I dont mean to be rude, but what makes it worse i feel is the fact that these Brokers are feeding off dumb people....there is no intelligence in their scam, its just predatory behavior.
What has that woman thnking she could buy a house on 24k with 3 kids?...and then dump the payents on her credit card.
I feel bad that there are cases where people who should be giving good fiscal advice are taking advantage of people.
Having said that, people have to be accountable for borowing money and getting credit cards. If you sign a document with blatent lies on it it's never going to end well.
I was bitten by credit, at the age of 23 I owed around $10k in credit card debt I'd always said yes to the credit increases which between 3 cards was around $20k which at that stage was more than I earned a year. While that's no homeloan by anymeans I was still resposible for doing it and it took 4.5 years of hard work to pay it off.
I'll never get another credit card if I can help it.
I the end of the day if it sounds too good to be true it is, there's no such thing as free money.
I've have always found it interesting that It takes about 3 years or more to become a hairdresser and less than 2 weeks of training to become a licensed financial advisor/mortgage broker. Our "Big 4" banks seem to be trying to keep a lid on our own version of sub-prime for obvious reasons.It will decimate their earnings and then , as happened in the UK nervous banks will likely ratchet down their LVRs (loan to valuation ratios).That would not be at all pretty for the residential property market here!
I was one of the unlucky ones to enter a mortgage contract two weeks before the sub-prime crash in 2007. A few months before that, I decided the time and income was right to buy my first house. After talking with a few brokers, it became apparent they had no idea about the effects of compounding. I was offered loans between $400000 and 500000. After an afternoon researching finance and economics, I calculated that a maximum loan on $250000 would be survivable if the interest rate went up by 4 percent (ie: a stock market crash, correction etc). I was very lucky to do this, because guess what happened next ?
I heard that loan brokers in the USA were giving loans to prisoners under similar "low-doc" products. No wonder there was a massive correction. Having brought "high", I await for that correction as Basecurve mentioned. We shall see.
I've always understood an economy to be a "zero sum game". The rich man lives off the poor man. The **** interviewed in the article (who came across as a bit of a sociopath IMO) got wealthly from the people she ripped off - wealth transfer. This is not unlike how it happens anyway.
I wouldn't be too concerned about a massive correction as per the US jn1.I think there are too many vested interests here to let that happen. Anecdotally however I know 2 parties who took out massive (ie over 2M) loans in 2007 on low doc , couldn't make the payments and 3-4 years later were sold under instruction from the banks one for a 750k loss and the other similar. The banks have done nought to try and recover their $$ so far. Its time for younger property investors to remember the old 10-20-30 rule. ie allow for 10% interest rate , have a 20% deposit and spend no more than 30 % of your income on mortgage repayments. You won't hear that too often from the property "seminar" spruikers.
mmmmm nicely priced investment property EP! Not familiar with that 'hood however I suspect You might want be sporting a full kevlar suit and automatic sidearm to collect the rent.
