. Of course as soon as there are hikes my rate will immediately go up. It is month to month. I did it because of a precarious job situation. Our payments drop from 1440 to about 450 at current rates. That is one hell of a savings for us. My wife lost her job (but fortunately found another). Should something happen again, I want as low a payment as possible. We also have 70% equity or more in our house as well as a stash of cash in a money market acct. I am going to make interest only payments for a while, to save up more cushion for future payments should something bad happen on the job front again. What I can not figure out is why someone wants the other sides of these bets in general. Perhaps it is a great deal for both of us. I financed thru Merril Lynch. In general, I think people do these things for the wrong reasons, to get more house than they can afford, assuming that rates will not go up, they will not lose their jobs, that housing prices never decline, and that their salaries will will rise more than interest rate hikes. Any one bad thing can do them in but multiple bad things are possible. In my situation, I believe we reduced our risk of getting into a bind and having to sell immediately when we do not want to. Huge difference. Mish