A 20% down payment on a house means that the value of the house can fall by almost 20% before the homeowner is underwater on their mortgage. It protects both the buyer and the bank. By not requiring a down payment, the bank is gambling that the value of the home will continue to rise.
Discussion
They know know that home values don't rise. The dollar just gets devalued.
Essentially they are betting the dollar keeps crashing, so people need more dollars for homes.
Then they can say "look it gained value!"
Look, there's another way to interpret this:
- Banks are not our friends and they don't care if we (homeowners) go underwater
- Also, they don't collect the 20% collateral, you have to pay it directly to the realtor's company (security deposit +1d after you both agree on the transaction AND the remaining of collateral by the closing date) -- meaning this doesn't go to the bank, that lends you the 80% standing out payment (this goes to the realtors' company and after taking their cut the seller receives it in full, but after closing date)
- The collateral payment is just a way to guarantee that you get into the loan really exposed, with skin in the game, meaning that you HAVE to pay, otherwise if you default, you lose all of the collateral and the bank can dump the house at face value on foreclosure, pocketing-in any interest already paid off
Gibberish.
The balance of the loan must be less than the future sale value of the home so that when you default and they take you home they can recoup most of the remaining loan balance. That's why they require a down payment.
Same goes for cars, which only depreciate. As a rule of thumb, (and this is especially true of used vehicles), the amount of down payment you're required to put down is the amount that the dealership is overcharging you, which is why the bank won't cover it. You know you're getting a good price on a used vehicle if the bank is willing to cover 100% of the sale price.
which part of the banking not pocketing-in your collateral you don't get?
if you had a mortage you would know the collateral goes to the seller on the closing date
and the bank loans you the remaining 80% of the total sale price
collateral is made so you feel the obligation to pay off your debt even if you carry the loan until your death (and that's the plan)
No. The bank doesn't care about you having "skin in the game." You're misinformed. They only care about risk. How much can they recoup in a short sale after they reposes your home?
When they start offering zero down mortgages in a housing bull market it's because they are confident that the cash value of your home will keep increasing, so they're willing to finance 100% of the sale price instead of just 80%.
do you really think the RISK of defaulting a loan (ANY loan) is the same for:
Person 1: paid 20% collateral
Person 2: paid NOTHING as collateral
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Think again...
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Sorry to burst your bubble on the "patrol of the truth" my dude, but *you* are misinformed.
Putting collateral or not, factors-in A LOT during the underwritting process (you know they have underwritters signing-off before releasing the loans, right?).
Again: it's ok to not being aware of this if you've never went to this process. Now ignoring this fact just to prove a point in a conversation with another anon it's another completely different thing. Have a great day!
This is why student loan debt follows you forever, nothing they can repossess
-If that debt was dischargeable, they would certainly take education more seriously to guarantee those loans were paid back.
Great example of an incentive that had a perverse outcome.
I definitely agree.
But I'm also not well versed on what bankruptcy looks like in an anarchist/libertarian community or if it would even exist since declaring bankruptcy is basically a state institution?
Being able to discharge debt is a very debatable topic. On the extreme end if the spectrum you get things like debtors prison. I think I like a credit rating system, just not the current one.
You don’t pay, you dint get more credit until you pay it back. Simple