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Sure, mortgages are the most common example of leverage for non financial pros. But that's also a reason not to use it as an example. Because even if they're le
by em500 4y ago
Sure, mortgages are the most common example of leverage for non financial pros. But that's also a reason not to use it as an example. Because even if they're levered 9:1 nobody thinks they're wiped out if their house price goes down 10%, they'd think they just need to hold on to it till it recovers.
- hn_throwaway_99 4y ago> Because even if they're levered 9:1 nobody thinks they're wiped out if their house price goes down 10%, they'd think they just need to hold on to it till it recovers. Amazing how time flies. I'm pretty sure anyone who was old enough to own a home in 2007/2008 in a "hot" market knows exactly how mortgage leverage can work on the downside.
- Enginerrrd 4y ago>knows exactly how mortgage leverage can work on the downside. Sorta... Usually when people talk about that, it's mostly in the context of balloon payments and variable rate mortgages where the value of your house dropping coincided with sudden increases to your monthly mortgage payment or large bills coming due.
- hn_throwaway_99 4y agoPartially, but a big difference is that tons of lenders were giving out mortgages in the mid 00s with no or very little money down. When things turned south, people were underwater really quickly, so was easiest/best to just mail the keys to the lender, especially in non recourse states.
- deleted 4y ago[deleted]
- NavinF 4y ago> they'd think they just need to hold on to it till it recovers Well that's the problem isn't it?