i am not shocked, i got a fixed 6.5% loan a few years ago, all you have to do is look at the amortization and the actual amount paid at the end, if you bought a 300k house roughly you end up paying almost double the amount if you paid for it until the last payment taking the interest into account, most don't ever do that nowadays but the way banks make rules they almost always win big.

Unfortunately unless you are well off, or have been left a large fortune the majority of average folks could never buy a home outright or avoid using credit to live in a home or residence that has their name on it and now even much more shocking they wont be able to come up with hard money as a downpayment, you figure how many people without using a credit card or borrowing can come up with 20 or 30k cold cash and if so you still get stiffed in the end especially with an economy that has left many with negative equity and no time soon to get in the black.

[edit on 18-5-2008 by phinubian]

Originally posted by phinubian
Unfortunately unless you are well off, or have been left a large fortune the majority of average folks could never buy a home outright or avoid using credit to live

Poor tax. Interest is a tax on being poor.

Or, interest is a payment for being rich.

Depends on your perspective :-)





[edit on 18-5-2008 by ianr5741]

Actually, I have heard of a way to make the banks pay for their scheming. I haven't tried this, so I'm really asking you if you know of anyone who has done it successfully. There is a guy that I hear about on the radio all the time named John Commuda (sp). Anyway, the basis of his plan for getting people out of debt is to prove that the banks, credit card companies, etc. never actually exchanged anything of value. Since you never received anything, how can you be forced to pay it back? Of course, I'm boiling this down to its very essence, but I have thought about buying his program just to see. If anyone here has tried it or has heard of anyone who tried it, I'd love to hear about how it worked out. I say stick it to 'em if you can!

I love it when people get their eyes ripped open.

But this is nothing to panic over my little fleeced sheep……..

when another thread comes out discovering that in a clause of your mortgage contract it clearly states that if the lender that has lent you the money goes under, your contract is sold to another lender……….AND THIS NEW LENDER CAN AND WILL CHANGE THE 6% RATE TO WHAT EVER THEY WANT!!! ……….

Question is will the poop hit the fan enough for your lender to go under?

When that little tidbit comes out then you can panic mua gua gua gua gua gua!!

OP star and flag and pleas look into what I have said.......

Star and flag i have no further comments, good work...

I thought most people realized that just by paying there mortgage and watching there statements if they asked for them to be sent to them.

People need a roof over there heads and this is the way it has aways been, people complain and do nothing just like with gas and everything else.

I'm 59 and bought this home 2 years ago have a 40 year mortgage and pay almost $1500.00 a month. The only way people will get there monies worth is if they stand together and all refuse to pay there mortgage and FIGHT and not give up there home, do you see that happening? Maybe this is why the government wants to stop people from having guns for protection of property alone.



[edit on 18-5-2008 by observe50]

You have to take the appreciation of the house into account. You may be paying back way more than you borrowed but in a 30 year period the value of the house should go up considerably also. In my area of NJ houses that were bought for $85,000 in the 70s are selling for over $600k.

Wow, this thread just goes to show we need more education on how money works in our school systems. I have no idea where to even start.

First let me say to the poster that said if your mortgage is sold to a new company they can change your rate to whatever they want---this is so wrong! Your mortgage has terms that guarantee the interest rate, payback period, etc. Mortgages are sold all the time on the secondary market. The new lender assumes the mortgage "as is" and cannot make changes to the terms of the contract.

To those who have talked about home appreciation, you are absolutely correct. Sure appreciation was improperly inflated in recent years and is correcting in many parts of the country, but a home will increase in value over the years, assuming it is maintained. The home you buy today will almost certainly be worth what you paid back over the 30 year term of your loan...or awful darn close.

Additionally, you get a mortgage interest deduction on your taxes.

And of course it will be that you paid back more than 6% in 30 years as total interest paid. Would you invest your money today knowing that in 30 years time you would only receive a total return of 6%? Of course not! But 6% per year would perhaps get you to invest. 6% compounded over 30 years is of course more than 6% total...but it is still 6% PER YEAR.

The whole "front loading" concept is not exactly right either. You simply pay the rate on whatever balance you have each month. Based on a fixed amortization loan your payments are calculated so you know how much per month you'd pay in equal installments to retire the debt in a specific amount of time. If you make the equivalent of one extra monthly payment each year to principal reduction you can significantly reduce the number of years of payments, because you are paying down principal. Go to an amortization calculator on the web and try it. Interest due changes every time you make a payment, because it's based on the outstanding principal balance.

The amount you pay back is fully disclosed in a mortgage. You also get an amortization schedule showing how much of each payment goes to interest and principal. If you don't like paying interest...don't buy a home. Pay rent instead. OOPS. You're still paying interest when you do that also...you are paying the landlord's interest, so he can own the home free and clear while you and other renters have made all his payments for him. Plus you get no tax deduction on your payments, you gain no equity and no home price appreciation.

Investing in a home is for most people a wise thing as long as they do not extend themselves too far to do it. Even very wealthy people keep a mortgage on their home due to the tax deductions and low interest rates. They know how to get much more yield on their investments elsewhere.

Besides, home equity is very over-rated. The only way you can tap into this equity is to either sell your home or take a loan against it. If your credit is bad or loan guidelines change you may not even be able to get to this equity that you "own". I ask you this: who is better off, the man with $100,000 in cash and a $100,000 mortgage...or the man with no cash and no mortgage? Obviously you are better off investing your money and having only minimal equity in your home...if you have to choose. Sure we'd all like to have tons of cash plus our home fully paid for, but for most that is not possible, at least at a young age.

Sorry but there is no conspiracy here...just simple mathematical principles at work.

By the way...no one mentioned the fact that this compounding of interest works exactly the same when YOU invest money. If you invest wisely and start at a young age you can have a significant nest egg on a very modest annual investment. Is that a conspiracy to make us all rich?

[edit on 18-5-2008 by Coach Knight]

Unfortunately, this medium does not lend itself to my intended audience, but...

Ever get mad that you don't own a home?
- if you can't read (or concentrate), you can't read your mortgage docs.
Ever get mad that your house payments just doubled? i mean tripled?
- even if you can't read, if your math was sound, you may have wondered what that "27%" was doing in the document, when your interest rate they said was 5.8% hmmm...
Ever wonder how much money you make sellin drugs? but you don't know how to do the math?

Even drug dealers can use scholastic knowledge...

Learn to read (for more than 2 minutes at a time).
Learn basic math and logic.
Do the damn work so you don't fall behind.
- Of course he dropped out - I would too if I was 15 and all my classmates were 10!
Ask Questions if you don't understand (applies to life even more so than school).
Ask don't Axe.
Finish High School. (High School does NOT equal G.E.D).

Follow these simple rules and you'll have multiple chances to succeed in life.

ok... gettin just a tad off topic here, sorry...

Originally posted by taybes
You have to take the appreciation of the house into account. You may be paying back way more than you borrowed but in a 30 year period the value of the house should go up considerably also. In my area of NJ houses that were bought for $85,000 in the 70s are selling for over $600k.

You wouldn't have to take that into account if there wasn't so much inflation. Inflation is caused by the banking system creating money. They do it all the time... it's what they buy the world up with (or the debts the use to foreclose on).

I bought a home and land that fail through the bankers cracks!
They won't loan on a Mobile home that is more then ten years old.
Therefore the owner had to finance it himself. I bought it directly from him.
Which cut out all the (middle men). The middle men really don't do anything, but make money off of the trade. If a seller can wait for there money. Seeing it as a good investment, that is earning them a little interest. More interest then a savings account. It works out well for all concerned.
We don't need bankers. We need to learn good judgment and trust others ourselves. Instead of paying bankers to take the risk. Really there isn't much risk for the seller. It is a win, win situation. If the buyer defaults, the seller gets to keep all the money paid, and start all over with a new buyer.
The world is just a victim of it's own lack of good faith!

IMO, the financial system is so broken. It's becoming more and more obvious all the time. And it's only a matter of time before something changes big time. It's historical fact that when most people can't afford homes, can't afford food, etc, interesting things start to happen. We live in interesting times!

Okay, I took a little course a year ago. I was (and still am, when I'm out the Army) getting into Real Estate. Rental properties until I had enough to start flipping houses and such. Looks fun on TV.

Got the Info from The Donald himself (though indirectly, he gave the class but I'm sure he doesn't know or care who actually takes the class) who some here may see as Satan. Anyways.

There are things you can do, especially if you are starting small. Problem is finding the time to do the research, especially holding down a 9-5 like us po' folk do.

The EASIEST way to avoid such interest is to find an individual with a house to sell. Now, you engage said individual and go Tony Soprano... oh, wait... wrong class. You engage said individual and learn his motives to sell. If he's 'in the business' then it's profit. However, not everyone sells PURELY for profit.

He wants to move. He wants out from under the payments so he has more monthly money to do other stuff. He simply hates the house. It's a gift or inheiratence and the taxes are killing him. All sorts of reasons.

Now, and PUT IT ON PAPER where the CONTRACT suits both parties, you approach about a LEASE OR RENT TO OWN OPTION. No Bank Required. (Does need stamped by a Notery) Of course, with a Bank he gets the lump sum (if he OWNS the house outright, that's a pretty penny). That's hard to beat. But you CAN beat that bid.

After all, he get's all that money at once he's in a new tax bracket and the sale gets taxed heavily. He may not see nearly as much as he thought. (Use numbers to back this up, if you have that kind of math skill). Explain how X amount a month gives him the freedom to purchase another item, stow away for savings at a greater interest rate, or what ever he is longing to do (from the interview you got from him when he was trying to interview you). Also explain how if you default on the payments, he's made that much PURE PROFIT because until the debt is paid the home is still HIS, and if he wishes to sell then he may. So you've paid $20,000 into the home and now you can't pay so you break your lease... he's got $20,000 over said period and still has the $150,000 home to sell. (Very strict rulings in contract so you don't get screwed out of your lease, by the way. Wording is damned important.)

One on one deals like these are best, as no interest (at least not crazy ass compounded interest) or fees are needed. Simple straight dealings. Banks are not required IF you can find the right seller for the right reason.

Contract to protect both parties and provide proof. Written reciepts signed are legal documents. Any 'leeways' like grace period for late payments MUST be in writing or after you've paid for it all an evil person could take it to court and win with the right judge, taking the property you completely paid for.

There are risks, and the contract must be used to cover yourself (both parties). However, there are ways to pay $150,000 for a $150,000 house, even if you don't have $150,000 to do it with.

It would be nice if High Schools would teach basic economics and finances so that many more would understand how a mortgage works. I found it rather easy to find an online calculator to determine how much money (principal and interest) I would pay on my house if I made payments exactly as set up for the original life of the loan. It was a lot more than the house price I paid for. However that is how that works.

A few years after getting a 30 year loan at almost 7 percent which I thought was decent at the time, historical rates dropped to record lows. I refinanced at 4.75% and reduced the loan from a 30 year loan to a 15 year loan with only a slight increase in monthly payments. I remember without doing any calculating that I saved over $60,000 over the life of the loan refinancing if I stay in my house the whole time without moving to another one. I thought figuring out things like this were simple. However I do feel a bit left out that some people had their homes appreciate 200 to 300 percent over 10 years while mine has only gone up around 20 to 30 percent over that time. If my house is still going up 2 percent from last year while the others has gone down 20 percent, the 10 year homeowners are by far way ahead of me in those better housing markets. You can't win them all. A house is a place to live not to speculate for a fast buck in my opinion. If you speculate, you sometimes have losing trades and need to be ready for that. If not, then you shouldn't be speculating. Just my opinion.

I do feel bad for all the newer homeowners in the last couple of years that were not trying to flip their house for profit but just got into a bad market at the wrong time. Unfortunately I believe there are so many people in a bad situation with their Alt-A mortgages, that the national and global economies are going to suffer. If you really want to read financial news and learn more, I suggest reading the comments and some of the stories on www.marketwatch.com
From there you can learn more if you're still interested.

[edit on 19-5-2008 by orionthehunter]

Property prices have near doubled in less than 5 years in my country. The banks were lending money to anyone who wanted it. The trend is starting to reverse and the property is reflecting its real value. Most people who entered the market in that time are starting to bail out selling the houses of for half the mortgage value. The trend is these people are ending up in $100 000's of dollars worth of debt, not including the credit cards with no assets to show for it.

Why has the same pattern occured in all these different countries?

Is there a worldwide effort for underhanded wealth redistribution to the upper classes?

The only thing that surprises me about this is that ANYONE can be surprised by how Compound Interest works.
It's simple maths.
The Banks do not actually have the money you "borrow" either - again this is no surprise. It's simply moving numbers around electronically.

The whole financial system only works because people still BELIEVE it (money) is worth what they are told. It's all a matter of trust.
Real money?
Once we all went off the Gold standard, and had to have gold worth the banknotes issued, and instead went over to the stock market for money value,. things have been insane.

As far as mortgages go - why the pressing urge to own a house? Not everyone can be landed gentry and mortgages are the systems way of keeping you a good little neuron in the collective.
Rental - Public Housing - is a fine thing.
Here in the UK, prices are so much higher than you lot over in the states. You do not seem to realise when you have it lucky. Gas is $12 a gallon here.

Wow.

1) The percentage rate on your house is ANNUAL PERCENTAGE RATE (APR) - your 6% does not turn into 580%. You are paying 6% interest on the remaining balance of your home. This is why you pay more in the beginning - because you have more debt.
2) The time value of money is such that a dollar today is worth less tomorrow. Sure, you may be paying 150% of the sale price of the house, but you won't pay that until over 30 YEARS - the bank is not making that much money off this, because over 30 years the time value of the loan is extremely small.

Finance 101 says if I offer you $100,000 today, or $150,000 in 30 years, the smart person always takes the money being offered now due to the magic of compound interest and the time value of money. But it looks like some people on here would take the later, thinking they are somehow "fleecing" me for 150% of my original offered amount. The joke would be on them, though, so since in 30 years I could invest that original $100,000 and turn it into $300,000.

This is not a conspiracy, its basic math and knowledge of finances...