Why would I want to go into debt with a bank for thirty fucking years? Why does a bank get so much free money over that thirty years in the form of interest, for almost nothing? All they do is front the cash, and that’s it. Why does that justify so much free profit? Why is this the way it has to work?
Because they take on the risk of what happens if you don’t pay it or default. They have to pay out a massive amount of money that they could have used for other investments, instead you become the investment and they just hope you’ll pay off, literally.
You don’t have to have the bank front you a loan though, you could just save up for 30 years and pay it all off with cash, but given the way housing prices are increasing, that seems to be a terrible plan. By the time you’ve saved up $150k for that $300k home, that home will likely be worth $450k lol. It’s better to get in early, lock in a rate (and refinance later), and start to pay off your mortgage now.
Get a loan when interest rates are low and/or refinance when they go lower. Your alternatives are buying a house with cash or renting. I’m assuming cash is off the table, so let’s compare renting with paying off a mortgage, which can often have similar monthly payments. When you rent, you have fewer responsibilities, but you also have less control over your space and lose every penny of your monthly payment. When you own, you have more financial obligations eg repairs or upgrades, but you have more control over your space, and a portion of your monthly payment goes toward your principal, which becomes equity. That equity is yours if/when you decide to sell. If you want to pay off your mortgage more quickly than the amortization schedule and pay less interest, that is also your prerogative.
But paying rent is no different than paying interest on a home loan as far as your pocketbook is concerned, except you get to keep some of your home loan payment every month
The 30 year mortgage revolutionized hime ownership in the US. Before it existed, home ownership was totally out of reach for a much larger percentage of society than it is today
Why would I want to go into debt with a bank for thirty fucking years? Why does a bank get so much free money over that thirty years in the form of interest, for almost nothing? All they do is front the cash, and that’s it. Why does that justify so much free profit? Why is this the way it has to work?
Because they take on the risk of what happens if you don’t pay it or default. They have to pay out a massive amount of money that they could have used for other investments, instead you become the investment and they just hope you’ll pay off, literally.
You don’t have to have the bank front you a loan though, you could just save up for 30 years and pay it all off with cash, but given the way housing prices are increasing, that seems to be a terrible plan. By the time you’ve saved up $150k for that $300k home, that home will likely be worth $450k lol. It’s better to get in early, lock in a rate (and refinance later), and start to pay off your mortgage now.
Get a loan when interest rates are low and/or refinance when they go lower. Your alternatives are buying a house with cash or renting. I’m assuming cash is off the table, so let’s compare renting with paying off a mortgage, which can often have similar monthly payments. When you rent, you have fewer responsibilities, but you also have less control over your space and lose every penny of your monthly payment. When you own, you have more financial obligations eg repairs or upgrades, but you have more control over your space, and a portion of your monthly payment goes toward your principal, which becomes equity. That equity is yours if/when you decide to sell. If you want to pay off your mortgage more quickly than the amortization schedule and pay less interest, that is also your prerogative.
But paying rent is no different than paying interest on a home loan as far as your pocketbook is concerned, except you get to keep some of your home loan payment every month
The 30 year mortgage revolutionized hime ownership in the US. Before it existed, home ownership was totally out of reach for a much larger percentage of society than it is today
Also consider that most banks have free checking amounts. Those cost money.