I guess it’s a sign that it’s getting harder for the banks and mortgage companies to find someone to loan money to. I continue to get more letters from various lenders telling me that I am qualified to either refinance my home mortgage with them or take equity out of my home.
The latest is from my actual mortgage company. The top of the page is a fake check and they start the letter with this:
“Dear XX,
Imagine if you were holding a check, made out to you, in the amount shown above.
What would you do with that money? There are probably dozens of ways you could spend it … and all of them worthwhile.
For example, you could use up to $105,000 to pay off high-interest credit cards, for home improvements, a great vacation, a new car … whatever you want. One thing’s certain …
You can take one step closer to making your financial dreams a reality by calling 1-800-XXX-XYYX before June 18, 2007.”
Yes, they actually bolded that text as well. That would be quite the vacation for $105,000. Just think of the car I could buy with $105,000. Nowhere in the text above do they mention what kind of payment that would be or what the interest rate is. As I read further, the best rate I could hope for is 7.75%. They also don’t mention the length of the loan. I have to dig deep in to the fine print to see that there is a $50 annual fee for this credit line and my interest rate can never exceed 21%. Wow. That sounds a little steep.
When I read this letter, my mind was replacing their text with what I was seeing in my head:
“Dear XX,
Imagine if you had a huge monthly payment and had sucked half of the equity out of your house. Just think how that payment could put a financial burden on your monthly cash flow and hurt your long term net worth.
For example, you could blow all of your home equity on lots of things that either depreciate rapidly or spend the money on vacations you cannot afford … Anything you want with plenty of consequences depending on what you choose.
You can take one step closer to financial ruins by calling 1-800-XXX-XYYX before June 18, 2007″
The illusion that this is free money is absurd. Most people reading personal finance blogs realize that this is not necessarily a good financial decision. My general rule about making financial decisions is to never go for an offer that is unsolicited. If I’m making decisions based on mailings I receive, it’s a sign that someone else is in control of my money.