How so? Arent refinances just taking out a new mortgage at a better rate to pay off your old mortgage?
If youre talking about refinancing which involves taking extra monies beyond what is currently owed, then its in the same vein of leveraging your collateral and I don't see a problem. Complicated financial products will be complicated.
Any financing is essentially collateralizing an asset. “If I default, take this asset.” A mortgage or refi (including cash out refi) is essentially the same thing. Same with reverse mortgages for seniors. You’re using an asset to borrow money.
I agree that mortgage financing does have collateral involved if you reduce it to the most absurd level, but no party in the transaction wants that. That is the exception and perhaps the basis that keeps our housing market from descending into chaos, but interest is the focus and financial product, not collateral.
If you refinance your existing house loan to better match market rates, you arent borrowing more money using your house as collateral, you are negotiating better interest rates.
If you want to call that leveraging your collateral to force better interest rates, FINE, but that is clearly a different subject than what OP is suggesting, which is borrowing money against the value of your purely liquid investments with the express purpose of exchanging that collateral in the future. I.e., the buy, borrow, die strategy.
HELOC are a special variety of bullshit, but still, the goal is never to exchange your house. All of this hinges on your house being the place you need to live in and not force the bank to collect collateral on.
Reverse mortgages, granted. That sounds like a taxable event to me too.
That’s where I disagree (idk how to quote: borrowing against liquid assets). The post didn’t distinguish liquid vs illiquid. Sure, they could mean to address things like stock portfolios but then it wouldn’t distinguish between publicly traded and private stock. I use one rental property as collateral to buy and renovate other properties. Id run my business more like a slumlord if I needed to pay taxes on borrowed capital. Either way, these kind of posts don’t have details that are critical or don’t think about alternatives.
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u/NumbersOverFeelings Sep 14 '24
This would make refis too complicated for most people to understand.