Sam Kwak vs Dave Ramsey : HELOC Rant - YouTube

alright, ladies and gentlemen, I think it is time for us to do a faceoff with Mr.

Dave Ramsey first time doing a face-off and giving a feedback on one of Dave's

videos now before I get to the clip and I'm gonna show you guys a clip as well

as providing responses along the way I don't have anything against Dave Ramsey

I think he does phenomenal job as far as providing good education information and

value to those folks that are in debt and then need help

I believe Dave's a very intelligent and smart man but there are certain

philosophies that I don't quite agree with him there are things in the

perspective of being an entrepreneur as well as a small business owner that I

don't quite die with so what I'm gonna do is I'm gonna go ahead and flip the

camera around to show you guys a clip and I'll be watching with you guys you

guys will be watching the clip as well but I'm going to show you a portion of

where he mostly talks about home Atlantic credit and of course I'm a huge

fan of home equity line of credit when used properly and within the context of

our key lock strategies and go and leave your thoughts below do you agree with

Dave do you agree with me I would love to get a discussion and conversation

started so go and feel free to comment down below we'll love to take some

questions from you as well cool all right so let's go ahead and press play

and hear what Dave has to say no one up and you know that is creating a couple

of situations in the real estate world that we're running into out here and I'm

talking to you about it one problem is this market watch came out this week and

said 1.6 million homeowners are predicted to get new home equity lines

of credit in 2018 now that people have equity what are they gonna do go borrow

it well that's just stupid a little bit of an extreme reaction that my opinion

but I'm so what's Dave Dave is doing here

and this is something that I just think it's like but this is something that I

don't appreciate about David he's assuming the worst about the people and

you know I believe that there are people with good intentions and there's you

know well intelligent decision-making skills as far as their finances that are

gonna use the home equity line of credit for different use so of course

our case in our context of the HELOC strategy we're using the home equity

line of credit to ultimately pay down our debt and to reduce our liabilities

as well as in the future acquiring income-producing asset now I

agree with Dave when it comes to borrowing the money from your your home

equity to go do some dumb things i buying a new TV buying a new coat unless

you use a boat for business purposes to make money but in most cases and most

consumers mindset they're borrowing home equity to do buy a new car buying things

that aren't necessarily gonna make you more money now what I am fan of and what

Dave doesn't necessarily talk about all the time is buying using the home equity

loan or using home equity line of credit which I'm gonna make a distinction in

just a sec by using a home equity home equity lines of credit to acquire income

producing assets such as rental properties maybe even buying a business

maybe buying an equipment that's gonna help you make more money or doing a

start-up on a business those are the things that I would actually suggest

that you do when it comes to borrowing money now of course if you don't have to

borrow money and do those things even better but when you have a certain

certainty when you when you put yourself at a entrepreneurial risk to start a new

venture to go create more income I believe there is a case in a use for a

home Atlanta credit and it is appropriate to borrow money for that

specific case so let's go and continue to hear what Davis say but there's 1.6

million people out there they're getting ready do something stupid according to

this report again he's assuming until first about people which you know in

Davis experience I can see why okay don't go Barbie her equity out of your

house especially on a freaking home equity loan hold on so I don't know if

this this might be a mistake that Dave Dave made but there is a distinction

between a home equity loan and a home equity line of credit they're two

different products while they both use your home equity to either withdraw

money or to get money up front there is a distinction between a home equity loan

and home life we line of credit we're not going to go into details and too

deep into that will have a separate talking about the difference between a

home equity loan the home equity line of credit but to give you a five second

version of it home equity line of credit is like a

credit card as assessed attached to your home it's a line of credit it's a

revolving product whereas home equity loan you get all the cash upfront much

like a mortgage and you pay back as you go as a time goes and you really

necessarily can't take the money back out like a revolving line of credit okay

so I don't know if David's kind of is confusing the two different products but

let's keep on watching let's give him the benefit of doubt let's just assume

that he is talking about home equity line of credit it's the credit card of a

mortgage world you don't know so he actually said that right

so he said comically loan but he's now saying credit card the mortgage world's

I think he meant to say home equity line of credit Oh Mac wait loan is it's a

good chance for you to lose your home let me tell you why most of them have an

annual or biannual and every two two year call in them meaning the bank can

just decide they want all their month so that's actually not true so different

banks have and this is something I share all the time is that different banks

have different types of home equity line of credit home equity line of credit he

locks our non-qm notes i non-qm loans so non-qualifying mortgages and that means

that banks have a little bit more Liberty as far as how they can you know

SEP the features of the he lock and what Dave's talking about yeah there are

certain banks with the two-year balloon to your call most home equity line of

credit have a ten-year drawl a 20 year 20 year repayment period I've seen

combinations up to 15-year draw 15-year repayment so Dave is making a blanket

statement here about home equity line of credit that's not necessarily all true

it's sort of half the truth because there are home equity line of credit as

dave talks about with two-year call but there are also home equity line of

products that are that don't have those to your calls so again that's something

that I my my reaction my response Dave about the two-year call not necessarily

all true me and you have to go get another loan or have the cash to pay

them off right then or they foreclose I mean it looks like something in an old

1930s movie or something but everybody just Bebop's along the next like it's

nothing because usually they don't do that but they have the right in the

paperwork to just decide they don't like you anymore and call the loan

you know the second thing is you know what the interest rate on your home a

quinone so right before that and I'll give you some context as to why dave is

freaking out and you know doing this rant um the reason why Dave is doing

this rant is and this is something that I actually would agree with him is that

a lot of people are banking on what's called phantom appreciation at this

point so we're shooting this video in 2019

you know Market Street markets doing really well unemployment super low

economy's doing really really well and what it tends to happen is people go

hog-wild crazy with their equity that they built now again the equity that

they built phantom appreciation meaning that all the appreciation that they've

been gained over the last couple years can all be gone like that in a case of a

recession or a market crash or correction in the market now the reason

why Dave is freaking out coming back to again today it's that question is that

when you go and borrow money let's say your home value is $200,000 and then

since the last recession you've gained $250,000 your total value of your home

is now $250,000 so you appreciated $50,000 more than what the home value

was couple years ago now Dave is freaking out because a lot of people are

taking that $50,000 appreciation that they've gotten and they're borrowing

against it to do some stupid things like buying a boat or going in Las Vegas and

wasting the money away now what happens is when the market crashes were one when

the market resets or there's a correction the appreciation falls back

down the equity the the home valley falls back down to say 220 or Toyota ten

we're worst case scenario it may fall be below $200,000 leaving you anywhere

around 180 170 I'm just throwing numbers out there but Dave is saying if you

borrow that extra home equity credit or home equity loan you're gonna

be essentially be underwater you're gonna owe more to the banks than what

your home value is actually worth in which that in that case yes the banks

will have the power and the ability according to your note to call the note

do and you're gonna have to fork over money to make sure you become solvent

with the bank that's why I Dave is freaking out and that's a little bit of

context I'm gonna give you guys right now is we have phantom appreciation

appreciation that necessarily isn't real and it isn't permanent but when people

borrow against that when the tidal wave is gone okay when they preach when the

recession happens and although the home value drops you pretty much you're it's

kind of like a hot potato you're you're holding the potato while

it's you know explodes on you so that's one of the reasons why Dave is like

don't borrow don't borrow don't borrow remember in the context of using our

strategy the helots strategy aka aka debt free acceleration strategy you're

using the home equity line of credit to pay off the mortgage faster which means

that you're lowering the balance of your overall debt okay so it's it's quite the

opposite of what Dave is imagining what people would do but you know the second

thing is you know what the interest rate on your home equity loans based on your

bankers mood so that's actually not true at all again so it can't the interest

rate cannot be arbitrary you know the bank just can't say oh we're gonna go

and Jack it up now there are marginal rates that the banks can change however

most banks use an index whether it's that see the US Federal Reserve index or

LIBOR so again Dave is making a blanket statement that that isn't quite

necessarily necessarily true with all home equity line of credit Dave might be

pointing at a one specific home equity line of credit product that he's dealt

with but again being that home equity line of credit products are non-qm

different banks have different features and different requirements and how they

get their interest rates you know not necessarily tie the bankers mood but

again by asset index that is determined by an external factor it's not

to any index it's not tied to any national publishing again not true it's

somewhat controlled by competition but you know when they change they just

change it it's completely variable and it's variable based on I think we can

get a little more on it so not all not all home equity line of credit is

variable there are home equity line of credit that can be fixed rate interest

rate yes like it statements that's very good George this week let's just raise

it and they Desiree's them or they might lower them but not very often and so

you're setting yourself up in a piece-of-crap loan with a call and a

variable rate that is based on the bankers Clem

that's just dumber than a rock that's just dumber you are asking for trouble

and then when things turned down you're gonna go oh I didn't think that was

stupid cuz hey when things are going really good stupid gets covered up

stupid can look smart when things are good but like Warren Buffett says when

the tide goes out you can tell he was skinny-dipping so yeah again so we gotta

remember the context of why dave is doing this rant again um David assuming

the worst about people too you know people are going Baba under equity out

to go buy some do stupid things which in that case yes don't do that it's it's

dumbest thing you'll ever do and you'll lose your pants and probably more than

your pants but seriously like if if if what Dave is assuming is correct about

people and people are gonna go and borrow money to do different things that

are not necessarily productive then yes I agree with Dave do not be borrowing

home I quit line of credit to do finance your trip down to Mexico okay not a good

thing but if you are using the the home equity line of credit in fact any

financial instrument okay if you use any of the financial advisor instruments

that are available in the market to do good to help people to build your

business to create an income-producing asset to go and build another stream of

income then yes it could be a very good thing it could be a very powerful thing

and an effective thing for you to help you advance your financial calls and

your goals so again Dave is is very one lane to here meaning that

he's he's only thinking in the context of people do or do some dumb things and

stupid things which again it put in that context yes I agree with him but when

you're using more strategy the whole metro Atlanta strike rule had a credit

strategy it could be a very good thing and it can help you reduce a lot of debt

a lot of can save you a lot of money a lot of time without changing your income

or your expenses so if you're wondering what strategy is this guy talking about

I'm gonna go and leave the video below this video in the link description box

below click on that video watch to the strategy it's gonna explain as to why

you want to be using a home equity line of credit to pay off your mortgage and

oftentimes when done correctly you can pay off your mortgage within five to

seven years without making more money or cutting back on your expenses so I don't

know if Dave continues to talk about the home equity line of credit he may change

the subject here let me just play that here when things go down there's a home

equity loans gonna be yeah well where were you in 2008 I mean where you're not

born yet seriously how did you have no idea you

didn't even look at all you cared about was I wanted a new kitchen Princes come

on yeah so obviously he's talking about people who spend money on you know

liabilities and there could be something to be said about that doing a new

kitchen maybe can help you appreciate your home value depending on your

situation right but if you have a perfectly fine kitchen looks beautiful

and you just want to spend more money because you want to spend more money

yeah probably not the best idea probably not the best investment I would say so

make wise decisions guys make wide wise investment but and at the same time when

you're getting an advice or suggestion from Dave Ramsey you remember the

context of what he's talking about it's really important to not only get the

idea of what he's saying but it's also important as to what context he's using

to give you that suggestion so in a way I do agree with Dave in a way I don't I

agree with them as far as not using your home equity line of credit or home

equity loan to go do some stupid things buying cars

and stuff that's not gonna make you money but if you are using it to help to

vanish your financial calls help you build more income to build you know

wealth in terms of buying a business or buying a rental property then yes go and

definitely do it it's gonna help you out so that's pretty much my commentary here

you guys you can go and watch the rest of the video I'll go and leave the the

original clip for Dave Ramsey's video down below in our link description

section and then be sure to check out our home equity line of credit strategy

or HELOC strategy aka the debt free acceleration strategy I I'll see you

there