4 ms·
Honestly, I never understood why a mortgage would even exist at, say, 3% interest ... Why would anyone loan out trillions of dollars at 3% (that also includes
by DataDive 2y ago
Honestly, I never understood why a mortgage would even exist at, say, 3% interest ...
Why would anyone loan out trillions of dollars at 3% (that also includes the risk of default).
The same money in an index fund produces 7% over the long term
Even at a 7% rate mortgages appear to be be less liquid, more risky, and will underperform the market.
Mortgages exist probably only because the govt backs them (aka, taxpayers are on the hook) and allows banks to keep charging bogus paper filing fees on top of it. Banks offer mortgages to charge a 1K "origination" fee ... or whatever it is called.
- nine_zeros 2y agoThere are enormous funds such as pension, state, family funds that require some percentage of assets to be held in fixed income. When the government bond returned only 1%, 3% mortgage fixed income seemed glorious.
- itake 2y agoThere are many investments that need guaranteed payouts every month (like pension funds). Mortgages are very valuable. Checkout this post about mortgages for more details: https://news.ycombinator.com/item?id=40403221 https://news.ycombinator.com/item?id=40403221
- deleted 2y ago[deleted]
- chii 2y ago> Why would anyone loan out trillions ... The same money in an index fund produces 7% over the long term the originator of these mortgage loans want a consistent income from the interest payments, even if it's lower than buying equities. These equities that earn a theoretical 7% is only good in the long run, such as 10-20 years. It might not return anything in particular years, or negative returns in others. If you needed a fixed income stream (eg., an insurance, or an annuities provider like pension funds), you will not want to bet it all on equities. Mortgages, which are collateralized, means you have a buffer for losses if the defaults do happen.