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How is that any different than today? When you have a mortgage, you don't own the property; the lender does (only they've also externalized all the risk to the
by caymanjim 8y ago
How is that any different than today? When you have a mortgage, you don't own the property; the lender does (only they've also externalized all the risk to the government via Freddie). If you fail, you might not lose everything, but you lose all the non-principal, which is effectively everything for the first half of the mortgage term. And if you fail while the market is down, you can lose even more than you've paid in.
- graeme 8y agoWhat do you mean lose the non principal? If you buy a $200,000 house with a $40,000 downpayment, you get it back if you default and the house value is unchanged, right? From what I read back then, you would get nothing unless you had paid everything. So pay in $199,999, miss final dollar, lose house, no money returned.
- lazyasciiart 8y agoNon-principal = all the interest you've paid.
- caymanjim 8y agoYeah, by non-principal, I was primarily referring to interest. On a 30 year mortgage, you're paying almost nothing but interest for the first 15 years. And the realtor/title fees and taxes are losses as well. The above commenter is right to point out that the downpayment goes toward principal, though. In the scenario I posited where the housing market declines, you can still end up in the red though.