He definitely would, I mean he did tempt Eve and subsequently Adam into eating the forbidden apple and thus doomed all of humanity into where we are now
This is sad, because I am financially ignorant. I am 66yo and I came across Ramsey when I was searching the internet on how to get rid of our time share 4 years ago. I have been listening to Dave ever since. Finance is my very weak point, but I get schooled everyday. Thank you Dave.
@@earthringWhich makes me think this is an illegal practice that needs investigation by the state's attorney general's office. Shut this company and others like it down. Protect the citizens in the state.
@@theadvocate3006 Some people can't be protected from their own financial ignorance. Maybe the State, instead of regulating, should teach financial principles in school.
Meh. It's only a bad deal if your house goes up in value. If you actually needed the money it makes perfect sense, you should just pay your debts off and sell the place immediately. You walk away with no debts and 60 percent of the equity growth. That's more than you had before, whats the complaint?
@@peterrose5373 The problem is that the caller is in Sacramento CA...house prices ONLY go up in that area. It could be a literal shack in CA and the price/valuation will continue to increase over time.
@christophercarrigg3775 I wonder what your definition of scam is then, hmmm. Yea this may be legal but it is not ethical or moral and for that I call it a scam. As Dave said and I agree, how can these people sleep at night? That's a rhetorical question and doesn't require an answer because for me, I couldn't sleep doing what this lender did. Then again I try and be a good person.
@GAFB1122 per webster's dictionary, a "scam" is a fraudulent or deceptive operation. Given that this man was given access to the terms and conditions of the agreement and that nothing about it was hidden it will be tough to make the case that he was deceive
@@austinduke8876 Well I am not Webster and this qualifies as a scam IN MY BOOK. If I were counseling someone about this lending practice I WOULD CALL IT A SCAM! What you call it is entirely up to you.
@@siva47931No the contract he signed is that he haves to pay back the 60K and then the get 40% of the houses value once the debt is paid off. He still owes them even when he pays the 60K. If he cannot pay I can bet you any money that the house is collateral for defaulting on the loan.
@Fred2-123 it's a collateral based loan. His DTI would have been resolved via the consolidation equation in underwriting. His credit could be in the low 500s and he could still get the loan. He probably made the same assumption you are making instead of shopping around
@rafaeldelgado1365 again, it's a collateral based debt consolidation and he has income. He simply reassigned where his debt lives. He likely assumed he couldn’t get an equity loan like you all are assuming. With his equity position, he could have gotten the loan
I don't know anything about this either, but from the discussion it sounds like the borrower makes no payments. All the return to the lender comes from the future house sale. If this is the case you can nearly see the appeal for someone desperate and drowning in payments. Horrible short term thinking though.
Some of the example calculations on their website are ASTOUNDING. There are examples where they literally make more than 100% interest. I'm looking at an example where they loan $80,000 for a $500,000 house, the house sells four years later for $593,800, and they keep $169,300 from the sale - that's an $89,300 profit on a $80,000 loan! (They can do this because they make a 'risk adjustment' [lol] to the home's initial value and give it an imaginary starting value of only $365,000, so they're calculating appreciation of $228,800 and taking a ~39% cut of this imaginary figure.) This is ON THEIR WEBSITE buried in all the photos of happy families and millennial-friendly language about 'investments' and 'partnership'. Just crazy.
Thank God my house is paid for! I will never use my house as a ATM - I have to have a place to live! I was not aware that they could get more money out of your loan besides what you borrow!
What a horrible predatory product. Please folks, just pay off your debts and get away from debt. My wife and I became debt free last summer. Never going back 💪
As someone who was in about that amount of dept with my wife a long time ago, the last thing we thought of doing was getting loans to pay it all off. We got rid of all non essential items, including a car, and we both got second jobs and lived way below our means to pay it off. It took a few years and lots of sacrifice, but when it was done it was done. This kind of loan is crazy and something I had never even heard of before.
He needs to call the attorney general's office. Sounds like he might have been swindled. The AG's office can investigate to see if the company's practices are legal. I'm actually surprised a state would allow this type of business to operate. I think an investigation is warranted.
O. M. G. I think the word "share" is the big red flag. "Time Share" " Equity Share" what's next ??? I appreciate learning about this, although I've already decided never to talk to real estate people or bank offers since I'm in my forever home, 70 yrs old and no debt. Hopefully I can steer younger people away from this.
You didn't read through the fine print of the most important thing you've ever signed? You deserve this. I'm self-employed, and I excruciatingly read every frigging contract that gets thrown my way. Even the most standard, basic stuff that I sign on a monthly basis. Never screw around.
They take the money quickly then watch the value of their home grow and as the value grows, they begin to resent the original deal. Well, people with leverage don't have to engage in these bad options. Lots of bad decisions put them in a bad place. Some people really feel like they deserve the same better options as the people that sacrificed and were more responsible than them. They want principal plus 40% in order to engage in risking not getting paid back. They likely ask for so much to absorb losses and still be profitable. They agreed. Gotta pay.
Caller sells 40% of the equity in his home for cash. Rather than using a normal loan that you have to pay off, he took the cash with a balloon payment at the end. The value of his home has gone up so much, that now he thinks that the lender is screwing him.
Dude knew the terms and agreed to it. The company is there to make money. Not be your friend. Now the question is ,"would it be a bad deal if his house did not go up in value so much? Usually houses value goes up 4% a year. Even if his house cost 400k, that is $16k a year it will go up. They get 40% of that which is about $6400. So its costing you an extra $533 a month. Sucks but still doable based on his income.
I thought this was the CA "Dream For All" program until he mentioned the %. 20% is bad enough, but 40% is crazy. I'm embarrassed to say I did briefly consider trying to get into that state program just so I can get onto the property ladder as a FTHB. Definitely desperation.
Keep in mind people usually take on these home equity schemes because they don’t have enough equity to close without it. They participate in the equity risk along with you, so they should get a piece of that return.
What if the house goes down in value? What would the loan be if there was another 08 and values dropped 50% overnight? I've never heard of a loan like this.
I think it might be a decent deal, depending on the value of the house. It is just that house value skyrocketed. They basically bought 40% of growth equity for 60k, totally depends on the value of the house at the time of signing
I never heard of this kind of loan. Hard to believe its legal but I guess if you bury the details in the small print you can do just about anything. Very good to know!
This is why you don’t go for the fancy new financial products but instead go for the things that have been around for decades. A standard HELOC would have been much better. We are seeing a lot of newer loan products that are terrible as banks get more desperate for customers.
I did a shared appreciation loan and it was the best financial decision I’ve ever made. It’s called California dream for all. The state of ca gave me the 20% down payment and in return I have to pay it back plus 20% of any appreciated value at time of future sale. It is basically a 0% interest loan for now. I won’t sell for at least 30 years anyways. The “loan” was 150k for my down payment and the max I will ever have to repay (150+20% of appreciation) is capped at 375k even if the home is worth 5M one day. The reason this was a good deal is because I already had the 20% down payment myself (150k) so I just put it into the S&P500 which will be over 2M in 30 years.
This isn't the same, though. They don't have a cap. So if their home appreciates by $1mil before they repay, they'll be out $400k plus the $62k. That's wild.
By the way, I did get out of debt by borrowing against my house and paying off higher interest debt. It only took about 2 years. Because I sold the house and did not replace it. If I had kept the house it would have taken just 10 years.
It won’t changed or you wont get a response by an email or sending a physical letter. So how would you start this off. It starts with a phone call and yeah if you can do it over the phone than you do it. Lol
Yeah.... that's not going to happen... not with the property appreciation of $100k in 8 months... sure... you signed a contract.... we bailed you out... things went well and you're up $60k and we're up $40k... let's just rip up the deal! Not gonna happen!
I've never heard about these kinds of loans. The only thing I've heard that comes close iin California are government programs that will heavily subsidize the purchase of a condo/house, but they share in the appreciation when you sell.
Something doesn't math right here, the callers house would have had to go up $250,000 in value in the past 8 months for his scenario of "This is how much equity they'd take if I sold today". Not in this real estate market in Sacramento, CA! But it shouldn't surprise anyone that the caller doesn't know the reality of his numbers, OR that the Ramsey team just rolls with it because it just helps them make their point.
Unless I misunderstood, this doesn’t make sense. He needs to pay 40% of the appreciation from the time of the loan to the sell date. The caller said that if it sold today, 40% would represent 100K. What kind of a house appreciates 250k in 8 months?
I think there's a communication gap... there's no way his property appreciated by $250k in 8 months. $100k is 40% of $250k. I can see the equity going up by $100k in 8 months... but even that seems outrageous. I'd assume the loan company only gets 40% of the appreciation between the sign date and the payoff date... not 40% of the total equity that's in the house. The sooner the loan is paid back, the better
This is when it becomes really tempting to do some really sketchy crap, like sell it to family at break even so there is no equity then buy it back you are out all the fees and commissions on both sales but thats like 12% not 40%. Maybe you could sell it to a family trust you set up and be the trustee. It might be worth getting an estate planner/attorney for $5k or so and see if they can get you out of this.
Dave got this wrong. He isn't paying 100% interest. Praying back 62 plus an additional 40 makes about 70% interest. For him to owe 40 his house would have to increase by, not be worth, 250,000.
you got it wrong; the guy owes what he borrowed plus 30% of the equity in the house when he sells. the guy said that would be 100,000 today. in the future it could be much more, so Dave wants him to get out as soon as possible to stop the meter
This has the same basic principles of the shared ownership buying schemes in the uk. The only difference is the use of The word “monthly rent” instead of “instalments”
Get a good real estate attorney to seek modification at time of settlement!! Perhaps there can be a cap on the imputed interest of this home loan, since it deals with the underlying property as collateral!!
Houses have gone down in value / stagnated here in Sacramento in the last 8 months. The caller should get an appraisal and see. There’s no way it’s gone up 100k
My guess is he doesn’t fully understand the terms of his loan. I doubt this is exactly how that works. Plus there are plenty of ways to reduce the appraised value of your property. He needs to get to work to both pay this off and get an appraisal in a few years to lower the value of his home so there is little to no appreciation.
It’s essentially them buying an equity share into your house. If the % of appreciation they gain is equal to the appraised value, then you’re essentially just paying a variable interest rate of the appreciation in your home. In this case though I suspect $60,000 was a lot less than 40% of his home value.
Wow, how can someone read a contract like that and still sign it??? I would never sign something like that. I rather keep all the other high interest debts.
Depending on the terms of the deal, I'm not sure I agree this is necessarily predatory. There is (AFAIK) no interest, and the lender may be taking a risk that the house doesn't go up in value before the borrower wants to sell. Appreciate there is apparently v little risk of loss, but there is a material risk of no return on investment.
One thing Dave does NOT mention is that the house went up in value by over 200K (becuase they take 40%) in 8 months. Which is incredible return on a house.
This isn't as bad as most people think and definitely not predatory. I just picked a random house in central Sacramento. In 2015 it sold for $386k and today it's listed for $699k for an increase of $313k. So let's say back then they loaned $30k (half of what was loaned today) so they loan $30k and get back $125k in interest over 10 years. That's a 20% compounded return. This is lower than most credit cards and much less than those payday loans. Also in m other comment I explained he sounds like he has no idea what he's talking about. Houses increased about 4.5% on average in Sacramento over the last year. He's suggesting his house increased $250k in 8 months. If so that would also suggest he owns a house 3-4x the average home price in Sacramento.
Caller is obviously no financial genius. He doesn't know what he is talking about, which is how he got into this mess in the first place. It took him months to even read the agreement he signed.
I always thought those kinds of deals were aimed at retirees short of cash and with no intention of moving house before death, so then after death the house gets sold, the equity release company gets their cut and the rest goes to beneficiaries of inheritance. To do a deal like that earlier in life is just madness!
I don't think this guy knows what he's talking about. It wasn't clear if the $100k was in addition to the $62k or included it. If it was in addition he's claiming his house went up $250,000 in value in the last 8 months when the average for Sacramento over the last year was about 4-5% increase. If it did include the $62k and he's talking $38k which is roughly $100k increase for 8 months which is still more than double the average increase for his area. I mean it's possible but very unlikely for that area. I think he probably didn't know what he was getting into and still doesn't understand it.
People see the instant cash up front, and their eyes bulge not seeing the bigger picture when 30 years go by and you own nothing because you've signed your life away with this reverse equity loan. People sign up for these things all the time, and many commit suicide when they've realized what they've done. Too Late!
![ร้อยพ่อพันแม่ - WanMai [Official MV]](http://i.ytimg.com/vi/XY2pNYASEbg/mqdefault.jpg)
It’s very expensive to be financially ignorant
Wise words. Take care mate! 😀 Many blessing to you! Cheers!
Desperation is truly the enemy of good decision making
No this wasn't desperation, it was sheer stupidity.
This is so true
@@johannesswillery7855 lol. That too
Desperate for Jesus is the only best type of desperation
amen sister
Buddy needs to sell his house, pay the debt, walk away a wounded man and never do this level of stupid ever again.
Best possible answer in such a terrible position
It is the Worst to sell he should stay because Prices only go up.
@@Jakkaribik1 tell me you didn't listen to or understand the video without telling me.
@@ryanwilliams7664 You Lost The Plot and want to sell rather then keep it.. You do not get another House for a LONG time
Pride goeth before the fall. Some things never change.
I have never heared of this type of loan. I dont think the devil would offer something this bad
He definitely would, I mean he did tempt Eve and subsequently Adam into eating the forbidden apple and thus doomed all of humanity into where we are now
@@kugelblitz81It was more of a sarcastic statement and not meant to be taken that seriously.
@@BREEZYM6015 probably
@@kugelblitz81- Seriously! 😂😂😂😂
@@kugelblitz81 wow, nothing gets by you
This is sad, because I am financially ignorant. I am 66yo and I came across Ramsey when I was searching the internet on how to get rid of our time share 4 years ago. I have been listening to Dave ever since. Finance is my very weak point, but I get schooled everyday. Thank you Dave.
That is the most horrendous thing I have ever heard.
This is the type of loan you see in movies from loan sharks… 😂. Crazy!
No, he DIDN't run the numbers. He just didn't want to THINK.
Never heard of home equity sharing before
Like all Americans.
@@amireallythatgrumpy6508 Seriously?! Let's paint with a broad brush, shall we?
@@earthringWhich makes me think this is an illegal practice that needs investigation by the state's attorney general's office. Shut this company and others like it down. Protect the citizens in the state.
@@theadvocate3006 Some people can't be protected from their own financial ignorance. Maybe the State, instead of regulating, should teach financial principles in school.
Desperation is brutal. Use debt to pay off debt and the creditor gets $400 for every $1000 his house increases in value. 🤦🏽
Meh. It's only a bad deal if your house goes up in value. If you actually needed the money it makes perfect sense, you should just pay your debts off and sell the place immediately. You walk away with no debts and 60 percent of the equity growth. That's more than you had before, whats the complaint?
@@peterrose5373 The problem is that the caller is in Sacramento CA...house prices ONLY go up in that area. It could be a literal shack in CA and the price/valuation will continue to increase over time.
So if his property value did not increase in the 8 months, he would have gotten an interest free loan.
The only way to pay debt is working and getting the money. No kicking the can down the road
This is why scams continue, people keep getting fooled over and over again.
This isn't a scam though. Just a stupid decision
@christophercarrigg3775 I wonder what your definition of scam is then, hmmm.
Yea this may be legal but it is not ethical or moral and for that I call it a scam. As Dave said and I agree, how can these people sleep at night? That's a rhetorical question and doesn't require an answer because for me, I couldn't sleep doing what this lender did. Then again I try and be a good person.
@GAFB1122 per webster's dictionary, a "scam" is a fraudulent or deceptive operation.
Given that this man was given access to the terms and conditions of the agreement and that nothing about it was hidden it will be tough to make the case that he was deceive
@@austinduke8876 Well I am not Webster and this qualifies as a scam IN MY BOOK. If I were counseling someone about this lending practice I WOULD CALL IT A SCAM! What you call it is entirely up to you.
@@GAFB1122 it's kind of like calling credit cards with 30 percent interest rates scams. They're not scams.
Really sorry to hear this brother. Hope you get clarity and resolution quickly. You got this man
Never put your home 🏠 on the line
How is his house on the line? He doesn't owe unless he sells
I will never put my house on the line and that is why marriage is out.
@@siva47931No the contract he signed is that he haves to pay back the 60K and then the get 40% of the houses value once the debt is paid off. He still owes them even when he pays the 60K. If he cannot pay I can bet you any money that the house is collateral for defaulting on the loan.
@@Omar_ZazzleI love my home and marriage
@@siva47931nah. He ALWAYS owes UNTIL he sells.
DAVE, You hit the nail on the head. When I get desperate, I do stupid things. I think we all do that.
He tried to find a fast solution to pay off his debt and now has a greater problem. Paying off debt takes sacrifice and persistence.
It blows my mind what people can get away with selling.
That's crazy!
I never knew these shared equity loans existed.
That's terrible.
The educational value of these videos is off the charts.
"sign me up for 'stoopid'!" - genius marketing Dave!
I have no idea why someone would take any unsecured debt and roll it into their home. Make absolutely no sense.
If he had to do this in the first place, I doubt he’ll ever have the money to pay this off. Poor decisions.
He could have called nearly any mortgage lender and done a standard equity loan for debt consolidation. This is crazy
Not if he had bad credit. Which he most probably did.
@Fred2-123 it's a collateral based loan. His DTI would have been resolved via the consolidation equation in underwriting. His credit could be in the low 500s and he could still get the loan. He probably made the same assumption you are making instead of shopping around
There is no income or credit analysis with those shared equity mortgages.
@rafaeldelgado1365 again, it's a collateral based debt consolidation and he has income. He simply reassigned where his debt lives. He likely assumed he couldn’t get an equity loan like you all are assuming. With his equity position, he could have gotten the loan
The worst ones come first to people in need
I have never heard of a "home equity sharing agreement." Why would one use that?
My question also, unless it's like for bad credit or something. Why wouldn't you just go to a bank for the equity?
Your guess is as good as ours. No one should do this! 🤷🏽♂️
I don't know anything about this either, but from the discussion it sounds like the borrower makes no payments. All the return to the lender comes from the future house sale. If this is the case you can nearly see the appeal for someone desperate and drowning in payments. Horrible short term thinking though.
Because he could not get a refinance.
I actually looked in this. A company named “point”. Man are they a bunch of crooked thief’s. Their “deal” is highway robbery 😭
This was probably it.
Some of the example calculations on their website are ASTOUNDING. There are examples where they literally make more than 100% interest. I'm looking at an example where they loan $80,000 for a $500,000 house, the house sells four years later for $593,800, and they keep $169,300 from the sale - that's an $89,300 profit on a $80,000 loan! (They can do this because they make a 'risk adjustment' [lol] to the home's initial value and give it an imaginary starting value of only $365,000, so they're calculating appreciation of $228,800 and taking a ~39% cut of this imaginary figure.) This is ON THEIR WEBSITE buried in all the photos of happy families and millennial-friendly language about 'investments' and 'partnership'. Just crazy.
I learn so much from these calls
Thank God my house is paid for! I will never use my house as a ATM - I have to have a place to live! I was not aware that they could get more money out of your loan besides what you borrow!
Same
So he went into debt to pay his debt??! 😂😂😂
This is ridiculous 😂
Because it "feels" like he did something
this is what happens when you listen to Dave Ramsey but stop listening midway
Got to spend money to save money!
He's an American! Of course he did!!
Good luck sir, I hope you pull yourself out!
I think Dave gave a very fair evaluation of the situation. Yes it is legal and not steal by any definition, but definitely is mean, greedy, etc
What a horrible predatory product. Please folks, just pay off your debts and get away from debt. My wife and I became debt free last summer. Never going back 💪
Me too😂
Hard to feel sorry for people who get themselves into such messes.
Like single mothers
Sadly, there are people all over this world who get taken advantage of for many different reasons.
Reprobates (these lenders) being reprobates.
When the caller said he owes $100K, I think he means that's the original $62K plus about $40K. Mr. Ramsey mistakenly (?) assumed it was $62K + $100K.
Oh the things people do to get out of doing the honest, hard work of living life.
People would rather go into more debt to pay debt than to change their lifestyle. WOW.
As someone who was in about that amount of dept with my wife a long time ago, the last thing we thought of doing was getting loans to pay it all off. We got rid of all non essential items, including a car, and we both got second jobs and lived way below our means to pay it off. It took a few years and lots of sacrifice, but when it was done it was done. This kind of loan is crazy and something I had never even heard of before.
Why not just take out a normal home equity loan?
His credit was horrible.
He needs to call the attorney general's office. Sounds like he might have been swindled. The AG's office can investigate to see if the company's practices are legal. I'm actually surprised a state would allow this type of business to operate. I think an investigation is warranted.
O. M. G. I think the word "share" is the big red flag. "Time Share" " Equity Share" what's next ??? I appreciate learning about this, although I've already decided never to talk to real estate people or bank offers since I'm in my forever home, 70 yrs old and no debt. Hopefully I can steer younger people away from this.
Clearly the word 'share' actually means 'take'.
Caller moved some money around and called It a day instead of doing the work he played the interest game as if that was the problem.
You didn't read through the fine print of the most important thing you've ever signed? You deserve this.
I'm self-employed, and I excruciatingly read every frigging contract that gets thrown my way. Even the most standard, basic stuff that I sign on a monthly basis. Never screw around.
They take the money quickly then watch the value of their home grow and as the value grows, they begin to resent the original deal. Well, people with leverage don't have to engage in these bad options. Lots of bad decisions put them in a bad place. Some people really feel like they deserve the same better options as the people that sacrificed and were more responsible than them. They want principal plus 40% in order to engage in risking not getting paid back. They likely ask for so much to absorb losses and still be profitable. They agreed. Gotta pay.
This is a wild deal. Definitely a desperate deal going bad quick.
Caller sells 40% of the equity in his home for cash.
Rather than using a normal loan that you have to pay off, he took the cash with a balloon payment at the end.
The value of his home has gone up so much, that now he thinks that the lender is screwing him.
I laughed until I cried when Dave said that dude walked in there eyes wide open and said sign me up for stupid 😂
Dude knew the terms and agreed to it. The company is there to make money. Not be your friend. Now the question is ,"would it be a bad deal if his house did not go up in value so much? Usually houses value goes up 4% a year. Even if his house cost 400k, that is $16k a year it will go up. They get 40% of that which is about $6400. So its costing you an extra $533 a month. Sucks but still doable based on his income.
I thought this was the CA "Dream For All" program until he mentioned the %. 20% is bad enough, but 40% is crazy. I'm embarrassed to say I did briefly consider trying to get into that state program just so I can get onto the property ladder as a FTHB. Definitely desperation.
The importance of financial literacy and doing simple arithmetic
Keep in mind people usually take on these home equity schemes because they don’t have enough equity to close without it. They participate in the equity risk along with you, so they should get a piece of that return.
What if the house goes down in value? What would the loan be if there was another 08 and values dropped 50% overnight? I've never heard of a loan like this.
What's funny is the Australian government is offering this same deal now at 25% share to "combat the housing crisis"
I think it might be a decent deal, depending on the value of the house. It is just that house value skyrocketed. They basically bought 40% of growth equity for 60k, totally depends on the value of the house at the time of signing
I never heard of this kind of loan. Hard to believe its legal but I guess if you bury the details in the small print you can do just about anything. Very good to know!
Fantastic Video, Excellent TH-cam Channel, We Love watching and Sharing Every Day.
This is why you don’t go for the fancy new financial products but instead go for the things that have been around for decades. A standard HELOC would have been much better. We are seeing a lot of newer loan products that are terrible as banks get more desperate for customers.
America needs to rethink it's finance laws. Its shocking how this is legal
I did a shared appreciation loan and it was the best financial decision I’ve ever made. It’s called California dream for all. The state of ca gave me the 20% down payment and in return I have to pay it back plus 20% of any appreciated value at time of future sale. It is basically a 0% interest loan for now. I won’t sell for at least 30 years anyways. The “loan” was 150k for my down payment and the max I will ever have to repay (150+20% of appreciation) is capped at 375k even if the home is worth 5M one day. The reason this was a good deal is because I already had the 20% down payment myself (150k) so I just put it into the S&P500 which will be over 2M in 30 years.
This isn't the same, though. They don't have a cap. So if their home appreciates by $1mil before they repay, they'll be out $400k plus the $62k. That's wild.
I find it hard to believe that his house has appreciated 250,000 dollars in 8 months.
Me too. I thought the caller meant the house has appreciated $100K in 8 months as he said, he'd have to get an appraisal to confirm.
I have a home I bought i have renters in doubled in value in few yrs!!
In some parts of California this is absolutely possible. I live in San Diego and it is possible.
I thought he meant he owed $100k total - $60k + $40k in "equity sharing".
@@semosancus5506, this is what I assumed also.
By the way, I did get out of debt by borrowing against my house and paying off higher interest debt. It only took about 2 years. Because I sold the house and did not replace it. If I had kept the house it would have taken just 10 years.
Dave thinking someone can change a legal signed contract with a phone call 🤣🤣
People do it all the time.
You mean to settle? lol
It won’t changed or you wont get a response by an email or sending a physical letter. So how would you start this off. It starts with a phone call and yeah if you can do it over the phone than you do it. Lol
He never said it’s gonna happen. But at this moment trying to talk to them isn’t going to hurt and worth a shot.
Yeah.... that's not going to happen... not with the property appreciation of $100k in 8 months... sure... you signed a contract.... we bailed you out... things went well and you're up $60k and we're up $40k... let's just rip up the deal! Not gonna happen!
I've never heard about these kinds of loans. The only thing I've heard that comes close iin California are government programs that will heavily subsidize the purchase of a condo/house, but they share in the appreciation when you sell.
Damn I’ve heard of people making a deal with the devil but this guy made a deal the devil and hell all combined….Wow
Something doesn't math right here, the callers house would have had to go up $250,000 in value in the past 8 months for his scenario of "This is how much equity they'd take if I sold today". Not in this real estate market in Sacramento, CA! But it shouldn't surprise anyone that the caller doesn't know the reality of his numbers, OR that the Ramsey team just rolls with it because it just helps them make their point.
No. His debt has gone up from $60,000 to $100,000, meaning the value of his home is up $100,000. Still difficult to believe, but a much smaller claim.
@@adamseidel9780 Thanks for the clarification!
I sold my soul at the crossroads to play the blues.
Sell the home to a relative or trusted friend for exactly what’s owned on the mortgage and home equity.
A bank appraisal is required and used to determine the appreciation value.
I would get an attorney to review the contract- not do what Dave said- call and beg for mercy.
Wild title
Unless I misunderstood, this doesn’t make sense. He needs to pay 40% of the appreciation from the time of the loan to the sell date. The caller said that if it sold today, 40% would represent 100K. What kind of a house appreciates 250k in 8 months?
Sell. Pay them & Run ! 😢
So he traded high interest debt for a 40% capital gains fee on his primary residence??? This is like dumber than a gambling addiction, holy crap!
I think there's a communication gap... there's no way his property appreciated by $250k in 8 months. $100k is 40% of $250k. I can see the equity going up by $100k in 8 months... but even that seems outrageous. I'd assume the loan company only gets 40% of the appreciation between the sign date and the payoff date... not 40% of the total equity that's in the house. The sooner the loan is paid back, the better
It’s gone up TO $100,000
This is when it becomes really tempting to do some really sketchy crap, like sell it to family at break even so there is no equity then buy it back you are out all the fees and commissions on both sales but thats like 12% not 40%. Maybe you could sell it to a family trust you set up and be the trustee. It might be worth getting an estate planner/attorney for $5k or so and see if they can get you out of this.
Dave got this wrong. He isn't paying 100% interest. Praying back 62 plus an additional 40 makes about 70% interest. For him to owe 40 his house would have to increase by, not be worth, 250,000.
you got it wrong; the guy owes what he borrowed plus 30% of the equity in the house when he sells. the guy said that would be 100,000 today. in the future it could be much more, so Dave wants him to get out as soon as possible to stop the meter
This has the same basic principles of the shared ownership buying schemes in the uk. The only difference is the use of
The word “monthly rent” instead of “instalments”
Get a good real estate attorney to seek modification at time of settlement!! Perhaps there can be a cap on the imputed interest of this home loan, since it deals with the underlying property as collateral!!
Houses have gone down in value /
stagnated here in Sacramento in the last 8 months. The caller should get an appraisal and see. There’s no way it’s gone up 100k
Wow!! Poor guy! Really bad decision, he never thought about the results. 😢
These home equity agreements are gonna be worse than credit cards
This sound like the banks in Jamaica when you trying to buy a house(huge processing fee, yearly renewal fees and high interest rates on top)
this guy went out of the bad consumer debt frying pan & into the shared home equity volcano
There’s no way he actually read this contract.
Why in the world would anyone do this? Lol. You have to pay back the original loan AND give them 40% of your house appreciation???? WTF LOL
My guess is he doesn’t fully understand the terms of his loan. I doubt this is exactly how that works. Plus there are plenty of ways to reduce the appraised value of your property. He needs to get to work to both pay this off and get an appraisal in a few years to lower the value of his home so there is little to no appreciation.
@@barnabusdoyle4930 My guess is there is a substance abuse issue and decisions were made..........
It’s essentially them buying an equity share into your house. If the % of appreciation they gain is equal to the appraised value, then you’re essentially just paying a variable interest rate of the appreciation in your home. In this case though I suspect $60,000 was a lot less than 40% of his home value.
Wow, how can someone read a contract like that and still sign it??? I would never sign something like that. I rather keep all the other high interest debts.
Depending on the terms of the deal, I'm not sure I agree this is necessarily predatory. There is (AFAIK) no interest, and the lender may be taking a risk that the house doesn't go up in value before the borrower wants to sell. Appreciate there is apparently v little risk of loss, but there is a material risk of no return on investment.
One thing Dave does NOT mention is that the house went up in value by over 200K (becuase they take 40%) in 8 months. Which is incredible return on a house.
This isn't as bad as most people think and definitely not predatory. I just picked a random house in central Sacramento. In 2015 it sold for $386k and today it's listed for $699k for an increase of $313k. So let's say back then they loaned $30k (half of what was loaned today) so they loan $30k and get back $125k in interest over 10 years. That's a 20% compounded return. This is lower than most credit cards and much less than those payday loans.
Also in m other comment I explained he sounds like he has no idea what he's talking about. Houses increased about 4.5% on average in Sacramento over the last year. He's suggesting his house increased $250k in 8 months. If so that would also suggest he owns a house 3-4x the average home price in Sacramento.
Caller is obviously no financial genius. He doesn't know what he is talking about, which is how he got into this mess in the first place. It took him months to even read the agreement he signed.
"We sold our souls to Rock and Roll." Ozzy Osbourne
As soon as he pays this thing off, home values will plummet
I always thought those kinds of deals were aimed at retirees short of cash and with no intention of moving house before death, so then after death the house gets sold, the equity release company gets their cut and the rest goes to beneficiaries of inheritance. To do a deal like that earlier in life is just madness!
Great song 🎧❤️😘
Can't imagine how payday lending is legal in this country. It couldn't be that a number of the largest entities are owned by Congressmen
I don't think this guy knows what he's talking about. It wasn't clear if the $100k was in addition to the $62k or included it. If it was in addition he's claiming his house went up $250,000 in value in the last 8 months when the average for Sacramento over the last year was about 4-5% increase. If it did include the $62k and he's talking $38k which is roughly $100k increase for 8 months which is still more than double the average increase for his area. I mean it's possible but very unlikely for that area.
I think he probably didn't know what he was getting into and still doesn't understand it.
People see the instant cash up front, and their eyes bulge not seeing the bigger picture when 30 years go by and you own nothing because you've signed your life away with this reverse equity loan. People sign up for these things all the time, and many commit suicide when they've realized what they've done. Too Late!
Imagine paying someone $62,000 cash for a 40% stake in the increase of equity in their home only to see the value of their house drop.
I'm feelin new but I demand some respect cause I already wear your advance on my neck.
Ok Lloyd Banks 😂
This is the wildest one I've heard.
Would hate to see what happens if the house depreciates for whatever reason.
Quiet acts of desperation are the English way!😮
Yeah....once I would have laughed the moment I heard the rate of return on investment they would get.
Usury is a sin, which group of people are responsible for this?
...the same group that fabricated up ridiculous concept of "sin"...?...
Actions have consequences....
Is borrowing money to pay off borrowed money ever a good idea?
I payed off 10,000 in credit card debt with a bank loan