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That’s not how it works in the real world though. A landlord takes out a loan at a particular interest rate, and makes repayments based on that. The bank doesn’
by stephen_g 4y ago
That’s not how it works in the real world though. A landlord takes out a loan at a particular interest rate, and makes repayments based on that. The bank doesn’t “get” the rent, they get the repayment that ideally for the landlord is less than the rental income, unless they’re relying on capital gains. The collateral only comes into account if the borrower defaults, for the lender to sell to make back what they were owed. Otherwise they have no claim on anything to do with the collateral - neither the rent nor capital gains.
- charcircuit 4y agoI was just trying to make up some sort of example where you can gain income by holding on to someone's collateral. I wasn't trying to say how something typically works.
- shkkmo 4y agoThat isn't how collateral works, so you really are just making stuff up. If you did start doing this sort of thing as a bank you would attract regulatory attention pretty quick.
- kristjansson 4y agoYou're basically talking about reypothecation[0] [0]: https://www.investopedia.com/terms/r/rehypothecation.asp https://www.investopedia.com/terms/r/rehypothecation.asp