How smart is it really to take out a loan right now?
but I can't help but feel that these low rates are somehow a gimmick   to trick people into taking out loans Let me help you: it's not a feeling. That's exactly what it is. Since the economy is down, people don't want to jeopardize what they have, and keep the cash in their wallets. But, while keeping the money safe in the pocket, it makes the economy even worse. So in order to make people spend some money, the rates go down so that the cost of money is lower. It also means that the inflation will be on the rise, which is again a reason not to keep money uninvested. So yes, the rates are now very low, and the housing market is a buyers' market, so it does make sense to take out a loan at this time (provided of course that you can actually repay it over time, and don't take loans you can't handle). Of course, you shouldn't be taking loans just because the rates are low. But if you were already planning on purchasing a house - now would be a good time to go on with that. Yes, it's a buyer's market. If one is looking to buy a house, comparing the cost to rent vs own is a start. Buying a property to rent to a stranger is a different issue altogether, it's a business like any other, it takes time and has risk.  If today, one has a decent downpayment (20%) and plans to stay in the house for some time, buying may make economic sense. But it's never a no-brainer. One needs to understand that housing can go down as well as up, and also understand all the expenses of owning which aren't so obvious. Ever increasing property tax, repairs, etc. "The logic ""the interest rate on the mortgage was so low it didn't make sense not to buy"" is one reason the housing bubble happened. The logic was that it made the house affordable even at high prices. Once the prices collapsed people still had affordable payments, but were unable to sell because they were upside down on the mortgage. If you can refinance to a 15-year mortgage, or from a adjustable mortgage to a fixed rate mortgage. it can make sense. You can save on the monthly payment, and on the total cost of the mortgage. But don't buy to take advantage of rates; or to save on taxes; or to build a guaranteed equity. These can be false economies or things that can't be gaurenteed. Of course if nobody spends money, the economy will stay poor. As to hidden details. Only purchase housing you want to own for the long haul. If you expect to flip it in a few years, you might not be able to. You might end up stuck as a long distance landlord." I think it's smart. It's the same game, just stiffer regulations, so your lender will ask more from you. Buy if you... If someone has been saving for years and years and still can't put 20% down, I think they're taking a significant risk. Buy something where your mortgage payment is around one week's salary at most. Try to buy only what you can afford to live in if you lost your job and couldn't find work for 3-6 months. You might want to do a 30-yr fixed instead of a 15-yr if you're worried about cash-flow. Are things getting better yet or are things still a mess? I have heard people say that right now is a 'good' time to take out a   loan, and that it is a buyer's market in real estate. Something to consider here is what intentions do you have for the real estate you'd buy.  If you intend to sell quickly, then selling into a buyer's market doesn't sound like a great idea.  While real estate may be cheap, there can be the question of how long do you think this will last?  How much of a burden on time and energy are you expecting to take if you do switch residences or buy an investment property? But more specifically, are there any hidden details that come with   taking a loan out when interest rates are low that I should be aware   of? I'd be careful to note if the rate is fixed for the entire length of the loan or does it adjust over time.  If it can adjust then there is the possibility of those adjustments going up. "You are not ""the economy"". The economy is just the aggregate of what is going on with everyone else. You should make the decision based on your own situation now and projected into the future as best you can. Loan rates ARE at historical lows, so it is a great time to take a loan if you actually need one for some reason. However, I wouldn't go looking for a loan just because the rates are low for the same reason it doesn't make sense to buy maternity clothes if you are a single guy just because they are on sale." so this is a loan for a house? a loan on a house? a new mortgage? you shouldn't just get a loan for the hell of it any time. interests rates are low because the yields on US treasuries have been pushed closer to zero, and thats pretty much that. the risk is on the bank that approves the loan, and not you. (your ability to repay should be truthful, but your payments are smaller because the interest is so low)
In regards to the legal recourse, no there is none.  Also, despite your frustrations with Citi, it may not be their fault.  Mortgage companies are now forced to select appraisers (essentially at random) through 3rd party Appraisal Resource Companies (ARCs).  This randomization mandate from the government was issued in order to combat fraud, but it is really causing more trouble for homeowners because it took away appraiser accountability.  Basically, there's nothing we can do to fire an appraiser anymore.  I've had appraiser do terrible jobs, just blatantly wrong, and have gone the distance with the dispute process only to find they won't change the value.  My favorite real-life example came from an appraiser who got the bedroom count wrong (4 instead of 5); yet he took pictures of 5 bedrooms.  The one he excluded he stated it shouldn't count because it didn't have a closet.  Problem is, it DID have a closet.  I had the homeowner take pictures of all of the closets in his house, and send them in.  He still refused to change the count.  After close to 2 months of the dispute process, the ARC came in and changed the count, but did not chagne the value, stating that the room count didn't increase the sqft, and there would be no adjustment in value.  I was floored.  The only solution we had was to wait for the appraisal to expire, then order it again; which we did.  The new appraiser got the count right, and surprisingly (not really), it came in at the right value... In regards to the value necessary to avoid MI, they are likely using 80%, but it's not based on your current balance vs the value, it's based on the new loan amount (which will include costs, prepaids, skipped mortgage payments, etc) vs the value. Here are your options: Get a new appraisal.  If you are confident the value is wrong, go somewhere else and get a new appraisal. Restructure the loan.  Any competent Loan Officer would have noticed that you are very close to 80%, and should have offer you the option of splitting the mortgage into a 1st and 2nd loan.  Keeping the first loan at 80%, and taking out a 2nd for the difference would avoid MI. Best Regards, Jared Newton "The short answer is that banking is complicated, but the bank really doesn't need your money because it can get it from the Fed almost free, it can only use 90% of the money you give the bank, it can only make money on that 90% from very low-risk and thus low-return investments, and as it has to show a profit to its shareholders it will take whatever cut it needs to off the top of the returns. All of these things combine to make savings account interest roughly .05% in the US right now. The longer answer: All FDIC-insured banks (which the US requires all ""depositor"" banks to be) are subject to regulation by the Federal Reserve. The very first rule that all banks must comply with is that depositor money cannot be invested in things the Fed terms ""risky"". This limits banks from investing your money in things that have high returns, like stocks, commodities and hedges, because along with the high possible returns come high risk. Banks typically can only invest your savings in T-debt and in certain Fed-approved AAA bonds, which have very low risk and so very little return. The investment of bank assets into risky market funds was a major contributor to the financial crisis; with the repeal of the Glass-Steagall Act, banks had been allowed to integrate their FDIC-insured depositor business with their ""investment banking"" business (not FDIC insured). While still not allowed to bet on ""risky"" investments with deposits, banks were using their own money (retained profits, corporate equity/bond money) to bet heavily in the markets, and were investing depositor funds in faulty AAA-rated investment objects like CDOs. When the housing market crashed, banks had to pull out of the investment market and cash in hedges like credit-default swaps to cover the depositor losses, which sent a tidal wave through the rest of the market. Banks really can't even loan your money out to people who walk in, like you'd think they would and which they traditionally used to do; that's how the savings and loan crisis happened, when speculators took out huge loans to invest, lost the cash, declared bankruptcy and left the S&Ls (and ultimately the FDIC) on the hook for depositors' money.  So, the upshot of all this is that the bank simply won't give you more on your money than it is allowed to make on it.  In addition, there are several tools that the Fed has to regulate economic activity, and three big ones play a part. First is the ""Federal Funds Rate""; this is the interest rate that the Fed charges on loans made to other banks (which is a primary source of day-to-day liquidity for these banks). Money paid as interest to the Fed is effectively removed from the economy and is a way to reduce the money supply. Right now the FFR is .25% (that's one quarter of one percent) which is effectively zero; borrow a billion dollars ($1,000,000,000) from the Fed for one month and you'll pay them a scant $208,333. Banks lend to other banks at a rate based on the FFR, called the Interbank Rate (usually adding some fraction of a percent so the lending bank makes money on the loan). This means that the banks can get money from the Fed and from other banks very cheaply, which means they don't have to offer high interest rates on savings to entice individual depositors to save their money with the bank. Second is ""quantitative easing"", which just means the Fed buys government bonds and pays for them with ""new"" money. This happens all the time; remember those interest charges on bank loans? To keep the money supply stable, the Fed must buy T-debt at least in the amount of the interest being charged, otherwise the money leaves the economy and is not available to circulate. The Fed usually buys a little more than it collects in order to gradually increase the money supply, which allows the economy to grow while controlling inflation (having ""too much money"" and so making money worth less than what it can buy).  What's new is that the Fed is increasing the money supply by a very large amount, by buying bonds far in excess of the (low) rates it's charging, and at fixed prices determined by the yield the Fed wants to induce in the markets. In the first place, with the Fed buying so many, there are fewer for institutions and other investors to buy. This increases the demand, driving down yields as investors besides the Fed are willing to pay a similar price, and remember that T-debt is one of the main things banks are allowed to invest your deposits in. Inflation isn't a concern right now despite the large amount of new money being injected, because the current economy is so lackluster right now that the new cash is just being sat upon by corporations and being used by consumers to pay down debt, instead of what the Fed and Government want us to do (hire, update equipment, buy houses and American cars, etc). In addition, the ""spot market price"" for a T-bond, or any investment security, is generally what the last guy paid. By buying Treasury debt gradually at a fixed price, the Fed can smooth out ""jitters"" in the spot price that speculators may try to induce by making low ""buy offers"" on T-debt to increase yields. Lastly, the Fed can tell banks that they must keep a certain amount of their deposits in ""reserve"", basically by keeping them in a combination of cash in the vault, and in accounts with the Fed itself. This has a dual purpose; higher reserve rates allow a bank to weather a ""run"" (more people than usual wanting their money) and thus reduces risk of failure. An increased reserves amount also reduces the amount of money circulating in the economy, because obviously if the banks have to keep a percentage of assets in cash, they can't invest that cash. Banks are currently required to keep 10% of ""deposited assets"" (the sum of all checking and savings accounts, but not CDs) in cash. This compounds the other problems with banks' investing; not only are they not getting a great return on your savings, they can only use 90% of your savings to get it." "I researched 3 of the major corrections, the 1929 one, the tech bubble, and the housing bubble.  The three things they all have in common was people were too complacent in their life, The world was doing pretty well at the time during at least 2 of those.  I believe there will be another great war before a recession though. The world isn't fine right now and people aren't complacent. Now perhaps this only means right now"" and not the past 8 years before now though. But any major events happening in the world is taking a slow and steady pace, and the market is making tiny corrections as it goes along. People are accepting the fact the way the world works is rocky so past events wont affect future events if something major does happen.   Another thing 2 out of the 3 I researched is they existed when people were taking advantage of something. Buying and reselling houses, creating websites and putting them on the stock market without any value. There are 2 things similar to that right now, phone apps/social networks, and crypto currencies(bitcoin etc).  People are taking super advantage of those 2 things right now millionaires are popping out too easily.  But if bitcoin and other crypto currencies crash I don't think it'll affect the rest of the market since they aren't a regulated currency. The phone apps and social networks aren't really being super over valued using the stock market in recent times either, with exception to snapchat.  All in all, I'll I don't believe there will be another great market crash/recession for at least another 5-10 years." To confirm: you say you have credit card debt of $18,000 with min. repayment of $466.06, plus on top of this you are also paying off a car loan and another personal loan. From my calculations if your monthly interest on your credit card is $237, the interest on your credit card should be about 15.8% p.a. Is this correct? Balance Transfer If you did a balance transfer of your $18,000 to a new credit card with 0% for 14 months and keep your repayments the same ($466) you would have saved yourself a bit over $3020 in interest over those 14 months. Your credit card balance after 14 months would be about $11,471 (instead of $14,476 with your current situation). If your interest after the 14 months went back to 15.8%  you would be able to pay the remaining $11,471 in 2.5 more years (keeping repayments at $466), saving 10 months off your repayments and a total of $4,781 in interest over 3 years and 8 months. The main emphasis here is that you are able to keep your repayments at least the same so you are able to pay off the debt quicker, and that your interest rate on the new credit card after the 14 months interest free is not more than your current interest rate of 15.8%. Things you should be careful about if you take this path: Debt Consolidation In regards to a Debt Consolidation for your personal loan and credit card (and possibly your car loan) into a single lower interest rate loan can be a good idea, but there are some pitfalls you should consider. Manly, if you are taking out a loan with a lower interest rate but a longer term to pay it off, you may end up paying less in monthly repayments but will end up paying more interest in the long run. If you do take this course of action try to keep your term to no longer than your current debt's terms, and try to keep your repayments as high as possible to pay the debt off as soon as possible and reduce any interest you have to pay. As you already have you credit card and personal loan with CBA talk to them to see what kind of deal they can give you. Again be wary of the fine print and read the PDS of any products you are thinking of getting. Refer to ASIC - Money Smart website for more valuable information you should consider before taking out any debt consolidation. Other Action You Can Take If you are finding that the repayments are really getting out of hand and no one will help you with any debt consolidation or reducing your interest rates on your debts, as a last resort you can apply for a Part 9 debt agreement. But be very careful as this is an alternative to bankruptcy, and like bankruptcy a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Further Assistance and Help If you have trouble reading any PDS, or want further information or help regarding any issues I have raised or any other part of your financial situation you can contact Centrelink's Financial Information Service. They provide a free and confidential service that provides education and information on financial and lifestyle issues to all Australians. Essentially, what you're describing is a leveraged investment.  As others noted, the question is how confident you can be that (a) the returns on the investment will exceed what you're paying in interest, and (b) that if you lose the bet you'll still be able to pay off the loan without severely injuring yourself.  I did essentially this when I bought my house, taking out a larger loan than necessary and leaving more money in my investments, which had been returning more than the mortgage's interest rate. I then got indecently lucky during the recession and was able to refinance down to under 4%, which I am very certain my investment will beat. I actually considered lengthening the term of the loan for that reason, or borrowing a bit more, but decided not to double down on the bet; that was my own risk-comfort threshold. Know exactly what your risks are, including secondary effects of these risks. Run the numbers to see what the likely return is. Decide whether you like the odds enough to go for it. "Good debt is very close to an oxymoron.  People say student loans are ""good debt,"" but I beg to differ.  The very same ""good debt"" that allowed me to get an education is the very same ""bad debt"" that doesn't allow me to take chances in my career - meaning, I would prefer to have a 'steady' job over starting a business.  (That's my perogative, of course, but I am not willing to take that 'risk.' /endtangent @Harmanjd provided the two really good reason for using cash over borrowing.  We have a tendency in this culture to find reasons to borrow.  It is better for you to make a budget, based on what you want, and save up for it.  Make a ""dream list"" for what you want, then add up the costs for everything.  If that number makes your head hurt, start paring down on things you 'want.'  Maybe you install just a wine cooler instead of a wine cooler and a beer tap, or vice-versa.  And besides, if something comes up - you can always stop saving money for this project and deal with whatever came up and then resume saving when you're done. Or in the case of the kitchen, maybe you do it in stages: cabinets one year, countertops the next, flooring the year after that, and then the appliances last.  You don't have to do it all at once. As someone who is working toward debt freedom, it feels nice whenever we have one less payment to budget for every month.  Don't burden yourself to impress other people.  Take your time, get bids for the things you can't (or won't) do yourself, and then make a decision that's best for your money." It is a very bad idea in almost all circumstances to borrow/withdraw from an IRA (or other retirement account) for a down payment on a house and I would only suggest it as a last resort. Even as a last resort it is a bad idea, and I'd suggest you aren't ready to buy a house until you have enough non-retirement money to do the deal. In your case you have money in savings, you should absolutely do that. If you don't feel comfortable using your emergency fund, you need to keep saving until you can afford to buy a house. Your retirement fund isn't a piggy bank for when you need money now, it is a payment you make to keep a decent lifestyle later in life. When you are retired your options for alternate income streams will be much more limited.  The biggest hidden cost is the opportunity cost of not having that money working for you. Your final retirement balance is very likely (when done correctly) going to be mostly comprised of the return on your investment more so than the money you put in. While you are young your greatest asset is time for that money to grow, don't throw that away when you have viable options! The other problem, if you are talking about an employer plan (401K/Roth) is that if you lose your job you will have 60-90 days to pay back the loan or it will be considered a distribution and subject to taxes plus a 10% early withdrawal penalty. This happened to a bunch of my friends from work when our company got bought by another company forcing them to close the old 401K plan and transfer to the new one. Short version: Don't touch retirement money for non-retirement things unless it is a life/death emergency and you have no other options. Are there any laws against doing this?  so long as you are truthful in your application for the loan, none that I know of - technically you could use the loan to pay for school and the cash that you would have used instead to invest.   Are there other reasons why this is a very bad idea? I think you've already identified the biggest one, but here are my reasons: Will you go broke or go to jail? Likely not, but there is significant risk in investing with borrowed money. You might come out ahead, but you might also lose a bundle.  If you're willing to take that risk, that's your right, but I would not call it a good idea under any circumstances.