A conundrum
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To be fair, it's a pretty large home. I'm living with my SO, my brother and his wife and there's a couple of offspring that needed space too. Our house has ~5 ish bedrooms. Considering the number of people who live here, it can feel small. If it was just me and my SO, this would be humungous.
But that also means that we have four fully grown adults helping with the mortgage. So my share of the mortgage is around $1100 ish, per month, and we split most of the household bills, so I usually throw in about $400 more to help with that. I personally pay about $1500/mo.
My SO does the same, and we've encouraged my brother and his wife to also do the same. If everyone pays $1500 towards the house every month, we have more than enough to cover all the bills (electric/gas/water), as well as shared things like the Internet. Also that's enough to cover the house insurance.
Yeah that actually sounds a little better than me. I’m the main bread winner and I’m responsible for almost all of it. It can be a little stressful at times
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But if you don't pay, they get the house. There is no risk of loss, only risk of not maximizing profit.
Foreclosing is a very expensive process.
If you borrow 100% of the purchase price and the bank has to foreclose they would incur a loss.
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This really isn't as easy as it sounds. Moving means you lose your support system of friends and family etc. Some people have children and need the grandparents to help watch them during the day as just one example. Job opportunities are likely not the same. While their current city job may not pay a lot the opportunities from that job could lead a lot higher but of course life choices can be a gamble. On top of all of that, moving long distance is difficult and expensive.
I have a highly intelligent friend from a small southern town and he moved out of there because he recognized there weren't any opportunities for someone with talent but no capital. Sure he could have stayed and bought a cheaper house but he'd still struggle to make the payment on his small salary.You realize the headquarters of Walmart are in Arkansas? There are plenty of very high paying jobs in significantly more affordable places. Also if you pay 1/4 less for a house, and add daily childcare it's still gonna be cheaper.
People literally do it all the time, the whole concept of the suburbs was created so that people could afford houses. -
Ok, your loan has been determined to be higher risk therefore you have to pay more. Why did we need to invent a second payment called PMI instead of just charging a higher rate to higher risk borrowers? Why do interest rates need to remain "reasonable" ?
That's a good question actually.
In Australia, some 60 years ago, banks wouldn't lend over 80% of the purchase price for a property.
The federal government created a government department to provide lenders mortgage insurance. It wasn't a free government service, but a good example of the federal government stepping in to do something private enterprise wasn't able to.
Since then of course that department has been privatised, like everything else, so private institutions provide that service now.
There do remain some differences between LMI and just simply extra interest. Notably LMI is a once off payment, and it can be included in the loan.
More recently, the Australian Federal Government has rolled out a scheme to pretty much abolish LMI. They're just going to guarantee the loans for free.
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That's not the point, and I can't tell if you're being genuine or arguing in bad faith. Do you want me to take the time and effort to explain why what you said is capitalist BS? I'm happy to if you're genuinely interested in learning.
I'm aware it's capitalist, however the alternatives tend to restrict what individuals can own significantly more than what I find acceptable
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I'm aware it's capitalist, however the alternatives tend to restrict what individuals can own significantly more than what I find acceptable
Should corporations be allowed to own private housing?
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Should corporations be allowed to own private housing?
if residential properties are cheaper per square foot than storage units, then absolutely
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The house you're buying is the collateral for their loan. If you took out a loan for 100% of the value of the house and are immediately unable to make payments, the bank then owns the house. For them to simply break even, they'd have to sell the house for more than you paid for it to cover the various costs (lawyers, agents, etc.) If the reason you're unable to make payments is that the economy crashed and housing prices tanked as a result, the bank couldn't hope to break even on their loan.
The down payment is basically a way to ensure that in the bank's worst case scenario they still don't lose money. In theory, the bigger the down payment, the lower the risk for the bank, and the better a rate you should get on the loan. Multiple banks should all be trying to be the one to give you a mortgage, and should be trying to compete by shaving their margins as tight as possible given their risk tolerance. Of course, it doesn't always work out that way, but there's a reason for what they're doing and it's not just to screw over their customers.
They can't really ensure a positive worst case scenario. 15% is the minimum down payment where I live unless you use extra collateral, but a home could lose half its value if there's a major economic downturn.
They're just mitigating bad scenarios, not anything close to the worst case.
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Mao did nothing wrong.
except for causing that famine.
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Then there's all the expenses you didn't know about before you bought the house. If you don't have at least some DIY skills, you get to pay people a lot of money to fix things for you.
...BTW, the county just did a reassessment on your property and your property taxes have now doubled. In exchange, you get nothing. Congratulations.
Also, the 500 is just the mortgage payment. It doesn't include the insurance and property taxes and, at least in the USA, private-mortgage-insurance (pmi) if the down payment isn't at least 20%.
The monthly obligation can easily be more than that 1000. The savings is in locking the first half in at a set amount.
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I am coming to realize that my rural perspective is pretty different, and that lots of people live in way higher cost of living areas than I do. My biggest suggestion is if you don't like expensive housing, get out of the city.
If city folk starts coming to rural area, they will start complaining that city people are jacking up property prices.
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If you were in negative equity, you might choose to suck it up and pay.
Statistically however, borrowers are much more likely to default when they're in negative equity, because quite obviously, there's an incentive to declare bankruptcy.
If you owed a million dollars on a property that had been condemned and is only worth $50k, obviously you would declare bankruptcy. If the property was worth $400k you'd probably do the same. If the property was worth $800k you might do that, but you might choose to suck it up.
My point is, negative equity is an incentive to default on the loan.
Obviously, defaulting on mortgages is a thing. Obviously, people are much more likely to do so when they're in negative equity.
This isn't something people do as a sophisticated well planned financial strategy. In a context of economic upheaval, declining property losses, usually because of unemployment, which usually causes family breakdowns.
Obviously, defaulting on mortgages is a thing.
In USA. As I explained in Europe it's not a thing. Own contribution is a thing in USA and Europe. Therefore, banks don't require own contribution because of defaults. Q.E.D.
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I am coming to realize that my rural perspective is pretty different, and that lots of people live in way higher cost of living areas than I do. My biggest suggestion is if you don't like expensive housing, get out of the city.
I tried and here are some places I have looked where the average home is $810,000 come to find out.
Pinedale, Wyoming, USA
Ennis, Montana, USAThese are in the mountains about 1 hour from the nearest big city of Jackson, Wyoming and Bozeman, Montana. I guess I need to look in the deep sticks.
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Obviously, defaulting on mortgages is a thing.
In USA. As I explained in Europe it's not a thing. Own contribution is a thing in USA and Europe. Therefore, banks don't require own contribution because of defaults. Q.E.D.
What do you call it in Europe when someone stops making repayments on a loan ?
Obviously, that's a thing.
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What do you call it in Europe when someone stops making repayments on a loan ?
Obviously, that's a thing.
I meant that intentionally defaulting on a mortgage when the property loses value and not paying the debt is not a thing. That's what we were talking about.
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Was it in a desirable location? Our tourist town went out of control with our of state buyers during the pandemic, but property values have adjusted back some and the market competition is gone. If you still have some of that $40k now might be a better time. My wife and I just did the federal First Time Homebuyers class and wound up getting a USDA rural development loan, they wouldn't even let us put a down payment to lower our payments.
I am a skidmark that cannot believe that I live in a house that I "own"(have a mortgage). And I am so much less pessimistic about anybody's potential to do what I did. I am happy to answer some questions. I make $22 an hour and my wife makes $17, the loan officer told me I almost make too much for the program.
Yes, at the time, I was hoping to buy in the Salt Lake Valley and it just wasn't feasible. Thank you for the tip, I will read up on the USDA loans.
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Foreclosing is a very expensive process.
If you borrow 100% of the purchase price and the bank has to foreclose they would incur a loss.
Oh no, their own process that they made for being given a house is so expensive, I feel so bad for them!
Why are you defending them so hard? You just have to look at their quarterly financials. They're making out like gangbusters.
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except for causing that famine.
Eh, what's a little famine among friends.
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I tried and here are some places I have looked where the average home is $810,000 come to find out.
Pinedale, Wyoming, USA
Ennis, Montana, USAThese are in the mountains about 1 hour from the nearest big city of Jackson, Wyoming and Bozeman, Montana. I guess I need to look in the deep sticks.
Are you really confused why those properties are expensive? Those are both desirable locations in regions with quickly growing populations. How about Livingston, or Butte?
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if residential properties are cheaper per square foot than storage units, then absolutely
Yep, that was a litmus test to determine if you're worth my effort. You failed.
