3 ms·

It is only a problem if you can't pay the interest right? Why is that? My home has to be payed in full, interest and the base sum.

by tiku 3y ago

missedthecue 3y ago
That's the difference between a mortgage and a bond. A bond only requires interest payments until the term is up and then it is repaid in full all in one payment.
simonsarris 3y ago
You can actually get an interest-only mortgage, it's not super uncommon, and you could refinance every 7-10 years to keep it interest-only in perpetuity, if you wanted to.
allisdust 3y ago
It does get paid in full at the maturity. It's just that the governments rollover the debt by selling new debt.
- Kranar 3y ago
  Also worth mentioning that for a period of about 8 years the U.S. government had a guaranteed buyer of U.S. debt, the Federal Reserve, who simply printed whatever amount of money was necessary to purchase U.S. bonds on the open market to the tune of what is estimated to have been 4 trillion dollars.
HDThoreaun 3y ago
Interest only mortgages are very common in the commercial real estate space.
marcosdumay 3y ago
In practice, it happens because people die. So they mostly can't get interest-only loans, as passing that loan down to another generation is way too risky. Also, that kind of loan is usually seen as predatory by finance regulators (for good reason). So people are usually required to jump through some hoops to get one. That said, as a sibling already pointed, some times it happens. And companies have a much easier time getting them.
vishnugupta 3y ago
I guess a good measure of tipping point is when the interest payment begins to approach GDP. As things stand today the interest payments is ~$900B[1] and the GDP is ~$25T[2]. Assuming the US govt collects ~10% of GDP as taxes it's making $2.5T. I'd say we are still quite a while away before the aforementioned tipping point. Disclaimer: I'm not an economist and just made up this measure, happy to stand corrected by experts. [1] https://fred.stlouisfed.org/series/A091RC1Q027SBEA https://fred.stlouisfed.org/series/A091RC1Q027SBEA [2] https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location...

It is only a problem if you can't pay the interest right? Why is that? My home has to be payed in full, interest and the base sum.

by tiku 3y ago

It is only a problem if you can't pay the interest right? Why is that? My home has to be payed in full, interest and the base sum.

missedthecue 3y ago

That's the difference between a mortgage and a bond. A bond only requires interest payments until the term is up and then it is repaid in full all in one payment.

simonsarris 3y ago

You can actually get an interest-only mortgage, it's not super uncommon, and you could refinance every 7-10 years to keep it interest-only in perpetuity, if you wanted to.

allisdust 3y ago

It does get paid in full at the maturity. It's just that the governments rollover the debt by selling new debt.

Kranar 3y ago
Also worth mentioning that for a period of about 8 years the U.S. government had a guaranteed buyer of U.S. debt, the Federal Reserve, who simply printed whatever amount of money was necessary to purchase U.S. bonds on the open market to the tune of what is estimated to have been 4 trillion dollars.

HDThoreaun 3y ago

Interest only mortgages are very common in the commercial real estate space.

marcosdumay 3y ago

In practice, it happens because people die. So they mostly can't get interest-only loans, as passing that loan down to another generation is way too risky. Also, that kind of loan is usually seen as predatory by finance regulators (for good reason). So people are usually required to jump through some hoops to get one. That said, as a sibling already pointed, some times it happens. And companies have a much easier time getting them.

vishnugupta 3y ago

I guess a good measure of tipping point is when the interest payment begins to approach GDP. As things stand today the interest payments is ~$900B[1] and the GDP is ~$25T[2]. Assuming the US govt collects ~10% of GDP as taxes it's making $2.5T. I'd say we are still quite a while away before the aforementioned tipping point. Disclaimer: I'm not an economist and just made up this measure, happy to stand corrected by experts. [1] https://fred.stlouisfed.org/series/A091RC1Q027SBEA https://fred.stlouisfed.org/series/A091RC1Q027SBEA [2] https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location...