The World According to Glissando

Tag: finance

  • So, how much are you actually going to pay for that $500K house you’ve just “purchased” with mortgage financing?

    Are you familiar with the phrase “a sucker is born every minute?” While P.T. Barnum is credited with coining this phrase, in fact he may well not be the originator. Historians squabble over this, but that’s another story. We’re talking about houses. You know, the “castle.” When you purchase a home with a mortgage, most of us fall into the context of the “sucker” phrase. It is actually a major rip-off.

    Let’s start here. You have just purchased a $500K house with a mortgage. You’re excited. You’re happy. You’re living the dream. But is it really a dream come true? Well, to start with, over the term of the mortgage (often 25 to 30 years), this house will cost you $1.25 million because of the interest over a long period of time. This is the true cost of that house to you. It’s important to keep in mind, as well, that over the first seven or so years you’re paying for mostly the interest on the mortgage. Very little is applied to the principal. Your mortgage company is giving itself a big, up front bonus and you get zinged if you are forced to sell.

    So now your house, which is valued at $500K, is actually costing you at least two and a half times that amount. Is this a good deal for you? The financing company playbook says “yes” because it will accrue value over time. However, life being what it is, there is no guarantee. You have the hope though it will increase, and greatly. At this juncture let me point out that you really do not own your house yet. The mortgage company does, and if you fail to pay, you will lose it. It is only when you have paid out the mortgage that you become the true owner. It’s a lot like cars or anything you buy on credit.

    Now, let’s talk about all the money you will spend on the house to try and keep it looking nice and livable. You need so much stuff to maintain it on an ongoing basis. Where to begin? There’s the yard that needs to be landscaped and maintained. Add to this the cost of maintaining both the interior and exterior over a long period of time. And, of course, there are the various taxes. We’re talking about a long, long and expensive list. Do you think your appliances are going to last 25 years? How about the roof? The carpeting? The windows?  

    This house is going to cost you a fortune. That’s the reality. The initial $500K is just a drop in the bucket. Meanwhile, if you fall on hard times and can’t pay that mortgage at any point in time during the term, you will lose the house. That’s when you realize what a sweet deal the holder of your mortgage has. You have spent all this money on your “castle.” Now you are going to lose it and all the “alleged” value you were accruing. The mortgage company has no problem getting all of their money back. You have to realize that they only loaned you the original $500K. They’ve already got some of their money back from you (through deposit and payments) and depending on the scenario will be able to liquidate it quickly at lower or even much lower cost to get all of their money back or even still make a little money. You have taken almost all the risk, not the mortgage company and you pay through the nose if you default.

    Even if you don’t default and pay off the mortgage, how far ahead are you really. It is true, houses are money pits. Buying a house is presented to you as a shiny, value accruing investment you should take on. Now, I’m not saying you should not necessarily buy a house because in our dishonest and corrupt financial system a house has its place. I just think you should understand the true implications of buying one. It comes with huge expenses (did I mention house insurance, if you can get it), and it needs a lot of TLC (money), especially if you want to possibly sell it down the road. This is just the tip of our truly rigged financial system where a few make a lot of money at the expense of a lot of people. We’re indoctrinated with this system from the day we are born, so it can be hard to “see the forest for the trees.” Hey another phrase. I wonder where this one originated. Going to have to check it out. When enough people say “enough is enough” and “we’re not going to take it anymore,” that’s when change will come. Then there’s inflation, not so good for most of us, but very good for the ultra rich to make even more money. That’s a topic for another time.

  • Lending

    Banks and the Bible. What  does the Bible say about lending money? Banks propagate an image of “being there for you” and “they care about you.” Banks are there for you, but, only if you have money. Banks don’t care about you, they care about money…your money, and how much can they make off your back.

    So, what does the Bible have to say about this subject? There are numerous passages that make it clear if you lend someone money, do not charge interest. There are even passages that say you should lend money without an expectation of getting paid back. Furthermore, for a long time, European Christians were allowed to make loans, but, they could not charge interest. Even the Koran forbids this: you cannot lend money with the expectation of benefitting in some way. Wealth must be accrued through legitimate work, trade and investments.

    Our banks obviously do not abide by these passages. Not only do they charge exorbitant interest rates (check out the interest rate on your credit cards, or, realize when buying a home with a mortgage that you will actually pay 2.5 times the actual value of the home); they pay out ridiculously low interest rates on savings accounts and other investment offerings.

    You should also note that if everyone wanted to withdraw their money out of a banking institution at the same time, banks do not have anywhere near enough funds to pay out everyone, even though it’s your money. Comforting, right?

    I’ve said this before and I will say it again: banks, at best, are immoral and unethical. Can you trust banks? Look at what Wells Fargo fraudulently did in creating bogus accounts at the expense of customers, or, that TD Bank in the United States pled guilty to money laundering and paid a penalty of US1.8 billion dollars to settle the case. Yet, we are brainwashed from birth that banks are our friend. They are not. They want to make money, lots and lots of money, far beyond reasonable amounts. Some things are truly and knowingly rigged. Our banking system is one of those entities.