The Ignorant Investor
Ignorance Can't Stand in the Way of My OpinionTuesday, February 28, 2006
A Home Equity Loan is Not an ATM Withdrawal, Dammit!
Tim Iacono points out something important today at The Mess that Greenspan Made:
One of the greatest misconceptions of our day is that home equity extraction is akin to an ATM - the "Housing ATM", as the mainstream media innocuously refers to it. Most people think of an ATM as dispensing money from their checking or savings account, when in fact the housing ATM is much more like a cash advance on a MasterCard or VISA - money that is borrowed and must be repaid.
Elegantly stated. I know that Wall Street bulls and the Treasury Secretary want to blur the distinction between debt and equity to provide a rosier picture of American wealth, but why do reporters have to play along so willingly? The only way to "extract equity" from your house would be to sell a portion of your equity to a third party. Taking out a loan and promising to give the lender your house if you default is just . . . borrowing money.
One of the greatest misconceptions of our day is that home equity extraction is akin to an ATM - the "Housing ATM", as the mainstream media innocuously refers to it. Most people think of an ATM as dispensing money from their checking or savings account, when in fact the housing ATM is much more like a cash advance on a MasterCard or VISA - money that is borrowed and must be repaid.
Elegantly stated. I know that Wall Street bulls and the Treasury Secretary want to blur the distinction between debt and equity to provide a rosier picture of American wealth, but why do reporters have to play along so willingly? The only way to "extract equity" from your house would be to sell a portion of your equity to a third party. Taking out a loan and promising to give the lender your house if you default is just . . . borrowing money.
posted by Worker 17 # 11:27 AM 
Archives
June 2005 July 2005 August 2005 September 2005 October 2005 November 2005 December 2005 January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 August 2006 September 2006 October 2007 November 2007 December 2007 January 2008 March 2008 May 2008 January 2009 February 2009 July 2009 November 2009 December 2009 January 2010 April 2010 September 2010 October 2010 November 2010 February 2011 March 2011 April 2011 August 2011 September 2011
Subscribe to Posts [Atom]