A 50 Year Mortgage
All bad things are packaged in a sweet wrapper.
What is the difference between a renter and and a property owner?
Not much -
When you rent, you don’t own the asset and pay a monthly payment.
When you own a house with a mortgage, you don’t own the asset - the bank does. You pay rent to the bank until it is yours.
And even then - it is not yours because you are shaken down by the local authority (mob) and have to pay - otherwise they will steal it.
“You will own nothing and be happy.”
Really - we are really in that reality eh?
I watched CNBC presentation on how much you can save with a proposed 50 year mortgage!
Look at the monthly payment differences. There is almost no difference between the $1823 and $2056. Its close to 90% the amount of the monthly payment.
For what? An extra 20 years of enslavement!? That seems NUTS to me.
Lets say you get 20% down payment by maybe the age of 30 (for a young person).
You will be done paying down the mortgage by the time you are 80 - or not at all.
Etymology
Mortgage comes from Old French - morgage - literally meaning “Death Pledge”.
Mort = death, Gage = pledge.
The Loan obligation dies when either the borrower repays the debt or the borrower fails to repay and loses the property.
An associated word - amortization - is the painful math behind the mortgage. The word comes from the same root as mortgage.
A - to, mort - death, -ization - the process of.
I.e. killing off a loan through scheduled payments.
The Math
If you haven’t studied a mortgage amortization table, I suggest you might.
Effectively it is split into principal and interest. The ratio between the two is what you own vs what the bank owns, however it is initially stacked in their favor, all of your ownership gains happen right at the end.
With the CNBC mortgage they showed, after 10 years with your mortgage you will have paid off less than 4% of the money you owe to the bankers (which they made from nothing).
Understand the differences between simple interest vs compound interest.
The Family Unit
Capitalism works best when labor is specialized - those best at teaching should teach and those best at widget making should make widgets.
However with the division of labor that occurs in well oiled capitalism machines, one must be cognizant of not becoming too isolated. Too much of an individual.
If I learned anything from the dark days of Covid - and I state dark days referring to the suppression of freedoms - was that having a Community is highly important.
When times are good and you get your fat paycheck, you can do what you want.
When times are bad and you are hoping and clinging onto anything - you need a group of people who you call your own.
What I am looking at doing is becoming the banker and helping my children with housing.
This likely will involve renovating older houses for them, where they put sweat equity into fixing up the place with my help. I would pay for the place and they can pay me back.
As to whether that is simple or compound interest - well see.
I think working together for a greater good as a family will become more important as time goes on. The idea of working as a family unit in business, housing, child care and so on makes a lot of sense.
Economies of scale work.
For example buying land, buying a compound on the land and having food, multi-generational housing all in one location can benefit your entire family. Your children and your parents.
This is also something I am considering.
I quite like the idea of a barndominium as a living option. Something definitely with a lot of garage/shop space.
My ideal house would be 30% office space, 30% garage space.
What do you think about multigenerational living?