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Examining the Mortgage racket

Lets say you got a 3 % interest rate on a 100 thousand dollar mortgage. Great rate. Yes, beautiful. You did great in negotiating! But, in the back of my mind, that is still approximately 2989 $ you will pay for one year of that mortgage, just in interest payments. At 50 thousand, it will be 1500. You could pay weekly to really reduce the interest charges down faster. And the banks will tell you this, which is really good of them to do.

In the above case, 3000 dollars maybe one months salary for a family. Maybe one and a half for many. Lets go up to 200 hundred thousand. 300 hundred thousand mortgage? Interest payments, up the yoodlie!

This is something that we were lucky to have. Low interest rates, due to a recession in many parts of the world. We know if the economy was on rocket fuel, these interest rates would go up like an oil gusher. The economy should come back, we hope soon.

To be truthful, I always thought governments should somehow regulate the interest rates on house mortgages. I know you are thinking I am crazy. But, if you see the amount of money a bank makes off of a mortgage in 25 years, it is in the 10s of thousands of dollars in time. Depending how aggressively you move to pay it off. A few extra payments can reduce your interest you pay greatly, if done every year. Still, the bank rakes in.

I think the economy would do well if the government legislated the value of homes. Half the value of homes. It would half the interest rate on new home buyers. It would put half of that interest the bank collects back into the economy. You would have more money to spend, as a first home buyer. Buy that ski doo, four wheeler, or whatever you want to do. Put it away for your childs education.

On the other side of the coin, people who own homes have equity. This is the problem. People who have huge loans on their homes. Or people who were depending to sell their homes, later on in life. Hoping the real estate market would continue to rise up.

Now this creates value for realtors too, when charging a total of 5 % or 6 % rate on a sale. Divided up by the two realtors doing the deal. This value could have changed over time. Home prices rising helps the banks, realtors first, people second.

We seen the housing crisis in the US. When interest rates went up just a little bit. Stock market hit the floor. People unable to pay for their homes. Government stepped in. If the government could step in here, at that point in time, why can't they step in to cut mortgage rates for first home buyers. Go by the principal amount, then decide the rate. 1.5 % per 100 thousand sounds good to me... But we live in dreams too.

Have a good day, till next time..


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