Comments on: Thank You, Yahoo!, for Perpetuating the Use of Home Equity as Cash

By: DonWest

DonWest — Tue, 10 Jun 2008 03:03:32 +0000

“Similarly, I cringe every time I see the Scotiabank “you’re richer than you think” ads. These guys are apparently still offering 40-year no-downpayment loans. I’m glad I don’t own any Scotiabank stock.”

Warning: CIBC is starting to do the same. Arguing it’s a means for us under 30′s priced out of the local housing market to get a home despite our huge student loans.

The truth of the matter is, we Gen-Xers in Canada are priced out of house and home in cities like Vancouver, Victoria, and Halifax, because these cities are retirement heavens for wealthy baby boomers who drive up the cost of land values, and thus real estate. These cities then become “tourist towns” with low level service industries being developed to supply the wealthy retiree community, yet high housing costs.

The existing boomers already there make things just as awful, as they want to use that house they fortunately bought in the 1970′s as a retirement fund rather than saving, so they too, can be like the wealthy retirees they see moving into our “tourist towns”.

Today is a horrible time to be young. Savings doesn’t actually do anything. There are no tangible goals to accomplish with the savings you can/could accumulate as a young working man.

You can’t save for a down payment, it is simply too much and too far out of reach in a reasonable amount of time. I’m confused exactly what a young person such as myself is supposed to do with 10K savings in my bank account. I’m very poor, I need help right now. I want to invest that money towards immediately short/medium term investments that can help my situation, but can’t find any use with these savings so I continue to horde more and more cash without purpose…

By: Patrick

Patrick — Sat, 19 Apr 2008 19:42:17 +0000

Similarly, I cringe every time I see the Scotiabank “you’re richer than you think” ads. These guys are apparently still offering 40-year no-downpayment loans. I’m glad I don’t own any Scotiabank stock.

By: Sarlock

Sarlock — Fri, 18 Apr 2008 22:30:37 +0000

A local radio advertisement for a home equity lending broker (who charges high interest) has a catchy tune:
“Making your home equity work for you…”

And every time it’s on, I sing over top of it:

“Taking your home equity away from you…”

By: Mrs. Micah

Mrs. Micah — Fri, 18 Apr 2008 17:14:00 +0000

What confuses me is that some people don’t understand that the bank doesn’t have to give them back the money. A HELOC is a privilege (a questionable one), not a right. It’s all based on what the bank thinks you’re really good for right now…you paid the money to them fair and square in exchange for equity if you choose to liquidate (or sell part back to the bank). But the bank has every right not to buy this time.

By: Jeremy

Jeremy — Thu, 17 Apr 2008 13:35:55 +0000

Wow, 41 million huh? Care to invest some of that in Gen X Finance?

There certainly are good uses for leveraging home equity, that is without question. Unfortunately, John Q. Public doesn’t have the intelligence or restraint to properly utilize these funds most of the time. And that is Yahoo’s target audience.

By: AJC @ 7million7years

AJC @ 7million7years — Thu, 17 Apr 2008 13:27:35 +0000

That 4 was a $ … oops.

By: AJC @ 7million7years

AJC @ 7million7years — Thu, 17 Apr 2008 13:26:38 +0000

Now you know why Microsoft does/doesn’t want to buy yahoo.

There’s an old saying: match the term of the loan to the useful life of the purchase (which means, that you would never buy a plasma TV, car, or vacation with a 30 year loan … even if you were dumb enough NOT to pay cash in the first place!).

However, there are two great uses for a Home Equity Line of Credit (I have a 41.25 Million one right now, just for this purpose):

1. To use for investments in stocks (direct, not Funds) and real-estate, and

2. As a proxy for an ‘emergency fund’ (but, you have to be able to pay it back within 3 – 6 months, if you do).

Thanks! AJC.

By: Emily @ Taking Charge

Emily @ Taking Charge — Tue, 15 Apr 2008 22:11:57 +0000

Yikes. Personal finance-savvy people like you and me can look at this and recognize right off the bat that this is NOT a good idea. However, I can guarantee there are tons of people out there who are struggling to make ends meet and are unaware of the dangers of taking out money against your home. While I agree with Meg that it could be much worse, I still think it’s not totally wise to advertise this and make it look so easy and risk free. The main problem I have with it is that the “Make your big dreams a reality” line implies that you should borrow against your home for any fancy you might have — like that new car or family vacation. I think a home equity loan is something that shouldn’t be taken lightly and used for frivolous expenses. I think the lead should have been “Struggling to make ends meet?” implying that it should only be used when absolutely necessary.

By: Meg

Meg — Mon, 14 Apr 2008 20:59:32 +0000

I don’t think it’s reckless. In fact I think it is pretty well done as far as being simple and informative and stressing “come learn,” “calculate the difference,” and “see current rates.”

Reckless would be “No risk! No hassle!” “Low Payments!” Get a $100,000 loan for just $100/mo!” “All you have to do is sign!”

Home equity loans are not bad or evil, and to say that they are is nothing more than a dramatic overreaction to the fact that real estate prices are returning to their mean return in many areas – which is still a positive return over time and unlikely to ever be otherwise.

By: Jagdu Fresno

Jagdu Fresno — Mon, 14 Apr 2008 17:11:48 +0000

You could start a post series titled “Retitle This Ad”.

My entry would be:

Screw Yourself Royally with Yahoo’s Help: Refinance And Increase Payments to More than You Can Afford!”

I doubt it would have the same appeal, but it would be a better description of what Yahoo! is going for.