HELOC Fun in Rockaway

Today's example is of a family that purchased their property well before the bubble. They bought at a low price and could have sold with alot of equity in the property - even during the bubble they could have still made a hefty return. Instead they continually used their property as an ATM that provided a nice second income. Here is a look at the house -




Here is a description of the property -

Rockaway Totally Renovated In 2004 This beautiful 4bed/3bath home was totally renovated in 2004. Features include hardwood floors, sliders to 21x16 cedar deck overlooking the fenced in backyard, Custom kitchen with 42in cabinets. Features Jennaire central air. Year Home Built 1953. Dishwasher. Deck. Central air conditioning. Microwave oven. Gas heat. Gas range oven. Public water supply. Eat In Kitchen. Dining room. Finished basement. Hardwood floors.

Here is a look at the financial information -

• The property was purchased in August 1997 for $160,000.

• The original mortgage August 1997 is noot available on database but was closed in Feb. 2003.

• A new mortgage was taken in November 2002 for $210,000 with Wells Fargo Home Mortgage. This loan was closed Nov 2005.

• A HELOC was opened in December 2003 for $50,000 again with Wells Fargo Home Mortgage.
• The owner refinanced yet another mortgage October 2005, this time $250,000 with Wells Fargo Home Mortgage.

• A new mortgage was taken the following September 2006 for $25,000 with Credit Union of New Jersey.

• Currently the property for sale at $399,000 reduced from $419,500. The property is listed with a realtor.
  

Before delving into the finances - the house for a property that was renovated in 2004 and has custom kitchen cabinets - it is strange that the of all 10 pictures on the web of the property there are none of the kitchen.

As for selling the property -if the property sells for the current prices and after the standard realtor's commission of 6% - the property will gross the current owners $375,060. However with the HELOC's and open mortgages the owners will be lucky to net $50,000 after over 10 years of ownership during the Great Housing bubble. At the 1997 purchase price the owners could have walked away with $215,060 plus the equity they invested. But the owners caught the cash-out refi fever and proceeded to take out $165,000 over the last five plus years. The house ended up providing a second income of approximately $33,000 per year. The property has to sell for at least $345,000 for the owners not to lose money on the property.