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Off topic, but other than some savings in origination fees, what are the benefits of going with a credit union? My understanding is that they are just as likely to sell your loan as any other institution. I was advised that unless a customer as a LARGE amount of deposits on record with the lenders bank, that the mortgage is almost always sold. Mine was sold within weeks--which I was aware would happen. I did research into the bank I borrowed from to ensure it would go to a decent mortgage servicing company and it did.
You don't care who services the loan, you just care about the conditions and approval. When we refi'ed from owner financing to a conventional mortgage, the banks wanted multiple inspections and hired an appraiser that was straight out of "Deliverance." We went to a mortgage broker, who took one look at our equity, payment history and financial statement and said, "OK," no inspections required. A year later they sold the mortgage to Wells Fargo. Six months after that, Wells Fargo offered a no-fee refi from 6% to 5%, just to keep us from churning. No inspections required. We said, "OK." We were pleased with the way Wells Fargo serviced the loan. They never screwed up the bookkeeping, and when we paid it off they recorded the fact with county clerk like they were supposed to. I have no idea if Wells Fargo actually owned the mortgage. Probably not. I assume it was bundled into a mortgage-backed security, which was all the rage back then. That meant nothing to me.
As people settled west and claimed territory, they would go in groups. Often they would form a shelter for a church/community area. Then they would begin building their homes on their property, and barns for their animals. They would work the land to make it suitable for agriculture. No one person could do it together, so they worked as a team. Could you imagine building your own home? How about with self hewn trees and few nails? It's what they did though.
As enough farmers were in an area, a trading post would turn into a town. Non agricultural trades would setup stores and buy built homes. The time of getting a home was generally right around the time of marriage, which was fairly young. A young gentleman's main expense was not the ring or the celebration, but the home to get ready to bring a new wife home too.
The unmarried would rent. The elderly may rent. Students would rent. People passing through would rent. The main community would consist of home owners though. Farmers getting bought out would move on further into the frontier. However industrialists needed people, and needed them cheap. Immigration provided that and some of the first rentals came from corporate dormitories. Nothing says control like both wages and living. In the South, sharecropping became a norm. A few decades after, the frontier was finished, though immigration was far from done. Landless farmers moved into towns, looking for a new way to settle down. Renting became more common for the young looking to find opportunities not available where they had born. Until they found it, they rented. With a steady stream of renters, a business model was born.
For centuries, that was part of the draw to America. Your own land, your own religion, your own opportunities. The flyers didn't really go into the Natives already living there of course. But truly home ownership used to be fairly standard up until the 19th century.
You cheerfully ignore the farm hands, sharecroppers, servants and slaves. Particularly in the South, a small aristocracy owned everything. That did not change until after the Civil War.
I don't know anyone with a 30 year mortgage. That's a really stupid contract. You can get a 15 year for a lower interest rate and only slightly higher payments. I paid my mortgage off 8 years ago. My parents lived over 30 years with no mortgage payments. OTOH, my older brother retired with an excellent pension (32 years as a Boeing field engineer) and lived in near poverty until he finally paid off his mortgage last fall. A 30 year mortgage is stupid, stupid, stupid. If you have to go to a 30 year to get into a house, you can't afford it.
Depends on where you live. I live in a high cost area (NYC) and I have 30 year mortgage for the financial flexibility it offers. It wouldn't make financial sense to rush to pay off the loan and have all my money tied up to the house. The value of the loan depreciates over time and you receive tax deduction on interest payments. With the additional cash I can use for investing.
Part of the difference between rich and poor people is how they use debt to their advantage.
Taxes vary by locale. They range from very affordable (I pay $1500/year) to horrible ($35,000/year). That's part of your buying decision.
You are correct, equity is nonsense. A home is a place to live and keep your stuff. That's what it is always worth, and the value does not vary.
Home maintenance is cheap if you figure it in months of rent. Upgrades are more expensive, but then you get things you like better.
Certainly the break-even point for home ownership is about 5 years. Up until then, owning a home is a loser. After that you start to get ahead, but it's a very long term investment. If you have to sell within 10 years, it's probably not worth the hassle.
I don't know anyone with a 30 year mortgage. That's a really stupid contract. You can get a 15 year for a lower interest rate and only slightly higher payments. I paid my mortgage off 8 years ago. My parents lived over 30 years with no mortgage payments. OTOH, my older brother retired with an excellent pension (32 years as a Boeing field engineer) and lived in near poverty until he finally paid off his mortgage last fall. A 30 year mortgage is stupid, stupid, stupid. If you have to go to a 30 year to get into a house, you can't afford it.
FYI, about 30% of home owners in the USA are mortgage-free. When we reach assisted living age we may offer owner financing and rake in both our equity and interest on the equity.
You don't know anyone with a 30 year mortgage? You must not know many people that have a mortgage. You must also be bad at basic math if you think 15 year payments are only slightly more than 30 year
There is a lot to be said leveraging an appreciating asset...
I'm a peasant from peasant farm stock... I accelerated my payments just to be done...
My play wasn't so much on a appreciating asset. I wanted to get out of rental market as rent keeps skyrocketing in my area. I bought a multi-family townhouse, I rent the other units for the cash flow that pays off the mortgage. I wanted to secure my place in the city as I worried I would be pushed to the outer limits of the city if the current trend in urban areas continues. I am also operating on the assumption of not to expect much from social security and pension when I retire in 30-40 years from now.
Depends on where you live. I live in a high cost area (NYC) and I have 30 year mortgage for the financial flexibility it offers. It wouldn't make financial sense to rush to pay off the loan and have all my money tied up to the house. The value of the loan depreciates over time and you receive tax deduction on interest payments. With the additional cash I can use for investing.
Part of the difference between rich and poor people is how they use debt to their advantage.
Leveraging tends to increase both risk and expected return. In a way what you're doing is holding more than 100% of your portfolio in equities. Those with a high risk tolerance may have this come as a desired allocation, but one can never know a priori that this is a winning strategy in any given starting year. Even seemingly prudent business leverage has been known to cause spectacular failures on some occasions. I'm not saying leverage is never right for anyone, only that it depends on a certain amount of luck to work.
Depends on where you live. I live in a high cost area (NYC) and I have 30 year mortgage for the financial flexibility it offers. It wouldn't make financial sense to rush to pay off the loan and have all my money tied up to the house. The value of the loan depreciates over time and you receive tax deduction on interest payments. With the additional cash I can use for investing.
Part of the difference between rich and poor people is how they use debt to their advantage.
I have a bunch of stuff in storage which I think will fetch $15K if I sell them online gradually. (Putting the entire quantity up for sale in a short period of time would drastically depress prices.) If I filed BK, the trustee would require liquidation, which would bring $1K-$2K and leave me literally at zero which would make restarting pointless. IOW I'm trying to look ahead to maintain my ability to earn in the future; with nothing to sell I would be limited to a minimum wage tedium.
Or, if you'd used that $4k to pay the loan, you'd be ahead.
If I used that $4K to pay the loan, I would have had no emergency fund and would have been homeless if I had lost my job.
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