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Key Takeaways
- Watch out for 'home equity investment' offers that aren't traditional loans – companies like Point take a share of your home appreciation, with effective rates of 15-20% when you pay them back
- Housing prices likely won't collapse like 2007 because only 8% of mortgages are adjustable rate (vs 36% before), less than 3% of payments are late, and total mortgage debt is just 43% of home values
- Inflation is causing restaurant tips to drop significantly – some servers report tips under 10% and food delivery drivers now only get tips 57% of the time
- Child support consequences affect men dramatically – courts can base payments on what you 'should' earn, not actual income, and parents can be forced to pay for minor sons
- Non-payment of child support can result in jail, wage garnishment, passport revocation, driver's license suspension, and loss of professional licenses
- Young men whose partners had abortions were nearly 4x more likely to graduate college than those whose partners gave birth – a hidden economic consequence of policy changes
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Full Transcript
Click to expand transcript
Steve Rhode covers four distinct stories about money, credit, and debt.
Each weekday I send one short email: one money story that caught my attention, why it might matter to you, and one manageable thing you can do with it. A couple of minutes, and a dad joke.
In the latest issue (Oct 16): The check that looks like a scam may be real
Free. I sell nothing. Unsubscribe any time.
STORY 1: HOME EQUITY INVESTMENT SCAM
Steve’s friend Matt received a mailer from Point Digital Finance offering “free money” with a big catch. The offer requires only a 500+ credit score and doesn’t check income – red flags.
The catch? It’s NOT a loan. Point gives you cash in exchange for a share of your home equity. While there are no payments for 30 years, at the end you must repay the original amount PLUS a share of your home’s appreciation.
Point admits the capped repayment is “typically equal to the total amount that would be paid on a loan of equivalent size with an annual rate of 15 to 20%.”
One testimonial came from an unemployed woman with shot credit who traded her home equity to pay credit cards. Steve asks: “What happens when that’s gone? Or what happens when unexpected home repairs are required?”
STORY 2: WILL HOUSING PRICES CRASH?
Steve explains why 2022 is fundamentally different from 2007:
– Only 8% of mortgages are adjustable rate today (vs 36% in 2007)
– New ARMs hold the same rate for 7 years
– Less than 3% of mortgage payments are past due
– Total mortgage debt is only 43% of home values (lowest on record)
– Negative equity is virtually non-existent
– Only 2.5% of borrowers have less than 10% equity
“I don’t believe home prices will collapse, but they may slow or stagnate as interest rates climb.”
STORY 3: INFLATION AND TIPPING
As inflation hits 40-year highs, discretionary spending is being squeezed – and servers are paying the price through reduced tips.
One server said: “I’m really pinching my pockets. I haven’t paid my water bill in two months.”
Another reported being stiffed more than ever in 7 years: “If they tip, it’s often less than 10%.”
Food delivery drivers now get tips only 57% of the time, down 6% since 2019.
Steve asks: “Should we eat out less and tip more, or eat out more and tip less?”
STORY 4: THE HIDDEN FINANCIAL IMPACT ON MEN
Following the Supreme Court decision on abortion, Steve raises an overlooked consequence: child support.
His friend Charles paid child support for 18 years, including retroactive increases based on past income growth. Research shows young men whose partners had abortions were nearly 4x more likely to graduate college.
Consequences for not paying child support:
– Arrest warrants (criminal or civil)
– Contempt of court
– Jail time
– Wage garnishment
– Tax refund seizure
– Passport revocation
– Driver’s license suspension
– Professional license revocation
– Property liens
– Military dismissal
Courts can base payments on what you SHOULD earn, not actual income. In some states, parents can be forced to pay for their minor sons.
“I’m not making an argument for or against abortion. I’m just presenting information to help educate regarding the financial consequences.”
Questions? Visit getoutofdebt.org/question
Frequently Asked Questions
What is a home equity investment and how is it different from a loan?
A home equity investment gives you cash now in exchange for a percentage of your home's future appreciation. Unlike a loan with regular payments, you pay nothing for up to 30 years – but when you sell or refinance, you owe the original amount plus a share of appreciation, with effective rates of 15-20%.
Will housing prices crash again like in 2007?
Unlikely. Today only 8% of mortgages are adjustable rate (vs 36% in 2007), less than 3% of payments are late, total mortgage debt is only 43% of home values (lowest on record), and just 2.5% of borrowers have less than 10% equity. The fundamentals are much stronger.
How much should you tip servers during inflation?
While inflation is squeezing everyone's budget, servers are being financially punished by reduced tips. Consider eating out less and tipping more rather than eating out more and tipping less – servers rely on tips for their income.
What happens if you can't pay court-ordered child support?
Consequences include arrest warrants, contempt of court, jail time, wage garnishment, tax refund seizure, passport revocation, driver's license suspension, professional license revocation, and property liens.
Can a court order child support based on income you don't actually earn?
Yes. If a court believes you're unemployed or underemployed, it can base support on what you 'should' be earning, not your actual income. In some states, parents can even be forced to pay child support for their minor children.
