Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Some Silicon Valley Tech Workers Get Home Loans with No Money Down

bloomberg.com

Post reply on HN
Print view View original

21–30 of 193 posts

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#21

Post by ceejayoz »

artursapek wrote: post #17
whack wrote: post #13

Earlier quoted context omitted.

Check out my earlier comment. Any time you get to borrow money at 1%, you should take that loan and reinvest it in something (anything) that yields a higher return. It's almost like getting free money.

But is the cost of a house significant to someone worth billions? I'm asking why he wouldn't just pay cash for it.

There's a saying along the lines of "You don't get rich by spending money" that applies here. A mortgage at 1.05% interest as mentioned in the article is basically throwing money at the person taking the mortgage.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#22

Post by raincom »

artursapek wrote: post #17
whack wrote: post #13

Earlier quoted context omitted.

Check out my earlier comment. Any time you get to borrow money at 1%, you should take that loan and reinvest it in something (anything) that yields a higher return. It's almost like getting free money.

But is the cost of a house significant to someone worth billions? I'm asking why he wouldn't just pay cash for it.

Billionaires' finances are managed by accountants, money managers, and lawyers. So, the accountant in this case suggests what's best: tax write off (interest expense), and interest rate differential (higher returns elsewhere - mortgage rate).

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#23

Post by tcoppi »

fsckin wrote: post #10
tinbad wrote: post #2

We looked at financing through some of those new 'hip' lenders. My wife works for Google and SoFi had some of the highest rates (even with 'Google discount' and 10/20% down). They may get your pre-approval within a day, but in reality most lenders get that done quickly. In the end, they have to play the game everyone else is playing and it means long turnaround times to actually close. This is the part that is fundam…

Just bought my first house a couple months ago. Despite picking a lender that seemed to have their ducks in a row, I wound up 'at the table' from 9AM to 6:45PM. Everybody involved was surprised it actually got done. Fundamentally broken is an understatement.

We bought a house last year with a credit union, and everyone during closing was quite surprised that we actually closed within two hours of starting. Apparently it is not unheard of for mortgage lenders to be doing final approval up to the day of closing, and keeping people on hold/not answering phones while you and the seller are sitting there twiddling your thumbs.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#24

Post by tantalor »

refurb wrote: post #20
whack wrote: post #9

I have little interest in tying myself down by buying a house, but the part that's most appealing to me is the mortgage structure. You get to borrow money at a ~3.5% interest rate, in order to invest in something that produces 5-7% yearly returns. On average, this is going to make a ton of money in the long term. Is there any way to do something similar with stocks, without paying an insane amount of money in interes…

Why do you assume housing provides a 5-7% yearly return? Past performance is no guarantee of future performance. You're also ignoring the carrying costs of a house.

> carrying costs of a house

Indeed, taxes and insurance can dominate the mortgage.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#25

Post by edoceo »

artursapek wrote: post #17
whack wrote: post #13

Earlier quoted context omitted.

Check out my earlier comment. Any time you get to borrow money at 1%, you should take that loan and reinvest it in something (anything) that yields a higher return. It's almost like getting free money.

But is the cost of a house significant to someone worth billions? I'm asking why he wouldn't just pay cash for it.

Time-value of money. Keep cash in YOUR pocket.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#26

Post by JumpCrisscross »

elgabogringo wrote: post #5

How does it make sense to tie up $1M+ at 1%? Are they turning around and selling the note to Fannie or Ginnie Mae? Unless we are Japan (and that's a slight possibility, but not likely IMO) this will be a total loser - not as bad as buying Spanish/French/Italian debt at negative rates, but pretty bad. Who else has friends going through all sorts of ridiculous acrobatics to buy houses in the bay right now? Where they a…

> How does it make sense to tie up $1M+ at 1%?

Three things likely going on here: loss leading, promotion and a hunt for yield.

Let's start with the hunt for yield. Yesterday's auction priced the 3-year at 0.87% and the 5-year at 1.15% [1]. We don't know the term of Zuckerberg'a mortgage. If it was less than 5 years, the bank might make a spread.

If it's a loan with a longer term the lender could have made more by lending to the U.S. Treasury. In that case, the difference may be booked as a promotional expense. "We're the guys Mark Zuckerberg gets his mortgage from" is succinct and memorable.

Finally, the lender may eat a loss on the loan for the opportunity to do more business with Zuckerberg in the future. One sees this with credit facilities in investment banking: JPMorgan and friends give companies cheap loans in hopes of winning their more-lucrative IPO and debt capital markets business.

[1] https://www.treasury.gov/resource-center/data-chart-center/i...

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#27

Post by Tuna-Fish »

protomyth wrote: post #11
refurb wrote: post #4

One reason: Almost half of their compensation packages are in Apple shares. So their lender, Opes Advisors, assigned the couple a financial adviser who used a software program to factor in debts and future income, including the stock, and the costs of education over the years for two young children. They don't go into much detail, but this part scares me. I'm assuming the "model" estimates some sort of future value f…

what is a "no-resource state"?

Probably an autocorrect glitch. What he meant to say is no-recourse state.

In some US states, when a mortgage defaults the borrower is personally responsible for the full repayment of the loan. That is, the asset is first sold and if that fails to cover all expenses, the borrower must fork over the difference.

In no-recourse states, the asset turned over to the lender and even if it fails to cover the debt, the borrower gets to walk away.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#28

Post by steveplace »

whack wrote: post #9

I have little interest in tying myself down by buying a house, but the part that's most appealing to me is the mortgage structure. You get to borrow money at a ~3.5% interest rate, in order to invest in something that produces 5-7% yearly returns. On average, this is going to make a ton of money in the long term. Is there any way to do something similar with stocks, without paying an insane amount of money in interes…

That's quite an assumption you're making on the interest rate tradeoff. No guarantee of 5% annual on RE, even if you're in an area controlled by bunch of NIMBY's.

The best model for that is to be a bank with the 3/6/3 model.

Borrow at 3%, lend at 6%, on the golf course by 3 PM.

Now doing something similar with stocks.... that's kind of Warren Buffett's model. He uses insurance companies like Berkshire and Aflac to create cash flows to buy stocks.

I guess you could use options to do something similar.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#29

Post by ryandrake »

tantalor wrote: post #24
refurb wrote: post #20

Earlier quoted context omitted.

Why do you assume housing provides a 5-7% yearly return? Past performance is no guarantee of future performance. You're also ignoring the carrying costs of a house.

> carrying costs of a house Indeed, taxes and insurance can dominate the mortgage.

Not to mention a new roof.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#30

Post by 6stringmerc »

I seem to recall Angelo Mozilo doing some similar "deal making" type things for US Government Employees during the time he was turing Country Wide into a cesspool of bad loans. And, for some reason, he's never had to atone for his role in the 2008 crash. Not like he's the only one though.
Post reply on HN