[drzoltar]

Actually, I’m worried about techies specifically. It’s (was) surprisingly easy to count RSUs as income collateral, especially since the last 5 years have shown such a consistent source of income. Now that many RSUs are in the gutter, combined with an ARM, I don’t get how some techies will make ends meet especially in places like the Bay Area. Anyone know the actual magnitude of this problem though?

[Androider]

For mortgages, lenders will entirely or heavily discount RSUs for income calculations.

However not discouraged by that fact, some tech folks are known to instead have taken out regular non-mortgage variable rate loans with their RSUs as collateral. So there are folks, who bought a house "all cash" with loans backed by stock collateral that is now worth much less. Those types of loans also have a double-digit APR, which might have been fine if you thought you could flip your house for 30-100% in the near future. In the current housing marking it is like putting everything on black at a casino, it might work out, but it might be also be a complete catastrophe.

[JumpCrisscross]

> lenders will entirely or heavily discount RSUs for income calculations

Multiple lenders, when I was shopping for a mortgage in October, encouraged me to take a variable-rate ARM with a balloon payment when I mentioned my options. (I declined, opting for a 15-year standard instead.) For the lender, as long as you can refinance in 5 years, the risk is minimal. For a borrower, this structure could easily wipe out one's savings.

[arcticbull]

> Those types of loans also have a double-digit APR, which might have been fine if you tought you could flip your house for 30-100% in the near future.

Nah not all of them. Margin loans were as low as 0.5% APR, and currently not much higher than that.

[brewdad]

Where are you seeing a margin loan rate that low today? Fidelity's current best rate (for over $1MM) is 4.75%. Their base rate is actually 7.85%.

[jmillikin]

https://www.interactivebrokers.com/en/trading/margin-rates.p...

IBKR charges 2.33% base rate, reducing to 1.58% for balances over 1 million USD.

[arcticbull]

Institutional rates are even lower at, for instance, PMR.

[ActorNightly]

Techies have zero excuse for any sort of financial trouble. Not only has the job market has been insane (and still is for the most part), the amount of money you make, even with previous RSU distributions should allow anyone in the field to save enough money to ride out a recession.

There is however a definite problem of people across all income levels living way above their means.

[dhosek]

Those of us who’ve lived through more than a few years of working life value stock options and RSUs and anything else at zero until it’s transformed into cash.

[whimsicalism]

well that's obviously nonsense

[scarface74]

I’ve had to go through the mortgage process three times in the last two years when my income was based on a prorated two year signing bonus and a back heavy RSU vesting schedule over 4 years [1].

The first time for a refinance and the second time for HELOC. Both times they would only consider my base. Luckily I lived in a relatively low cost of living area and we weren’t talking about that much by todays standards - a $300K refinance and a $160K HELOC a so my base pay was enough.

The third time when I tried to get an investment property, my DTI was too high to qualify based on solely my base. If they had counted my RSU grants even considering the 30%+ YTD decline, it would have been more than enough. I ended up doing a no income documentation loan and paying down the loan by a point. I also had to put 30% down.

For the second one, they still questioned why my stated income for 2022 was much lower than my actual income for 2021. I had to re-explain my compensation structure.

[1] How do you say which BigTech company you work for without saying which BigTech company you work for.

[nkingsy]

I was explicitly told by a mortgage broker in January that RSU's don't count in income calculations.

Made the difference between me qualifying and not (for a 10% down jumbo, which was admittedly a stretch).

[drzoltar]

To clarify I’m not sure it counts directly to income, but it starts to be taken into account when there is substantial salary and other investment funds, especially if you are right on the border of the salary/loan ratio. Someone else mentioned it’s more like collateral

[desmosxxx]

Probably depends on the broker and market. We bought in the bay area and RSU were counted as income (and fairly certain 1:1 by some lenders). And in some other areas they wont look at them at all is my understanding.

[notyourwork]

> It’s surprisingly easy to count RSUs as income

This is irresponsible in my opinion. (I'm sure some disagree.) Personally, I took the conservative approach where during my home purchase we made sure our income could afford a mortgage. Our RSU's are a bonus and when they come we can pay down our mortgage faster, go on fun vacations, or do all sorts of other things.

Currently, I'm on pace to pay off my 30-year mortgage in 8-10 years by putting half of my RSU's towards my mortgage on top of the monthly payments.

[arcticbull]

> Currently, I'm on pace to pay off my 30-year mortgage in 8-10 years by putting half of my RSU's towards my mortgage on top of the monthly payments.

This is not a great idea if you have a 30-year fixed mortgage with an APR below inflation. You're better off not paying it off, and instead setting aside the cash you would have used. Even in like a Series I bond which is currently paying 9% APR.

Money loses value every year, and it's losing value faster than your mortgage is going up in cost. Therefore, why would you pay it off today using money that's worth more, when you can pay it off in the future using money that's worth less?

Especially if you can park your money in something that tracks inflation.

Paying off your mortgage early is one of those things folks are always told is good - it's really not.

That's a free 9%+ return on capital. You're giving up free double-digit returns by paying off your mortgage early.

[danans]

> Paying off your mortgage early is one of those things folks are always told is good - it's really not.

It only makes sense if there is a legitimate fear that someone might otherwise waste the money on frivolities - for many people saving and the self control it requires is very challenging.

[digisign]

It was great in the old days of high interest rates, not so much at low ones.

[notyourwork]

You're sort of ignoring the point which is I get to chose how to allocate my money by not factoring my RSU's into my upper limit for what I can afford. I can keep my RSU's as they vest, or I can pay ahead on my mortgage or a combination of things.

If you're in tech and paying your mortgage depends on your salary and your RSU's you are not being financially responsible.

[arcticbull]

Now all that I'm with you on!