this post was submitted on 02 Jun 2024
19 points (95.2% liked)

Personal Finance

3819 readers
1 users here now

Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Join our community, read the PF Wiki, and get on top of your finances!

Note: This community is not region centric, so if you are posting anything specific to a certain region, kindly specify that in the title (something like [USA], [EU], [AUS] etc.)

founded 1 year ago
MODERATORS
WandererLagomorph799@lemmy.ml
nieceandtows@programming.dev
nieceandtows@lemmy.ml
19
Please explain leverage to me (lemmy.ml)
submitted 5 months ago* (last edited 5 months ago) by dingdongitsabear@lemmy.ml to c/personalfinance@lemmy.ml
5 comments fedilink hide all child comments
 

can someone explain leverage to me as practised by those RE ~~bullshitters~~ finfluencers. I feel their whole spiel is just bullshit but I don't know enough to be sure about it.

according to them, you "buy" a home - you put X% down and pay your first monthly (and then post on r/firsttimehomebuyer). then you go to (another?) bank and say "look I got this house I wanna use as collateral" and they go "wow you own a house! sure, have this bag of money"... repeat until you "own" like a city block.

like, how does that not crash and burn at the first step, just a cursory glance at the asset's status? how are they not "lol you ain't got no house dumbass come back in 20 years when you actually own it"?

you are viewing a single comment's thread
view the rest of the comments
[–] tburkhol@lemmy.world 14 points 5 months ago

You can't use house #1 as the collateral for both the mortgage on house #1 and house #2, because the bank is smart enough to know that you don't actually own house #1. If house #1 has appreciated significantly from the purchase price, or you have paid off a good chunk of the mortgage, you may have enough equity to take a loan (eg home equity line of credit / HELOC) on that equity to get down-payment money for a second house. That's generally a slow process, unless you happen to own property in a market bubble.