It seems that mortgage loans are crazy unfair. You can buy a nice car for about 70,000 dollars and pay it off in about six to seven years. Why would a 70,000 dollar house take 30 years to pay off and the interest double the price of the house? Why is this legal?
thats how banks make money. they loan out money at a higher interest rate than they borrowed it at. if you can come up with the money to pay cash for a house then good for you, but most people need to borrow that money.
Why are mortgage loans not illegal?
Leave a comment
house is a necessity, ppl who buy those such cars can usually cough up all the cash in one go
References :
You can pay off the mortgage in seven years even if the mortgage goes for 30 years.
References :
because nobody has the money upfront to buy a house anymore. the banks need to make money so they charge interest and make "affordable" payments on it every month so you dont have to have huge chunks of money to pay it off at once
References :
People tend to buy the best house that they can afford. So often they do this by stretching the loan out over 20 years.
The current loans used to be illegal, but Regan and Clinton both changed the law to allow no collateral, no credit loans.
Yeah, you are right, these used to illegal for good reason.
References :
thats how banks make money. they loan out money at a higher interest rate than they borrowed it at. if you can come up with the money to pay cash for a house then good for you, but most people need to borrow that money.
References :
If you have enough money to do so, you can pay off your mortgage in a much shorter time and save a lot on interest – you’d only pay interest for the time you still owe the money. Most people can’t afford that, so need a longer time.
Even if you take the mortgage for 30 years, if you pay it off early you’d most likely pay less total than you would have for a car the same price.
References :
Illegal? Get real. No one forces you to get a 30 year loan. You can get a 10 year loan (or less) IF you can afford it. And you can pay off a 30 year loan in one year IF you can afford it.
References :
Mortgage loans are simply long-term loans backed up by property. Yes, if you stretch the payments out over the entire length of the loan you DO wind up paying a LOT for the house, the same way you wind up paying huge amounts on credit cards when you make minimum payments. With either, however, you have the option to pay early. I have a relative who got a 30 year fixed rate mortgage for 95% of the purchase price of the house, made payments in full and on time for 6 years, and then by happenstance had a very nice windfall from an estate. Being unwilling to risk the windfall in the stock market (and this was several years before the current financial stuff), she met with several people with financial expertise and nothing to sell her about how to handle the windfall appropriately. The banker, the CPA, and the rich uncle all advised her to pay off her mortgage, which she did. The amount of interest she paid on that mortgage over the entire time she had it, less the interest deduction on her income taxes during those years, amounted to less than the appreciation of the house itself, so she actually was able to buy her house very reasonably and almost exactly at the purchase price plus modest appreciation. Many other friends have always paid their regular mortgage payments and then put every other bit of income they can into savings and then high-yield T-bills and/or CD’s (which keep the principal safe), and then when they have enough socked away to pay off the remaining mortgage and still have some savings as a cushion, they pay off the mortgage YEARS early.
The bottom line is that a house does NOT take the entire length of the mortgage to pay off, IF you budget carefully, manage your money, and pay ahead or save to pay off early. And remember this — a person has to apply for a mortgage and go through a lot of hoops to get a mortgage, so it’s not as though forced to do it or tricked! Nobody holds a gun to one’s head. The mortgage disclosure requirements are always available, but you have to read them!
References :
banker