usury: when banks make you pay the interest first so the principal never goes down

[Generic Other]

Now if I buy a house for 50 grand with 5 percent interest, it should cost me $525 a month for ten years. But they specialize in usury. Which should be illegal. The principal of the loan should be paid off first followed by reasonable interest payments. This is an honest purchase + interest. In ten years, a bank would earn 50 grand + 2500 interest. Funny they have found a way to gouge us for twenty years of interest payments and nothing paid on the principal.

I hope we soon see a shitload of ambulance chasing lawyers offering homeowners a deal on every tv commercial played during "Judge Judy." Lawyers who will sue to force banks to produce the notes or eat the payments for a cut of the interest payments. Sounds fair to me. They would take your house in a nanosecond if you didn't dot the "i's" or cross the "t's." correctly. Why should we act any differently? NO MERCY for banksters!!

[TexasObserver]

1. This will never happen and defies economic logic.

[Generic Other]

19. In Japan deflation is so bad they are renting multimillion dollar condos for 100 yen (1 US dollar)

Never say never.

<snip>
While the effects are felt across Japan’s economy, they are more apparent in regions like Osaka, the third-largest city, than in relatively prosperous Tokyo. In this proudly commercial city, merchants have gone to extremes to coax shell-shocked shoppers into spending again. But this often takes the shape of price wars that end up only feeding Japan’s deflationary spiral.

There are vending machines that sell canned drinks for 10 yen, or 12 cents; restaurants with 50-yen beer; apartments with the first month’s rent of just 100 yen, about $1.22. Even marriage ceremonies are on sale, with discount wedding halls offering weddings for $600 — less than a tenth of what ceremonies typically cost here just a decade ago.
<snip>

http://www.nytimes.com/2010/10/17/world/asia/17japan.html?pagewanted=2&_r=1&partner=rss&emc=rss&src=ig

[Codeine]

23. That's a rather wild claim.

You have a link to that?

[Generic Other]

25. sorry had to find it...

kind of scary.

http://www.nytimes.com/2010/10/17/world/asia/17japan.html?pagewanted=2&_r=1&partner=rss&emc=rss&src=ig

[Codeine]

26. Ah. First month's rent. Teaser rents aren't uncommon.

I'm sure it goes up dramatically from there.

[Generic Other]

30. Except no one's biting...

That's the scary part. Kind of think we are next. It's why I am in the process of paying off my debts and not spending money on anything but necessities. I am going to starve the banks like they've done to so many others.

[TexasObserver]

53. You won't find a lender that allows your note payments to only reduce principal.

You may be able to find interest only loans, but that's the opposite of what the OP proposed.

The OP proposes that note payments go first against the principal debt, with the interest to follow some time in the distant future.

Charging reasonable interest is not usury. It's normal.

[Hannah Bell]

45. it *is* happening, has been for some time.

[TexasObserver]

47. No, it isn't. The OP proposes the note payments should cover principal first.

Interest on the principal gets paid first, then principal is paid with the remainder of the payment, if there is any.

[Hannah Bell]

51. whatever you say, all-knowing one/

2005:

Homebuyers often find interest-first mortgages a smart choice because their structure initially allows monthly payments to be considerably lower than more conventional loans. Traditional mortgages typically require payment of principal and interest throughout the term of the loan; but with an interest-first mortgage, the borrower pays only the monthly interest for a fixed number of months.

Then, when the initial term expires (usually between 3 and 10 years), the monthly payment increases as the mortgage fully amortizes over the remaining life of the loan. Interest-first mortgage products are offered on both adjustable- and fixed-rate mortgages. Typically, interest-first mortgages don’t run the full term of the loan because borrowers tend to refinance when the interest-first term ends. That’s true even with fixed-rate loans.

http://www.cunalendingcouncil.org/news/460.html

Interest-only loan - Wikipedia, the free encyclopedia
In other words, if a borrower had a thirty-year mortgage loan and the first ten years were interest only, at the end of the first ten years, the principal ...
en.wikipedia.org/wiki/Interest-only_loan - Cached - Similar

[TexasObserver]

52. Loans require payment of interest before principal reduction.

The OP suggested that lenders reduce principal first, then later collect interest payments. That's the exact opposite of interest only until the principal is paid on the back end, which is the situation you cited in your post.

Your example is the opposite of what the OP proposed. Your example is interest only with interest payments until the principal is paid at the back end. It is not the reduction of principal first, as the OP proposed.

If the interest is paid current, THEN a debtor can reduce their overall principal by paying down that principal, but that requires extra payments over and above the normal payment.

Read your note and deed of trust, if you have a home loan. It's all explained in detail there.

[Dorian Gray]

66. Interest only

loans are what the OP was complaining about in the first place. They are what got many of us into the financial mess that we find ourselves in these days.

[Statistical]

69. Which is the EXACT OPPOSITE of what OP is proposing. n/t

[karynnj]

75. Wht the OP described IS an interest- first (in fact an interest only) mortgage

This is what the OP is complaining about. This is NOT what the OP is asking for - which is that the principal is paid off first. But you can see this makes no sense because even if you did subtract the payment from the principal, you would then need to add the month's interest to the principal - which when added returns the principal outstanding to the original amount.

[hfojvt]

111. your first error is the assumption that the OP is making any sense at all

he/she is not.

When I was much younger, age 24, I found it ridiculous that my co-worker's $800 house payment only included $25 in principal. I still think that is crazy. I would be paying at least $25 extra every month to help reduce the principal. In actual practice I paid about $800 more every month and paid my house off in 4 years or so.

Of course, the hilarious part was when my credit card company offered me 3.9% interest for the life of the loan. I borrowed about $4,000 and paid it on my house, which was charging me 5.5% interest. The funny part was that my credit card company and my mortgage holder were the same bank. So they basically paid me 1.6% interest to borrow money.

[karynnj]

143. Smart moves on your part!

I knew the OP was completely off base, but like some others here figure I'd try to explain it to him/her and the others who immediately agreed with the OP.

[AnArmyVeteran]

145. If done HONESTLY, interest & principal would be paid EQUALLY the life of the loan.

Paying 4, 5 or many times the value of a home in interest is gouging the consumer. Mortgage companies & banks have virtually zero risk because they can repossess the house whenever there is a non-payment. We are a country full of 'middlemen' who produce virtually nothing, but who feed of off the hard work of others. Wall Street is the ultimate con game. One illegal migrant farm worker produces more for society in one day picking vegetables than everyone on Wall Street does in their lifetimes. You can't eat derivatives, credit default swaps or other banking schemes and scams, but you DO need to eat to stay alive. But unfortunately, the people who produce the things human beings need to survive are paid the lowest, while those who produce nothing get obscenely wealthy. I'd rather be among illegal farm workers than any of the white collar scum who prey on others.

I know the above is an oversimplification, but as a rule it is generally true. Those who produce the most for society get paid the least, while those who produce the least for society get paid the most. I realized this when I was 15 and it's even more true now than it was then.

[Statistical]

147. You can do that.

Simply increase your payment so the principle portion is equal to the interest.

For example $200K loan @ 6% interest for 30 years ~ $1200 per month.

first payment is $200K principle and $1000 interest. So pay $2000. $1000 principle and $1000 interest.

By the 7th year principle will be down to $646.18 in interest so you can drop your payment to ~$1300.

You may say $2000 vs $1200 that is "too much" well that is why the principle portion is so low on 30yr fixed to make the payments smaller.

There is absolutely nothing which prevents you from making a payment large enough for principle is half your payment. You also have the added bonus of a) paying note of in 11 years and b) seeing your payment reduce each month.

[AnArmyVeteran]

149. I know you can repay a loan that way, but INT & PRINCIPAL should be the same.

From the start of the loan until it's payed off in 20, 30 or 40 years the ratio between P and I should remain constant. Banks should not be allowed to front load all of the interest at the beginning of the loan payback. It's just another way for banks to bilk money out of the consumer. The risk for the banks are low because they can always reposses the house if a consumer misses a couple of payments. Then once they reposses the house they can use the same scam on the next person.

I also think it's a joke how much the middlemen make in the selling of a house. It's like dozens of vultures all picking the flesh off of roadkill with fees, charges, inspections, more fees, commissions, etc, etc, etc... Even if a house was just inspected by a prior prospective buyer whose deal fell through the new homebuyer still has to pay to get another inspection. It's a racket. Biting a house shouldn't be much more complicated than selling a lawnmower. But current system was dreamed up by people trying to extract as much money from buyers as they can for the least amount of work. Hell, almost the entire transaction can be completed using computers eliminating all of the buzzards who traditionally circle around the sale of every house.

Lastly, I don't get commissions either. If a house is selling for $100,000,000 and the realtor gets a 5% commission they get $5,000,000, but another realtor who sells a house costing $100,000 gets a commission of $5000. It doesn't take any perceptible amount of difference selling a 10 million dollar house or a 100K house, but the commissions are ridiculously different. (btw, I rounded off and simplified to make the math easier to understand).

[dkf]

2. If you want the principal to go down just pay extra.

Every extra dollar goes directly to principal.

[girl_interrupted]

3. +1,000,000

Absolutely agree with you! And what's truly ironic, is when we had to "bail" these suckers out, they paid no interest, with no exact date for repayment. One of the reasons, I have always hated the Credit Card Bill that passed, it did nothing to protect the consumer, and it allowed guns in National parks. Senator Bernie Sanders had put forth a bill that would have helped curb usury, but that one didn't pass, unfortunately the other one did.


Like you I hope for the same thing...a day in "court" for the banks. But I don't have much hope that will ever happen. But I'll keep my fingers crossed!

[TexasObserver]

9. Interest is the charge for loss of use of the money loaned.

The rate represents a variety of factors, mainly the risk of making the loan, of losing money on the loan, of servicing the loan, and if the debtor defaults, of covering the losses on the loan. Expected inflation plays a role, as does the rate at which the government is paying on its debt.

No lender will loan money on the basis that principal is paid first and interest in deferred until the principal is paid off.

The only people who would do that are your parents.

[Generic Other]

17. Lose my receipt and I can't return stuff to Walmart either

I hate when that happens.

[kenfrequed]

34. right...

But I think a lender should allow you to be paying both interest AND principal simutaneously without paying extra. The idea that you have to cover the interest first seems criminally greedy.

[Generic Other]

35. +1

Thank you.

[tammywammy]

36. Your monthly payment is BOTH principle and interest

Unless someone signs an interest only mortgage.

[Generic Other]

37. The interest payments have never gone down

even when I pay extra on the principal. Maybe they will soon. I am on the last 5 years.

[Codeine]

40. They'll go down dramatically near the end. nt

[tammywammy]

44. Well I have a standard 30 year fixed mortgage

I pay extra towards principle when I can.

I can pull up a current amortization schedule via my mortgage company and you can see I pay less interest with each payment. It may not be a drastic change, but it changes each month. I can also see my current principle balance which obviously has been going down since I first got the mortgage.

[Thav]

65. If you change to bi-weekly payments

You'll pay off the loan 5 years sooner. Essentially you're making an extra payment a year, but it's probably worth it. I did that with mine and I'll save about $15k in interest.

[AnArmyVeteran]

146. What you said is correct, but...

You can be five years ahead on your loan payments but if you miss several payments in the future the house can be repossessed. The banking industry is mostly ran by dishonest people who prey on the most vulnerable.

[Statistical]

72. The interest is less on EVERY single payment

Where do people get such insane "theories" when it comes to money.

Say you borrow $200,000 over 30 years @ 6% interest.
Your payment will always be $1199.10 per month.

However the split between principle and interest changes on each payment. The interest on the 2nd payment is less. Why? It is because interest is calculated on CURRENT balance each month. So for example at 6% interest annually that is 0.5% interest per month.

No you borrow $200K for 30 days you owe $1000 in interest. Your payment ins $1199.10 so $1000 pays the interest and $119.10 pays down balance. 30 days later you owe another 0.5% interest however the balance is no longer $200K it is 199,800.90 so 0.5% of that is $999.00 meaning an extra dollars goes towards interest.

Payment 1 Principal: $199.10 Interest: $1000.00
Payment 2 Principal: $200.10 Interest: $999.00
Payment 13 Principal: $211.38 Interest: $987.72
Payment 25 Principal: $224.42 Interest: $974.68
Payment 37 Principal: $238.26 Interest: $960.84
....
Payment 360 Principal: $1193.14 Interest: $5.97


http://www.hsh.com/calc-amort-results.html?prin=200000&int=6.0&term=30&strt=Jan&stry=2010&full=Yes&ppay=0&apay=0&pay1=0&ppno=0

[karynnj]

81. I think you are confusing the "interest" payment with the "mortgage" payment

Your mortgage payment includes both interest and repayment of principal - and it is fixed over the mortgage. In the early years, the bulk of the the payment is interest with the amount of the principal paid off gradually increasing because the interest charged declines slowly as the principal is paid off. (The interest part is a rate time the current balance) If you itemize deductions, you would have seen that the amount that you can deduct as interest has greatly decreased from earlier years.

[Sherman A1]

56. Precisely

That is how my 15 year fixed loan is structured and all my previous mortgages have been through the years. I do pay a bit extra each month to round up the payment which then reduces the principal a bit more.

[Codeine]

39. You do pay both.

Look at your statement. It will show (usually) how much of your payment is going to each. Failing that there are a number of internet amortization calculators that will show you precisely what portion of each payment you send is going to your interest and what portion is going to principle.

[TexasObserver]

50. They allow you to pay all the principal you want.

When you have a loan in which the payment is some interest and some principal, first the interest must be paid. After that, the balance of the payment (except for various fees) goes to reduce the principal.

If your loan payments are current, you can pay the principal down as much as you like. This will not reduce the amount of your monthly payment, however. Next month, you'll still have to pay the regular amount. If you do make such extra payments against the principal, it shortens the life of your note, but on the back end.

The point is that you pay interest on your loan as long as you have it, and the amount of each payment committed to interest is highest on the front end and lowest on the back end (assuming you have a fixed rate mortgage for the entire term of the note). By paying additional amounts to the principal above the monthly payment, you do pay the loan back faster than scheduled, and you do reduce the number of months you'll pay on the loan.

The interest you have to pay first is the interest rate times the principal.

Assume your home loan is 5% and your loan is $100,000. Roughly, $5000 of your first year's payments will go to interest. If you're paying $500 a month on your loan, that means $5000 in year one of payments goes to interest and $1000 goes to principal reduction. At the end of year one, your mortgage still has a principal balance of $99,000. As time passes, the amount that goes to interest each month decreases slightly, and the amount that goes to principal reduction increases slightly.

[karynnj]

78. That makes no sense mathematically

There are not two amounts - the principle and the accrued interest. There is one amount which is your current balance.

That balance starts with an amount that you borrowed - the principal. There is an agreed upon interest rate. The interest that accrues each period is the monthly interest rate times the balance. At the end of the first month before you make a payment, you owe the principal plus the the principal times the monthly rate (the "interest"). If you pay an amount equal to just the interest - the balance will always be the original principle.

You have to pay more than just the interest to make the principal lower.

[Xenotime]

120. Well said! Excellent point.

[Statistical]

129. All lenders DO give you that option. It is called paying more than the minimum.

Every payment is INTEREST & PRINCIPLE. The payment specified is merely the minimum payment (to meet terms of the note).

If you want to make the principle more then simply pay more.

Higher principle = higher overall payment = shorter loan term = less interest.
Lower principle = lower overall payment = longer loan term = more interest.

You can have either one you want but you can't have both at the same time.


Thus $200K mortgage for 30yr @ 6% works out to about $1200 per month. Your first month that is $200 principle & $1000 interest. Add $800 to the payment ($2000 total) and you are paying $1000 principle & $1000 interest.

[Greyhound]

59. No it isn't. Without the loan there is no money to use.

Interest is charged for nothing more than the special license granted to banks by our government. The newly created money does not belong to them, nor do the deposits held to make their reserve requirements.

[TexasObserver]

97. You keep thinking that. It's not correct, but why educate yourself?

Interest is the cost of borrowing, and it relates directly to the risk of not being repaid.

[Greyhound]

115. I and every student subjected to an economics curriculum.

I don't know where you get the idea that this is incorrect, but I encourage you to expand your education. http://en.wikipedia.org/wiki/Fractional-reserve_banking#References">Here is a link to 40 references through Wikipedia (one stop shopping) where you can start.

Unless of course you think that morons like Ben Bernanke, Milton Friedman, the Federal Reserve Banks of Chicago, San Francisco, and New York, the Federal Reserve itself, The Nobel Prize committee on economics, the central banks of England and India, the Bank for International Settlements, every Congress of The United States since at least 1931, as well as every economics professor on earth just don't understand how this works as well as you do...
:eyes:

[Xenotime]

122. +1 Excellent.

[Greyhound]

140. It's funny/sad that all of my economics professors (3 years of them) agreed that I understand

at least the basics of economic theory by giving me straight A's, but Mr. Authoritarian can't mount a cogent argument beyond "Nuh-uh", and switches to a completely different argument.
:rofl:

ETA; and then runs away.
:rofl::rofl:

[TexasObserver]

124. I know you think you understand it, but you don't.

I've read enough of your posts in this thread to know that you do not understand economics or finance at all.

Your fantasy of how it all fits together sounds like something one might hear at a Ron Paul rally.

When a bank has a loan that goes bad, it is charged off against their capital, and if they have enough charge offs to wipe out their capital, they're insolvent and fail. These are the kind of things you'd know if you actually knew anything about finance or economics.

[Greyhound]

128. The Great Double Whammy of the man with no argument. Attack the poster and try to change the topic.

"When a bank has a loan that goes bad, it is charged off against their capital, and if they have enough charge offs to wipe out their capital, they're insolvent and fail."

This is true, although you ignore the fact that the charge off is also a tax write off, but has nothing to do with the topic, which is usury. There is no reason that the essential functions of banking can not be fee based, for there is no additional expense in creating a loan for $10k than there is for $10M or $10B.

[Statistical]

130. Except the loss is more on default at $10M. A flat fee based bank would reward large borrowers

at the expense of smaller borrowers.

The same flat fee applied to all loans would mean the millions borrowing a little would subsidize the few borrowing millions. I mean no progressive could look at it logically and decide fee based banking would be better than interest based (which is determined by principle balance).

Bill Gates getting $28 mill mortgage would pay exact the same (over principle) than a struggling teacher on a $70,000 condo. Yeah that is progressive. No with interest the interest paid by Bill is a couple magnitudes more than that of the teacher (as it should be).

[Greyhound]

133. That's right and that is why the government was initially given control of our monetary system.

The politicization of that system was the reason that an outside, politically immune organization became necessary (lifetime SCOTUS appointments is another example).

At it's foundation, The Fed is a good, even necessary concept, the problem is in it's implementation. Even then, it was salvageable with the restrictions and divisions imposed by/through FDR's administration (essentially separating the essential public banking functions from private investment functions).

You just have understand that public banking is essential to a functional national economy, while private investment is a completely separate and non-essential activity.

[TexasObserver]

132. A charge off and a tax write off are not the same.

They're two entirely different concepts.

The loan is charged off entirely against the bank's capital, and such is mandated by the bank examiners who work for the Office of the Comptroller of the Currency. They determine if a loan is non performing and must be charged off.

The extent to which a charge off results in a tax write off is dependent upon the end result of the loan which went into default.

A charge off results in diminution of the bank's capital at the moment it is charged off. If the bank, after foreclosure, recovers 90% of the loan charged off, that results in the bank's capital increasing again, correspondingly. Tax write off depends on the business loss that is tied to the entire transaction for the tax year. All of the repo expenses are deductible, as they are business expenses. Any of the actual losses the bank suffers are deductions because they're losses.

[Greyhound]

134. Never said they were the same thing. Please continue...

perhaps you will get back around to the topic at some point.

[TexasObserver]

136. I've covered the topic. You've covered your misconceptions.

We're done.

[tammywammy]

4. Part of my mortgage payment goes to principle each month.

:shrug:

[Tess49]

7. Mine, too. It has always worked like that.

edited for spelling

[Codeine]

10. Exactly.

Not as much as we'd all like, but it's there. If people want to put a bigger dent in their principal they can kick in a little extra with each payment -- that goes to paying it down.

[tammywammy]

12. Yep. ;) n/t

[Statistical]

91. Especially early on.

In the beginning (on 30 year) fixed roughly only 1/6th (depends on the rate but doesn't vary much) of the payment is principle.

So say your mortgage (P&I) is $1200. Roughly $200 goes towards principle. So to DOUBLE the rate that you are paying down the loan only requires $200 extra. $1400 vs $1200. Also mortgage usually includes $200 or more for escrow so in nominal terms the difference is even less.

$1400 vs $1600. Not a huge difference but the second one pays down the loan twice as fast*.

*Later in the loan the portion going to principle gets very large thus to keep paying down the loan twice as fast requires larger payment. Still paying extra $200 per month for first decade can cut years off your loan (and save thousands).

[slackmaster]

86. Same here, in fact over 2/3 of my last payment went to principle

Funny how that works.

[gratuitous]

5. Nope

The standard is and has been for practically ever that payments are credited first to accrued interest and then to principal. Boilerplate language in about any loan document, and really the only logical way to go about computing payments.

But as to your other point, yes indeed, the colossal fuck-up of the big money boyz should cost them dearly. Whether it will actually happen is another story. But it doesn't seem right that entities should be able to foreclose on properties on little more than their own say-so. Make that downright illegal.

[Generic Other]

11. Let them settle with all the homeowners whose mortgages are lost

I'll make a deal. I have paid every single month on my mortgage + extra. Hasn't reduced my principal in any appreciable way. My mortgage was sold repeatedly in the first few months I had it. Countrywide, Stanwell, Wells Fargo...who knows who all...I would like to see the note. May demand they show me a copy when I send in my next payment.

[gratuitous]

112. Check your mortgage

It sounds like you may have gotten an "interest only" mortgage which provides for payments of interest only. In your original example of a 10-year mortgage at 5% on $50,000, the monthly payment according to the handy-dandy amortization template in Microsoft Excel should be $530.33.

There are free on-line loan amortization websites all over the place. Enter the loan amount, the annual percentage rate, the length of the mortgage and a starting date, and you'll get the monthly payment amount. If the monthly payment amount for your mortgage is lower than what the program says, you may be paying an "interest only" mortgage, which may not be what you wanted to sign up for.

[datan]

6. check your maths

if interest is 5% that means 5% per year

[Generic Other]

14. Ah...so usury

5 times 30 = 150 grand for borrowing 50?

[Codeine]

18. Check your dictionary.

Usury is interest in excess of legal limits. Amortization is not usury, and it's hardly a new concept. If your grandparents had a mortgage it worked exactly the same way.

[Generic Other]

20. Exactly how they lost their farm in the Depression

So that makes it right?

[wickerwoman]

61. Sorry, but

most people didn't have mortgages before and during the Depression. In the 1920s you could only get a mortgage if you were already relatively rich and could afford a massive down payment (like 50-60% of the cost of the home) and you had to pay it back in three to five years.

FDR securitized mortgages with the National Housing Act of 1934 which meant that people could get 30-year loans with much lower down payments and pay back the mortgage in monthly installments.

http://en.wikipedia.org/wiki/Federal_Housing_Administration

http://en.wikipedia.org/wiki/National_Housing_Act_of_1934

People lost their farms because they took out loans in the spring for seeds, equipment rental and labor and then couldn't pay back the loans in the fall because their crops failed or the price of whatever they were growing fell through the floor. Nothing to do with home mortgages.

[TexasObserver]

103. Then don't borrow money to pay for what you want to buy.

What you're suggesting over and over is that you should borrow money without the person or entity from whom you borrowed the money getting paid a reasonable return on THEIR risk. Their risk is that you will not pay them back, and they'll be stuck paying for your investment decision.

No one is going to loan you money for free except your family. Not banks. Not credit unions. Not your boss. Not your next door neighbor.

Instead of WISHING it was different, you might try understanding the tutorials many here have tried to give you. If you can't understand it, then say that, and be done with it, but it won't change the fact that your pipe dream will never happen.

[Bluenorthwest]

82. Actually, the primary definitions of usury are not about 'legal'

the lending of money at exorbitant interest rates. Usury can exist within the law, especially when laws are written to favor the usurer. Excessive interest is usury.
What you are foisting as the definition is actually the third form of use, to be exact a specific subset of the third form. Yes, interest in excess of the law IS usury, but that is not the only form of usury, and many forms are within the law, here or in other places.

[TexasObserver]

127. The only definitions that matter are the legal ones.

You can talk about your perceptions of usury all you want, but for purposes of discussing commercial or personal loans made by persons in the business of loaning money, only the legal definitions of relevant state and federal law matter. If it isn't usurious under the controlling law, it isn't usurious, as a matter of law.

[datan]

24. no

no
assuming a 30 year mortgage, the 5% will be on the remaining principal each year.

so the total amount repaid would be less than 150k (roughly $46k interest on a $50k loan)

[Generic Other]

27. Well it's a lot of money, and one should keep their books straight don't you think?

I am not on the side of banks. Nevertheless, I am still paying my mortgage and have never been late, but I will be demanding and scrutinizing my note in the next payment. Am I wrong to do that?

[lumberjack_jeff]

105. If you're able to make your payments, there's no reason to demand your note.

"produce the note" is a hail-mary tactic to avoid foreclosure.

Even looking at it from a purely mercenary standpoint, if you make them produce the note today, they'll have it readily on hand if you ever do default.

[hfojvt]

121. welcome to DU

:hi:

and thanks for trying to talk some sense to an old-timer :patriot:

[MiniMe]

55. Your math is wrong

It is 5 times the unpaid principal. The amount of interest goes down every month, only by a slight amount at first, but it does go down. In the middle of the loan, you may be paying half to interest and half to principal. Towards the end of the loan, most of your payment goes to principal. That is the way loans work. There is a cost of borrowing money, mortgage loans are much more reasonable than something like a credit card, which is also a loan. Mortgages are structured so you pay off the loan in the amount of time the loan is for. And selling the loan shouldn't affect the amortization of the loan at all. Your original loan paperwork should still be what the loan is based on, no matter now many times it is sold. Ask for an amortization schedule, that will show you how much principal and how much interest is being applied.

[Xenotime]

123. Looks like a forumla for the rich to get richer to me.

[Codeine]

8. That's not how interest works.

Did they have an econ class at your high school?

[tammywammy]

13. Econ? I covered amortization in basic college algebra. n/t

[Codeine]

15. We dealt with it in a very simplified form in economics in high school.

We didn't learn how to calculate amortization, but we learned conceptually what it was and why it would be used for something like a mortgage. That way we wouldn't be as shocked as the OP when we got our first statement later in life. :evilgrin:

[tammywammy]

21. I don't remember much of my high school econ

I knew enough about amortization to understand it when I bought my home a few years ago. But then college algebra covered amortization, by hand, and a separate class taught Excel amortization. Woo.

[Statistical]

138. delete

oops wrong spot

[Generic Other]

16. Losing my note is also not how it works

How it works and what is usury, what I have to feel sympathy for banks for losing is not the same thing in my econ book.

And no. I don't give squat for money. I took art classes.

[Codeine]

22. Not giving squat for money is why you're so confused here.

I don't give a squat for it because I don't have enough of it to matter, but if you're dead ignorant of the most basic of economic ideas it's probably not a good idea for you to even enter into a mortgage agreement, or to try to use words like "usury" when you don't have a clue what they mean.

[datan]

28. reasonable

5% is a very reasonable rate of interest.

it covers stuff like risk of default, uncertainty over future inflation/interest rates, cost of servicing the loan, etc.

put it this way: if you had $50k, would YOU lend a complete stranger off the street a secured loan to buy a property at 5% interest/30 years?

[Generic Other]

31. I signed the note and agreed to the deal

and as long as the proof still exists, I will pay.

[Generic Other]

29. My house is nearly paid off and I have relatively few debts

I make a decent income. Money just isn't the main motivator in my life.

I do care about people less fortunate than me. And I hate corporate greed and unbridled capitalism. So, yes, I really have no right to live.

[Codeine]

32. I'm also not a fan of corporate greed.

And I'm a socialist. But please understand that you're railing against a very simple interest formula used all over the world for the lending of large amounts of money that will be paid back very slowly. Notes, record-keeping, capitalism -- these are all separate issues to the question of amortized interest.

[Generic Other]

33. I think the banks have made too much profit over the years

They didn't pay interest on money they borrowed but charge me interest. They did it with student loans too. They got their cuts. I begrudge them. Big deal.

I thought the bailouts should have paid off all Americans' debts, not be handed to banks who did nothing for us. I think if they lost our notes now, they should lose. Isn't that how capitalism works? Some win, some lose?

[kelly1mm]

38. Upthread you stated that you have made payments but the principal

had not reduced much. Now you are saying your mortgage is almost payed off. Which is it?

Here is your quote from above:

" I have paid every single month on my mortgage + extra. Hasn't reduced my principal in any appreciable way."







[

[Generic Other]

42. Mortgage was refinanced as interest rates came down

Just feels like less to go.

[Statistical]

74. If your house is nearly paid off then it looks like a mortgage was a valuable and useful service.

Right. Since it is unlikely you would have saved enough to buy the property w/ cash.

Kinda strange to bash the system that enabled you to own some real property forever (can be passed to estate) in just 30 years (less if you chose to simply pay more each month).

[hfojvt]

110. hate seems to be making you unable to reason properly

I am not sure why I should consider somebody who buys a $150,000 house with zero down and later gets foreclosed to be "less fortunate than me".

Mose of the people less fortunate than me are renters.

[Bluenorthwest]

83. The OP's use of the word 'usury' is dead on correct

While you were learning amortization in High School, it seems you glossed over the vocabulary. The word 'usury' means excessive interest, the legality is not a factor. Being in excess of the law is one form of usury, but it is not required that a charge be illegal for it to be called usury. That is just how it is, the word has a meaning, you are trying to make the meaning far more specific so that it fits your screed against the other poster.
Usury can be within the law. Yes indeed.

[Statistical]

90. 5% interest isn't excessive.

Obviously the longer you take to repay money the more interest will be paid 0.1% interest over 10,000 years would result in a large nominal amount.

One also has to consider the effect of inflation. Inflation is a cost component of interest rates.

Lets say I "know" you won't default (thus 0 loss risk), I also don't want any profit but I also don't want to lose money. I would loan money to you at 0% right? No I would loan you money at rate of inflation. The only measure of wealth is in real terms (adjusted for inflation). Inflation has historically been 2.5% to 3.0%.

Thus lending at 2.0 to 3% above inflation on an loan that does have risk (low risk but still some risk) is hardly usury by any definition of the word.

[Dr. Strange]

93. Is 5% really usury?

What interest rate would qualify as appropriate?

[Bluenorthwest]

99. I am talking about the word, not about the numbers

The other poster claimed 'usury' is defined as illegal interest, when legality is an aspect of some usury, it is not required that a law be broken for usury to be the proper word. Any terms or interest rates that a person considers excessive, that person can name usury and be employing that word correctly. Now, the subject of what rate is and is not usury is a different matter. I am talking about the definition of the word, and the fact that legality or illegality is not a required factor for the word to be properly used.
The question you are asking me has nothing to do with the point I am making. 5% sounds fine, but if the customer buying it thinks it is too high, they can call it usury and be using the word properly. That is the point. 1%, 5%, 333% if it is excessive in the eyes of the speaker, usury is the correct word.
A rate can be both legal and rightly called usury. This is my whole point. We have posters claiming that the word means 'illegal interest' when that is not the actual definition of the word. The definition of the word does not contain nor require figures, numbers, or any set point of what is or is not excessive.

[TexasObserver]

104. Only in your head and the OP's head, which doesn't count.

Usury is what the law says is usury, not what you think it ought to be.

While the rates charged on some loans are excessive and are higher than previous usury limits, it isn't usury unless the law defines it as such.

All you're saying is that you THINK it is usury, but that's because you want usury to mean something it doesn't mean.

[lumberjack_jeff]

96. not caring squat for money isn't a good option.

With all due respect, your adult decisions will generally revolve around money. If you don't want to be a victim of unscrupulous people, you need to accept some education in the subject.

This may seem unkind, but it's the truth. Compound interest only works one way, but there are a bunch of variations on that general theme created to victimize the ignorant.

[TonyMontana]

114. LOL

I don't give squat for money. I took art classes.

You got that right!

[defendandprotect]

41. Congress needs to return to USURY laws -- student loans used to be 6 year limit ....!!!

Top profits were 10% --

What does it cost to borrow $5,000 from a bank and what does a deposition get

when they deposit $5,000 in a bank --

besides a hassle provlng who we are --

If you're not laundering drug money you do have to do that!!

[Generic Other]

43. The student loan money isn't even theirs and they charge exorbitant interest

This money should be interest free. The government can do that!

[tammywammy]

46. LOL, the govt charges around 7% on student loans. n/t

[Generic Other]

48. So? They shouldn't.

Investing in Americans' educations should not be a profit making operation. And letting banks handle the money and take a cut is why so many students are in poverty after college. When students default, the banks rub their hands gleefully!

Also the government charged 7% at a time when banks would have charged 3 times as much. They need to lower the interest rate considerably -- 0% for those with 3.00 GPA and above or those who do public service after graduation.

[Statistical]

107. Well it is 4.5% now and tax decutible

thus the after-tax rate for someone in 25% bracket would be 3.375%. Considering historical inflation is about 3% that ia 0.075% interest in real terms. Pretty amazingly good deal.

There is no reason for the banks to be involved though. It is govt, and govt insured. Banks simply "process it" collect a fee (paid by taxpayers) and collect guarantee from govt in a default.

No reason that 100% every single loan for school is from dept of education "direct loans".

[defendandprotect]

49. Agree -- but kids and parents are paying these loans off after 20 years and more!!

[struggle4progress]

54. Does your mortgage agreement allow the lender to use one of those weird old

pre-computer-days approximate formulas to calculate how much of the loan you've paid off at any point?

Back in the pre-computer era, when people had to work out the mortgage tables by hand (if they didn't have access to published tables) there were some popular quick and dirty rules-of-thumb that allowed people to app
Some of those rules survived much longer than they should have: I remember reading an article in the 90s about people who'd paid their mortgage for years and then discovered, when they wanted to sell their houses, that they somehow owed more than the original loan amount -- typically, they would be more or less OK, if they hung onto the property and made the required payments until the end of the mortgage term, but they'd get screwed if they tried to cash out early

Check your mortgage agreement to see if it contains some special language like "the bank can compute the outstanding loan balance by using the <flibberty-gibbet> rule"

[Turbineguy]

57. The system during the past decade was based on

1) collect a fat commission
2) collect fees
3) make money move faster
4) houses will increase in value forever (in any case, houses in the US at the top of the bubble were cheap compared to Western Europe).

The greatest rewards were given to those who made the worst loans. Wall Street sold bogus investments.

[Greyhound]

58. This is common practice in car loans, but in what state is this allowed?

And BTW any interest is usury, outlawed in the Old Testament and spoken against by Jesus. I'm betting the Qur'an didn't look too kindly on this totally illegitimate practice as well.

In any case, the practice you describe is illegal in every state I've lived in.
:kick: & R

[exboyfil]

63. Good luck getting a loan for anything then

Save your cash at 0 percent interest until you can buy what you want. Or you can speculate by buying something like gold which may or may not increase in value over time to obtain a proxy for interest.

Do you keep your cash in a mattress or an interest free account?

The Muslims use some creative techniques to get around their scriptural ban. In effect the bank maintains ownership until all payments are made, and the payments total higher than the purchase price. Other methods involve equity positions in the property, and the home(owner?) gradually assumes a higher and higher equity position with the payments until it is owned.

I am not sure what happens in a default position under Muslim banking law for mortgages. The bank still owns the property - are they required to pay back all the payments that were made or can they go ahead and sell the property out from under the current occupant?

Any one have any experience with the sharia law "mortgages"?

[Greyhound]

116. How does this refute the definition of usury?

The point is that usury is only the worst (for anybody not a bank) way to finance the operation of currency circulation. There is not one function that could not be paid with a straight fee for service and the only reason we have this system is that interest represent and infinitely variable sliding scale, and therefore is not nearly as profitable for the banks.

[Gaedel]

76. During medieval times.....

The Roman Catholic Church was opposed to usury so charging interest was illegal.

If a landed lord needed money, he pledged some of his land. The lender (often a diocese, monastery, or convent) collected the rents from the land until the loan was paid back and, in the event of the lord's death, took possession of the land.

Not like them "eeeevull joooze" who wanted usurious interest for a loan

[Greyhound]

118. And yet they ("eeeevull joooze") outlawed it in their Book.

We practice usury simply because it is a great scam that creates an infinite opportunity for infinite profits.

[old mark]

60. This is very common practice with mortgages - we have ben trying to pay off our

remain ing mortgage for 4 months now - we cannot get the company to give us the correct paperwork. They are making a ton on the interest, and out payoff would be about a third of wht they would get under the full term of the mortgage.

We are going to a lawyer next.

mark

[NNN0LHI]

67. Can't you just send them a check for the remaining balance?

Thats what I did.

It was easy.

Didn't need any lawyer for that.

Don

[Statistical]

70. Really why not just make really large payment?

Interest is based on balance due.

So if you pay your loan down to "close" i.e loan is $50,287 you pay $50,287. Now it might now pay off the loan but the remaining balance (interest acrued since last payment) would be very small. You could then pay it off the next month.

" They are making a ton on the interest"
Then pay down the balance by 99% and reduce interest by 99%. 1% of potential interest is a lot less than 100% right?

[slackmaster]

89. That's frustrating. I'd take an educated guess of the payoff amount, subtract $1,

And send them that as a principle payment.

[old mark]

113. The payoff statement came in the mail today. We will have it paid off by mid November.

They need the exact amount and the routing number for their bank.

Part of the problem is that every time you get someone from that company, you are speaking to someone in India, and everything you want has to go via computer to the US offices...sometimes it gets lost in transit, or plain ignored.

mark

[quaker bill]

62. it is all money

If you apply the funds to the principle, then the interest reverse amortizes. You end up paying the exact same amount of money either way.

I have a simple interest mortgage from a credit union. I pay the interest, plus a small slice of principle every month. If I throw an extra payment in, my payments drop the next year, because the interest the Credit Union earns on the balance decreases, so I owe less. In my case, there is no pre-payment penalty. In some cases there are pre-payment penalties. If you don't have such a penalty and can afford it, an extra payment a year will shorten a 30 year mortgage to a 22 year term, build equity, and save you a ton of interest.

[ThomWV]

64. That's not what Usury means, not today, not yesterday, never.

[Bluenorthwest]

84. Dupe

[Bluenorthwest]

85. Here is what it means:

Definition of USURY
1
archaic : interest
2
: the lending of money with an interest charge for its use; especially : the lending of money at exorbitant interest rates
3
: an unconscionable or exorbitant rate or amount of interest;

[Statistical]

68. If you want more applied to principle .... then pay more.

Nothing prohibits you from paying $625, $825, $925, or $2525 a month.

Ammortization isn't usary.

"In ten years, a bank would earn 50 grand + 2500 interest. "
That would be 0.5% interest not 5% interest.

Interest is per year not per loan. If it wasn't then I would get be a 10920391234084923147312904324 year mortgage at 5% thus paying about 1 penny in interest per year.

Longer loan means lender's money is tied up for longer thus more interest paid. Pretty simple concept.

[Mimosa]

71. Informative topic! Thanks. n/t

[karynnj]

73. Where you go wrong is that you should pay more than $525

You are correct that if you just pay $525, you always owe 50 grand. In your example, the bank would earn $2,500. To say that it earned 50 grand plus that is simply incorrect - the 50 grand was theirs and is still theirs.

[Donald Ian Rankin]

77. It should work however the contract you chose to sign says it works.

If you can find someone who wants to offer you a loan on the terms you want, great. If not, either take a loan on the terms available or don't.

[Yeshuah Ben Joseph]

79. The so-called "fundamentalist Christians" should be all over this.

Usury is mentioned a lot more often in the Scriptures than homosexuality or anything else they like to complain about.

http://www.tentmaker.org/lists/UsuryScriptureList.html

[taught_me_patience]

80. 26 net recs shows the financial ignorance of many DUers

and is actually pretty disheartening. Ammortization is basic finance and has nothing to do with usury.

[Bluenorthwest]

87. Usury has to do with taking excessive interest

Not the methods used to calculate the interest payments. If a person feels interest charges and terms are excessive and unfair, it is absolutely proper to call it usury. That has zip to do with amortization. Many of the more numbers oriented posters show they are ignorant of the meanings of words, and thus spend much time explaining what others know because the terms confuse them.
Usury originally meant 'any interest charged' and now it means 'excessive interest charged'. If one sees it as excessive, it is fine to call it usury, no matter what charts and formulas are being used.

[Statistical]

92. Calling 5% interest (2% above historical inflation) excessive and unfair is stupid.

"If one sees it as excessive, it is fine to call it usury"
Yeah and it is fine for people to point out that is stupid.

Also you will notice the OP didn't complain about the amount of interest but rather the specific method of calculation (amortization) which undermines you argument.

[Bluenorthwest]

101. No it does not.

I'm not talking about the figures. I first responded to a poster saying 'check your dictionary' and claiming the word usury means 'illegal interest' when it means excessive interest. That is my entire point, that the word is the right one. You can take issue with calling this case usury, and I might join you in that. However, that still does not alter the definition of the word to simply mean 'interest that is against the law' when it means 'interest that is excessive'. For most of the history of the term, it meant any interest charged at all, and it was illegal to charge interest on a loan while being a Christian. So on the original level, any interest charge is usury, any at all is excessive.
Point is, while the word might not apply to 5% interest, it does not require a law to be broken for the word to be applied.
My point and the one you are addressing are not the same points at all. Words have exacting meanings, and while you might take issue with the OP's choice of the word, that does not change the definition of the word. And that is my point.
Billions of people right now see any interest charge as immoral, as usury. Even 5%. So when they use the term usury to mean any interest charged, they are using the word correctly, even though I do not agree with their view. The word is still being used properly, because usury does not mean 'illegal' it means 'excessive' and excessive is clearly a term up for debate globally.
Words have exact meanings, much as numbers do. Usury still means what it means, even if you do not think it applies in this context. Sorry if that is a problem for you. Take it up with Webster.

[Terry in Austin]

98. That's the story that usurers tell, anyway

"Usury" traditionally meant any charge of interest. It's the basis of capitalism, so now it means "excessive" interest.

Who's to say what's "excessive," anyway? From one point of view, it's like saying "don't get too pregnant."

Interest is fictitious money -- even capitalists admit that an economy is obliged to grow by about the going rate of interest in order to service its debt. And that's just to stay even, just running in place.

Bankers create most of the money, about 90%, and they pretty much run the show. They ARE capitalism. Basically, no interest, no capitalism. That'd suit me fine. YMMV.

[hfojvt]

151. so then anybody with a savings account or who owns a bond

is a usurer.

And bankers do not really create money - the financial system and financial activity create the money by spreading it around. Unless people put money in the bank, the bank has no money to lend. Once it lends the money, borrowers buy things and build things and then that money goes throughout the economy as it gets spent, it becomes income which then gets spent again. Except for reserves and time, which reduce the multiplier effect.

[lumberjack_jeff]

100. Banks suck!!!

And they invented all this hard math.

:sarcasm:

[TexasObserver]

106. Sad, but true.

I can't believe we have to explain a 5% mortgage with a 30 year amortization requires heavy interest payments in the early years.

There's an easy way to avoid paying interest. Don't borrow money!

I wonder if any of the proponents of the OP's approach would be happy to loan me all of their savings, which I would pay back, without interest, over the next ten years. I suspect if they did, they'd eventually figure out why that's a lousy deal for the person or entity doing the lending.

[Gormy Cuss]

125. Or maybe the net recs reflect the interesting discussion and replies to the OP's assertion.

A rec isn't limited to thumbs up on the content of the OP, is it? I think of it more as a reflection of the value of the OP and subsequent discussion.

[Mnemosyne]

148. I've rec'ed OP's for pure discussion value, not to necessarily agree with an OP.

Good call CG! :hi:

[hfojvt]

150. I agree, and it only got worse

and the discussion is not very interesting either.

[slackmaster]

88. If paying principle down is really important to you, get a 15-year loan rather than 30

Half of the first payment on a 15-year note goes to principle, and that portion goes up with every payment (as is true for a 30-year note, but you start at nearly zero interest on those).

Unrec for failing to grasp the basic idea of amortization.

[mainer]

119. You'd think it would be obvious, wouldn't you?

We took out a 12-year mortgage when we bought our house.

If the only way a homebuyer can afford a house is with a 30-year mortgage, maybe they're buying too much house.

[slackmaster]

126. Most young people enter the world of home finance with almost no knowledge

A 30-year loan makes sense if you are very young, or if it's all you can qualify for. If you have a decent source of income and take care of your creditworthiness, chances are good that you'll be able to refinance with a better deal in a few years.

A 30-year loan may also make sense if you are quite sure you will never be able to pay it off (because you are very old or terminally ill, for example). That way you get the maximum tax benefit.

I was just talking to a neighbor yesterday, a man who owns some apartment buildings. He told me one of his tenants is an eccentric man in his mid-60s who has about $100,000 in student loans. Because he hasn't finished his doctoral dissertation yet, he hasn't had to start making payments on the student loans.

Unless the religion he invented takes off and he becomes fabulously wealthy, there's no way that man will ever pay off his debts.

[lumberjack_jeff]

94. You're doing it wrong.

1) the monthly payment on $50,000 @ 5% for 10 years is $530.33
2) If you make the payments on the agreed schedule, the total of payments will be $63,639.60. If you pay additional principal payments, the total of payments will be less.
3) you say that the bank should be happy with 5% TOTAL interest during the entire 10 year term of the loan. As someone posted upthread, only a parent would agree to those terms.
4) interest is measured in terms of an annual rate because a lender is going to want more money to loan it to you for 10 years than he would if he was lending it to you for 1. Consider it analagous to rent. Should a landlord be satisfied with $500 whether you live there for one month or 12 months?

once you've paid off all the principal, how much interest is owed? There's no outstanding balance against which to apply the interest rate. If the principal is accruing interest while you're paying it off, that interest becomes principal... you still owe it, and it makes no practical difference whether you're paying off principal or interest. Your total of payments is still $63,000.

If you want to pay off principal first, make $625 payments. An extra $100 will be applied to your principal, and the following month's interest will be less.

I clicked your post because the subject made some sense; banks offer interest-only loans in which the principal truly never does go down. I'd argue that it's generally imprudent to choose such a loan, but lots of people do it.

It can't work in any way other than the way it currently works. Compound interest is simple stuff. If you don't have money, and wish to purchase something, you must purchase someone else's money. The price you pay is the interest.

[justanaverageguy]

95. A loan is an investment

Investments involve risk. Do you mean to tell me that if you had $50,000 dollars to invest that you would consider it a good investment and a safe risk to give that 50 grand to me and allow me to pay you back in a manner that will at best net you only $20 per month over the next 10 years? If that was the profit standard in the industry NOBODY would be able to get a mortgage cause NOBODY would be dumb enough to loan the money and you'd be on this board bitching about how only the mega rich can buy houses. C'mon get real.

[gmoney]

102. Most loans use the Rule of 78s - front loads interest at start of loan

http://en.wikipedia.org/wiki/Rule_of_78s

"For a 12 month loan, 12/78s of the finance charge is assessed as the first month’s portion of the finance charge, 11/78s of the finance charge is assessed as the second month’s portion of the finance charge and so on until the 12th month at which time 1/78s of the finance charge is assessed as that month’s portion of the finance charge."

This makes it so some principle is paid each month, but a larger percentage of the payment goes towards interest in the early months, then declines as you get closer to your payoff. The last few payments are almost entirely principle. But you're also fighting against interest compounding, which is paying interest on interest on principle over time. This is why the total payments on a $150,000 house can easily end up being over $350,000 for the term of the loan. It's also why it's worth bargaining for the lowest rate you can manage, even an 1/8 of a percent lower, because over time and compounded, it really adds up.

The old figure I recall was that if, when paying a 30 year mortgage, if you took the amount of one month's payment, and every year you made an EXTRA payment towards principle only of that amount, you could pay off the 30 year mortgage in 20 years. Because when you cut away at principle, you're also compounding the interest reduction benefit in YOUR favor.

[hfojvt]

108. I cannot believe this ridiculous post got 27 R's

Must be a bunch of people here who don't understand math and will vote for anything that bashes a corporation.

Paying interest on your debt is not usury. Usury usually involves a VERY HIGH RATE.

[county worker]

131. With that kind of reasoning is it any wonder we are going down the shit hole so fast?

We say the tea party is pretty out of it but some on our side are just as much out of it as they are.

[Greyhound]

137. This is exactly why science uses, first so-called dead languages and now mathematical

terms for definitions. At this time you are right, but only because the meaning has been changed through the evolution of (in this case)the English language.

http://dictionary.reference.com/browse/usury">usury
c.1300, from M.L. usuria, from L. usura "usury, interest," from usus, from stem of uti (see use). Originally the practice of lending money at interest, later, at excessive rates of interest.

Noam Chomsky explains it much better, but as the common understanding or misunderstanding of meanings evolve, the conversation drifts away from the original point and communication becomes impossible as the participants may well be saying the same thing without understanding the intended meaning of the other.

[hfojvt]

139. actually I knew that too

but it seems to me that interest itself has been a very productive thing. Without interest, very few people are gonna take the risk to lend money, nor will they bother to save.

Seemingly the OP was not complaining about interest itself, just making an absurd statement about how it should be calculated and seeming to not understand how payments are distributed and why the bulk of the payment goes to interest at the beginning of the loan.

To some extent, however, the banks only have money to lend because we lend it to them first and they pay us interest. Those of us with savings accounts, at least. Considering the rates of the immediate past, it is quite absurd to complain about today's mortgage rates.

[Greyhound]

141. I figured you probably did.

The OP was off target, but I believe it is due to not understanding how the system really works. Nonetheless, she does understand that the game is heavily tipped in favor of the useless extractors of wealth, and is rightly pissed.

We rarely agree on anything, including this issue, but you do know how things work. All the U.S. currency in existence flows from us and the banks create new money through license from the government which is (ostensibly) us, therefore extracting an infinitely expanding number profits from us, even when such extractions are injurious to all of us, is simply wrong and there are many alternatives to this system.

More and more people are coming to understand that this system must change if we are to ever realize a significant percentage of our product and potential.

Bottom line; we spend far too much of our lives toiling for the benefit of those that produce nothing of value.

[hfojvt]

144. we rarely agree on anything?

I don't think that's true.

I think we both probably agree that this Republican Governor is a major jerk
http://journals.democraticunderground.com/hfojvt/128

and we both agree that Republican tax policies favor the wealthy
http://journals.democraticunderground.com/hfojvt/126

and that billions in tax cuts have gone to the super-wealthy
http://journals.democraticunderground.com/hfojvt/123

and that the media is not liberal
http://journals.democraticunderground.com/hfojvt/100

and that payday lenders are disgusting
http://journals.democraticunderground.com/hfojvt/105

and that Clinton was not very liberal
http://journals.democraticunderground.com/hfojvt/71

anyway, I think we have some large areas of agreement.


But as for this OP, being pissed off is not really a good thing if your whole complaint is ridiculous and incoherent.

[Egalitariat]

109. Your example assumes 5% total interest, when every loan quotes the interest rate "per year"

[Xenotime]

117. Where are you getting houses for 50K? Most banks won't even write mortages that low.

[hfojvt]

142. not true. My house was only #35,000

and lots of houses sell in Lawrence for less than $50,000

although I got distracted looking for a link for that. The Lawrence Journal World puts real estate sales in their paper by amount, but I have not subscribed for over a year.

[Swamp Rat]

135. k&r

:kick: