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The difference is that in personal mortgages the house isn't expected to be cash flow positive. The bank extending a residential mortgage is securing against d

by ethbr0 3y ago

The difference is that in personal mortgages the house isn't expected to be cash flow positive. The bank extending a residential mortgage is securing against default with the asset (house), but they're guaranteeing the income stream (mortgage payments) against the buyer's income. With a leveraged buyout, you potentially impinge the company's ability to generate cash (with additional debt payments and dividends)... which gets back to the parent's point about borrowing someone else's money.

lmm 3y ago
> The bank extending a residential mortgage is securing against default with the asset (house), but they're guaranteeing the income stream (mortgage payments) against the buyer's income. They're not, because they have no recourse against the buyer. > With a leveraged buyout, you potentially impinge the company's ability to generate cash (with additional debt payments and dividends)... which gets back to the parent's point about borrowing someone else's money. Well a mortgage is even more so by that logic, since the house has no income stream of its own.
- khuey 3y ago
  > They're not, because they have no recourse against the buyer. That depends on which state you're in.
  - lmm 3y ago
    Yes, I mentioned that earlier in the comment thread.
HWR_14 3y ago
Rental properties are also financed with mortgages.