p e n g u i n d e v i l

When thinking about buying a house, one cannot help but think about how much one can afford. I think that one one major factor that makes homes so unaffordable is the mortgage loan. I can’t help but think of my grandmother. She bought and sold many, many houses from the 1940’s through the early 1980’s and every one of these deal was a personal contract, she never utilized a mortgage loan. While mortgage loans are generally considered filled with fee’s for the buyer, in exchange for loaning them the money. I think there is another aspect to them: depriving the seller of most of the money that someone pays for their home. What mortgage loans do is take up to 60% of the actual selling price away from the seller and give it to the bank as a fee to give the seller the rest of the money up front. If you list a house for 150,000 and you sell it to someone using a 30 year 7% mortgage, the buyer will actually pay more like 350,000. Yet the seller gets less than half of that.

The mortgage is a lure to the seller to give them some money upfront in exchange for keeping the lions share of the purchase money for themselves. Under a contract, when a house sells for 150,000, the buyer gets what the seller pays. Under a mortgage, the seller still gets 150,000 for their property, but the buyer pays 350,000 and the bank gets 200,000. Who really wins in that situation?

It seems to me that under a personal contract, it would work better for the seller to pick a higher selling price (of 300,000, 250,000, etc…) and then they would get much more money and the seller would spend much less money and the bank wouldn’t profit at all. Yes, it would take the buyer maybe 20 years to get all of their money, but then, if they were planning on using the money for buying another house, they could just turn the payments that they are receiving around to be the payment for their next house.

In the long run, it seems like mortgage loans were created as a way for banks to make vast profits off of something that they weren’t getting anything out of. And it also serves as a way to raise house values, at the primary benefit of the bank. I realize that there has been some bad news lately for these banks, but it seems that their greed got so extreme that they began financing people to buy houses that they knew darn well that they couldn’t afford. Though what the banks end up getting out of that situation is that they collect on the house for a while, write off the failed loan and then end up owning the house anyway, at which point they can sell it again. Maybe they are intentionally financing people who can’t afford these loans?