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Old 05-09-2018, 03:56 PM
 
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Quote:
Originally Posted by UNC4Me View Post
Yes, quite a bit higher. To be exact $42,342.85 over the 15 years.

So total house bill with interest be 142,342.00? So another 50k, and they double their money back?
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Old 05-09-2018, 06:21 PM
 
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Originally Posted by hitpausebutton2 View Post
So total house bill with interest be 142,342.00? So another 50k, and they double their money back?
The 142K is the total principal plus interest you will pay over 15 years. 100K is what you pay back for the money the bank lent you to pay for the house. The bank doesn’t make anything off that money. They gave you 100K, you paid it back so it represents a zero sum gain to the bank. The 42K is the interest you pay for the use of the banks money for 15 years.

I think I remember you saying you had/have a car loan. Those also have an APR so you’ve already been exposed to these types of loans. Surely you read and understood the loan documents before you signed them? If not, that’s not the way to become financially literate.
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Old 05-09-2018, 07:01 PM
 
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Quote:
Originally Posted by UNC4Me View Post
The 142K is the total principal plus interest you will pay over 15 years. 100K is what you pay back for the money the bank lent you to pay for the house. The bank doesn’t make anything off that money. They gave you 100K, you paid it back so it represents a zero sum gain to the bank. The 42K is the interest you pay for the use of the banks money for 15 years.

I think I remember you saying you had/have a car loan. Those also have an APR so you’ve already been exposed to these types of loans. Surely you read and understood the loan documents before you signed them? If not, that’s not the way to become financially literate.

Yea i read it twice.. and they broke it down pretty nice here at the dealership. Pretty much made it "stupid proof" for people like me. I admit, the financial market is my weakness, so dont be to hard on me. My statement just gives me a total balance each payment is made, so all i see is one big number. I can ask for what is being diverted to what if i wanted it, but just like to see that big number get smaller and smaller is my task. 2 more years and it be zero on one car!!

But still thats 42k.. good enough chunk change to go purchase a double wide... So in theory, if you put another 5% with that, the bank pretty much double their money. 100k back paid in full, then 80 back in interest.
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Old 05-09-2018, 08:21 PM
 
Location: Omaha, Nebraska
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Quote:
Originally Posted by hitpausebutton2 View Post
But still thats 42k.. good enough chunk change to go purchase a double wide... So in theory, if you put another 5% with that, the bank pretty much double their money. 100k back paid in full, then 80 back in interest.
??? Where’s this additional 5% coming from?

The bank is making 42k intotal interest from the loan as compensation for the loss of use of that full 100k for 15 years and as compensation for assuming the risk that part or all of the money will never be repaid. What you’re getting in return is the use of a house (as opposed to a double-wide or an apartment) for 15 more years than you’d otherwise enjoy if you had to pay the entire 100k purchase price up front before moving in. BOTH sides of the transaction are benefitting, not just the bank. That’s why mortgages (and car loans) exist.
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Old 05-10-2018, 06:20 AM
 
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Originally Posted by Aredhel View Post
??? Where’s this additional 5% coming from?

The bank is making 42k intotal interest from the loan as compensation for the loss of use of that full 100k for 15 years and as compensation for assuming the risk that part or all of the money will never be repaid. What you’re getting in return is the use of a house (as opposed to a double-wide or an apartment) for 15 more years than you’d otherwise enjoy if you had to pay the entire 100k purchase price up front before moving in. BOTH sides of the transaction are benefitting, not just the bank. That’s why mortgages (and car loans) exist.
Exactly. Both sides benefit. Why the OP is trying to paint the bank as some sort of evil entity and himself as a victim is beyond me. Especially given that no one is forced to get a mortgage. Renting is a good alternative or saving up and paying cash. Especially for those like the OP who are convinced that a mortgage is just a vehicle for the big bad lender to rip you off. I always saw the mortgage process as a positive. I got a home to live in and was willing to pay interest to the entity who made that possible. Even in 1984 when rates were 15%.
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Old 05-10-2018, 10:20 AM
 
8,298 posts, read 3,461,858 times
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Quote:
Originally Posted by Aredhel View Post
??? Where’s this additional 5% coming from?

The bank is making 42k intotal interest from the loan as compensation for the loss of use of that full 100k for 15 years and as compensation for assuming the risk that part or all of the money will never be repaid. What you’re getting in return is the use of a house (as opposed to a double-wide or an apartment) for 15 more years than you’d otherwise enjoy if you had to pay the entire 100k purchase price up front before moving in. BOTH sides of the transaction are benefitting, not just the bank. That’s why mortgages (and car loans) exist.
Well, what you are saying about the loss of use of the $100K is no longer true. Banks have vast excess reserves since the crash, and actually get paid to store the cash. So the effective 'loss' is minimal. Loans create deposits. More modern money descriptions reveal this.

http://www.theguardian.com/commentis...land-austerity

So excessively high rates in a low inflation environment like today is highway robbery. Not so in 1980 when I took a 14% mortgage.
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Old 05-10-2018, 10:25 AM
 
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Originally Posted by UNC4Me View Post
Exactly. Both sides benefit. Why the OP is trying to paint the bank as some sort of evil entity and himself as a victim is beyond me. Especially given that no one is forced to get a mortgage. Renting is a good alternative or saving up and paying cash. Especially for those like the OP who are convinced that a mortgage is just a vehicle for the big bad lender to rip you off. I always saw the mortgage process as a positive. I got a home to live in and was willing to pay interest to the entity who made that possible. Even in 1984 when rates were 15%.
I paid 10% on an ARM in 1984.

14% on a different house in 1981. This one I soon converted to my banks first ARM, maybe in 1982. The rates on both loans dropped over time.
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Old 05-10-2018, 11:13 AM
 
5,607 posts, read 4,164,742 times
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Originally Posted by Hoonose View Post
Well, what you are saying about the loss of use of the $100K is no longer true. Banks have vast excess reserves since the crash, and actually get paid to store the cash. So the effective 'loss' is minimal. Loans create deposits. More modern money descriptions reveal this.

http://www.theguardian.com/commentis...land-austerity

So excessively high rates in a low inflation environment like today is highway robbery. Not so in 1980 when I took a 14% mortgage.
A 3.75% rate for a 15 year loan is highway robbery?? Have you ever looked at the historical rates? Clearly not.
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Old 05-10-2018, 11:26 AM
 
8,298 posts, read 3,461,858 times
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Originally Posted by UNC4Me View Post
A 3.75% rate for a 15 year loan is highway robbery?? Have you ever looked at the historical rates? Clearly not.
No, not those low rates. Rates over 10%, for instance some credit card rates.
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Old 05-10-2018, 11:28 AM
 
5,228 posts, read 2,383,065 times
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Quote:
Originally Posted by Hoonose View Post
Well, what you are saying about the loss of use of the $100K is no longer true. Banks have vast excess reserves since the crash, and actually get paid to store the cash. So the effective 'loss' is minimal. Loans create deposits. More modern money descriptions reveal this.

http://www.theguardian.com/commentis...land-austerity

So excessively high rates in a low inflation environment like today is highway robbery. Not so in 1980 when I took a 14% mortgage.
Tell us how this works. Be specific.
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