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> For the lender the benefit is a much larger total amount of interest paid by the borrower over the life of the mortgage. I'm just a layperson, but I don't th
by leetcrew 4y ago
> For the lender the benefit is a much larger total amount of interest paid by the borrower over the life of the mortgage.
I'm just a layperson, but I don't think this is how lenders typically look at ROI on deployed capital. they can only lend so much. unless they are having trouble finding enough qualified people to lend to, I would expect them to maximize yearly returns on capital rather than absolute returns over the full term of a loan. if the interest rate is the same, wouldn't a 50 year mortgage be strictly worse from this perspective?
- staticman2 4y agoIn the U. S. at least many if not most lenders sell the loan after it is made. So their business model isn't about collecting interest every year but collecting a cut of the loan when the loan is bundled into a mortgage backed security when third party investors buy the loan.