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

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

#111

Post by dragonwriter »

jpmattia wrote: post #75
tsunamifury wrote: post #60

Earlier quoted context omitted.

I actually looked into it. You are required to put 4 months of payments in escrow. This is far less than a downpayment, but still shows your ability to pay.

> but still shows your ability to pay. I wasn't being clear: It doesn't matter that you can pay, it matters that you will pay. (Four months is nothing to the mortgage principal.) Look, the Fed is going to raise rates RSN. Which way does the high end of real estate go when interest rates come off zero %? So suddenly the homeowner is down 10% on the value of their $2M home. Is it worth it for them to mail in the keys t…

> Look, the Fed is going to raise rates RSN.

What in the considerations that drive monetary policy (employment and inflation, mainly) suggests that another interest rate hike is imminent?

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

#112

Post by DannyBee »

mywittyname wrote: post #40
artursapek wrote: post #8

Why does someone like Zuck need a mortgage? Is it economically advantageous to him in a significant way?

He doesn't need a mortgage, it's just financially savvy to have one. He avoids paying taxes on the sale of stocks to finance the home. Mortgage interest is tax deductible. His stocks will almost certainly yield more than the interest rate on the mortgage. He's getting a sweetheart deal from the bank. For him, selling stock is a PITA because he has special class of stock that grant him voting rights far beyond what a…

"Mortgage interest is tax deductible."

In practice, not for zuck.

1. Only the interest on the first 1 million is deductible. 2. The income phaseout probably also hits him hard

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

#113

Post by phamilton »

JumpCrisscross wrote: post #37
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…

Zero down is more concerning. It is commonly accepted to grant loans based on employment income. That is a cash-flow stream unilaterally cancellable by one's employer with limited notice. Stock is not cash. It is less liquid and more volatile. But if one properly discounts to accommodate those factors, it's just another deferred cash flow. This time, not relinquishable by the company. (If the stock goes to zero the e…

I'd argue that stock in an S&P 500 publicly traded company is pretty much as liquid as cash.

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

#114

Post by eropple »

dragonwriter wrote: post #97
eropple wrote: post #74

Earlier quoted context omitted.

Yup. $2700 for a primary, $2700 for a general election. Now consider how much of the country could conceivably throw $5400 at something like that without significant sacrifice, and "elite" starts to make a lot more sense.

The elites in terms of expenditure-driven political influence are people whose expenditures far exceed the legal limit on direct donations (because they'll do that for more than one candidate in a cycle , plus giving money to entities like the party congressional/senate campaign committees, and the party national committees, and politically active interest groups, interest group PACs, and candidate- and issue-focused…

I'm well aware, thank you. But if you max out your average Congressman and ask for a meeting, you get it. You will be invited to events--including ones that are not donation-expected for years after the fact, and your congressman will almost certainly know you by name, if not face.

This is not a great system, but many tech workers can get into that circle if it's something that matters to them.

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

#115

Post by wavefunction »

maxxxxx wrote: post #43
matt_wulfeck wrote: post #19

Earlier quoted context omitted.

Mortgage interest is tax deductible, which can be quite substantial if you're trying to lower your tax burden. The good news is that AMT comes along and typically eats up deducting property taxes and other things, but the mortgage interest itself still works.

There should be a cutoff for deductibility at some price. Let's say 300k or whatever. This would do make miracles for housing affordability.

I think a more effective change would be to remove the mortgage interest deduction for second houses.

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

#116

Post by jalonso510 »

JumpCrisscross wrote: post #26
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 le…

It's all about the relationship. If Zuckerberg keeps even a small portion of his wealth at this bank or managed by their advisors, that's a huge win for them as they've increased their capital base available to lend to other customers.

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

#117

Post by JumpCrisscross »

phamilton wrote: post #113
JumpCrisscross wrote: post #37

Earlier quoted context omitted.

Zero down is more concerning. It is commonly accepted to grant loans based on employment income. That is a cash-flow stream unilaterally cancellable by one's employer with limited notice. Stock is not cash. It is less liquid and more volatile. But if one properly discounts to accommodate those factors, it's just another deferred cash flow. This time, not relinquishable by the company. (If the stock goes to zero the e…

I'd argue that stock in an S&P 500 publicly traded company is pretty much as liquid as cash.

> I'd argue that stock in an S&P 500 publicly traded company is pretty much as liquid as cash.

That argument is good until it is not. Unfortunately, when it is not is precisely when one needs it.

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

#118

Post by BashiBazouk »

gmarx wrote: post #52

Does anyone else experience mild anxiety reading stories about Bay Area real estate? Long ago I decided it can't be wise to buy instead of rent. Logic and math argue this must end and yet it seems there is always another "sucker". We seem to have entered a new phase in which Chinese are moving money offshore and into the local market. Lots of Chinese, lots of money, could go on and on but for how long? Ultimately a h…

Logic and math? We bought two years ago, my mortgage + taxes are about the same as what it would cost to rent a similar home today in the same neighborhood. I grew up in the bay area and remember my parents buying a home for $16,000 and selling for $28,000 thinking they made a killing in the real estate market. This area started back in the gold rush and continues today on the boom bust cycle. But having been through a few, the low of the current cycle is still usually higher than the high of a cycle or two before. I also think we may be entering a period world wide where there is more people with money than nice places to live. I have noticed as well that there are not enough "starter" homes, so they don't fall in the busts as much as the higher end homes tend to.

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

#119

Post by matt_wulfeck »

maxxxxx wrote: post #43
matt_wulfeck wrote: post #19

Earlier quoted context omitted.

Mortgage interest is tax deductible, which can be quite substantial if you're trying to lower your tax burden. The good news is that AMT comes along and typically eats up deducting property taxes and other things, but the mortgage interest itself still works.

There should be a cutoff for deductibility at some price. Let's say 300k or whatever. This would do make miracles for housing affordability.

With more laws comes more accounts and more loopholes.

We need to overhaul the tax system, not pile more crap on top of it.

Besides, the vast majority of people taking advantage of this deduction is the normal American. Not a business owner or speculator. You'd be ending the largest tax relief the middle class has.

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

#120

Post by SilasX »

tsunamifury wrote: post #38
jpmattia wrote: post #15

Earlier quoted context omitted.

A nit: You mean non-recourse state , as in "The lender has no recourse to tap your assets in order to fulfill obligations of the mortgage in the event of non-payment." But CA is a bit strange: A mortgage is non-recourse only in defined circumstances, eg when the mortgage is purchase money guaranteed by the property. It used to be that refis turn non-recourse debt into recourse debt. I'd be very surprised if a loan ba…

Restricted shares may not be used to back a loan. They can only be used as a measurement of future income. edit: actually its complicated

Mayn't or aren't? Do you mean that,

a) it's illegal and grounds for penalty if you merely write up such a contract, ("mayn't") or

b) it's not common practice to use them as collateral? ("aren't")

Because if there's someone who thinks it's valuable, then there's someone who's willing to accept it as collateral.

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