Question about mortgages

[Mazeman03]

So me and a friend have been debating about if a mortgage is good are bad. I think it's bad she thinks it's good.

So from what I know about them and it's very limited. But what I seem to have got from what I heard about them is this.

A mortgage is a loan you take out on your house. That you have to pay back. And if you need to take one out you are usually having money troubles (low funds) and if you can't pay it back they can take your house away.

What my friend thinks is this. A mortgage helps you pay off your house faster. She says if you take one out then pay it off then the house is yours. Like she thinks it's a way to pay your house off earlier.

I told her that you still have to pay off your house and the mortgage the mortgage doesn't just take over your house payments and make them void.

So now please correct any of use if we are wrong.

But I'd a mortgage good or bad. I know it can be both but I mean in a general term. Not like well in this situate it's good or in this ones it's bad. Just in general is it good or bad to take one out.

I should note we are both 17 and don't have houses so we both dont fully understand it. So don't call us dumb or anything. Help us learn instead of bash us please.

[bking]

A mortgage is nothing more than a way to buy a house now, as opposed to waiting until you have save all the money. You pay for the opportunity by having interest charged.  Nothing more, nothing less.  

 

It doesn't help you pay your house off sooner at all. In fact it takes longer than saving the money first THEN buying since they add the interest.  It sounds to me like your friend is actually discussing buying vs renting.

[Mazeman03]

A mortgage is nothing more than a way to buy a house now, as opposed to waiting until you have save all the money. You pay for the opportunity by having interest charged.  Nothing more, nothing less.  

 

It doesn't help you pay your house off sooner at all. In fact it takes longer than saving the money first THEN buying since they add the interest.  It sounds to me like your friend is actually discussing buying vs renting.

can't you just buy a house and pay in monthly or weekly payments until you pay the full price of the house?

[Mug]

Mortgage law is different in every country.

 

In the UK, you may take out a mortgage to help pay for your house. Nobody usually has the money to buy houses up front so a mortgage is a loan that you can take so that you can afford the multiple hundreds of thousands of pounds it can cost to buy your own place.

 

In some countries, you can re-mortgage your house (sell it back to the bank) if you come across trouble. They won't give you a mortgage, however, if they know that you won't pay it back. It's essentially a loan.

 

However, the thing about mortgages is that they get paid off when you die. This is the reason that they're called mortgages, mort meaning death in French. If a bank doesn't think you'll pay off the mortgage before you die then they won't grant you it either.

 

I've considered taking out a mortgage myself but I've realised it's much better to rent currently as I can't afford the huge deposit.

[Mug]

can't you just buy a house and pay in monthly or weekly payments until you pay the full price of the house?

That's exactly what a mortgage is

[bking]

can't you just buy a house and pay in monthly or weekly payments until you pay the full price of the house?

 

 

That's what a mortgage essentially does. Let's say you're buying a used home - is the seller able and willing to take payments for 20-30 years?  Usually not, so that's what the mortgage provides - full cash-out for the seller, and then the mortgage company gets the money back a little at a time.

[Griffscavern]

Mortgage is the loan you take, from the bank, to buy a house and make monthly payments to them for how ever many years you need to pay off the house.

Your friend is talking about a refinance loan. That's when you already have a mortgage, and want to get better terms for your mortgage. Such as better interest rate, lower monthly payments, and such.

Unless you can buy a house with cash right off the bat, you are going to have to get a mortgage to pay for it.

Until you pay off the mortgage, the bank owns your house. If you fail to pay the monthly payment, for how ever long the bank gives you, they can foreclose on your house, boot you out, and resell it.

[AnonymousGuy]

Someone who actually has a mortgage here.

 

Mortgages allow you to buy a home earlier than would be otherwise possible.  Could I save up $1500 a month every month for the next 15 years and then buy my home with cash?  Sure.  But with a mortgage I can "buy" my house now because someone else is fronting the money and willing to risk me not paying them back in reward for getting interest every month on their investment.

 

Another benefit to having a mortgage and being able to buy a house now is that I can start leveraging the housing market to make a profit now.  My home is worth about 30% more than I paid for it.  That's a substantial amount of money that I wouldn't have been able to make if I was waiting on the sidelines to save up enough to buy it.

 

Mortgages go bad in a hurry when you start giving them to people who can't afford them at all, because when people start defaulting on their mortgages en masse the market gets flooded and prices get driven down hard which normally shouldn't/doesn't happen.

[Mazeman03]

That's exactly what a mortgage is

Someone who actually has a mortgage here.

 

Mortgages allow you to buy a home earlier than would be otherwise possible.  Could I save up $1500 a month every month for the next 15 years and then buy my home with cash?  Sure.  But with a mortgage I can "buy" my house now because someone else is fronting the money and willing to risk me not paying them back in reward for getting interest every month on their investment.

 

Another benefit to having a mortgage and being able to buy a house now is that I can start leveraging the housing market to make a profit now.  My home is worth about 30% more than I paid for it.  That's a substantial amount of money that I wouldn't have been able to make if I was waiting on the sidelines to save up enough to buy it.

 

Mortgages go bad in a hurry when you start giving them to people who can't afford them at all, because when people start defaulting on their mortgages en masse the market gets flooded and prices get driven down hard which normally shouldn't/doesn't happen.

so a mortgage is just getting the money you need to buy a house from the bank so say 200k and then you just paying the bank back that money?

[Griffscavern]

so a mortgage is just getting the money you need to buy a house from the bank so say 200k and then you just paying the bank back that money?

Yes. That's what a mortgage is.

[Yoinkerman]

can't you just buy a house and pay in monthly or weekly payments until you pay the full price of the house?

What you're talking about is exactly what a mortgage is.

[Yoinkerman]

so a mortgage is just getting the money you need to buy a house from the bank so say 200k and then you just paying the bank back that money?

There's more to it than that, but essentially, yes. A mortgage is a loan to buy a home where the collateral for the loan is the home.

[AnonymousGuy]

so a mortgage is just getting the money you need to buy a house from the bank so say 200k and then you just paying the bank back that money?

Yes.  The bank makes profit in the form of interest.  They're using money to make more money in the long term.  You're $200k mortgage will actually end up costing you probably $300k or something (depending on the terms of your loan), and the bank takes $100k in profit (spread out over 15 or 30 years or whatever)

 

Bonus content:

 

Nowadays so-called "micro loans" are becoming popular.  It's basically you as an individual operating as a bank loaning out small amounts of money to people and similarly making small amounts of interest-profit.  The benefit is you get a taste of the "money making money" life, the downside is the loans are more risk since there's no physical object you can use as collateral (like a house that you can take if you don't get paid).

[Mazeman03]

Yes.  The bank makes profit in the form of interest.  They're using money to make more money in the long term.  You're $200k mortgage will actually end up costing you probably $300k or something (depending on the terms of your loan), and the bank takes $100k in profit (spread out over 15 or 30 years or whatever)

 

Bonus content:

 

Nowadays so-called "micro loans" are becoming popular.  It's basically you as an individual operating as a bank loaning out small amounts of money to people and similarly making small amounts of interest-profit.  The benefit is you get a taste of the "money making money" life, the downside is the loans are more risk since there's no physical object you can use as collateral (like a house that you can take if you don't get paid).

so when a person says they took out a 2nd mortgage what would be the point of that? If the first one had to be enough to buy the house and I'm guessing you can't just take one out and use the money to buy anything why would they need to take out a 2nd one?

[Yoinkerman]

so when a person says they took out a 2nd mortgage what would be the point of that? If the first one had to be enough to buy the house and I'm guessing you can't just take one out and use the money to buy anything why would they need to take out a 2nd one?

To leverage the money you've already paid on the house (aka equity) to get another loan. To buy a boat, do renovations, buy a car, put your kid through college, etc. It lets you get another loan while keeping the mortgage you already have.

Hopefully you would get one to do renovations, and after the renovations are done your house increases in value more than what you took out in a loan.

[Mazeman03]

To leverage the money you've already paid on the house (aka equity) to get another loan. To buy a boat, do renovations, buy a car, put your kid through college, etc. It lets you get another loan while keeping the mortgage you already have.

Hopefully you would get one to do renovations, and after the renovations are done your house increases in value more than what you took out in a loan.

so pretty much if you get dented a loan to get a car you can just take out another mortgage

[Yoinkerman]

so pretty much if you get dented a loan to get a car you can just take out another mortgage

Not really, no. Car loans are easier to get than mortgages. If you're denied a car loan you wouldn't be able to get another mortgage. You would use a home equity line of credit to buy a car outright because the interest rates are better, and you own your car outright.

[Mathematical]

so when a person says they took out a 2nd mortgage what would be the point of that? If the first one had to be enough to buy the house and I'm guessing you can't just take one out and use the money to buy anything why would they need to take out a 2nd one?

 

The person might have multiple properties. You might be confused with re-financing.

[Mazeman03]

The person might have multiple properties. You might be confused with re-financing.

idk I heard my uncles say a few weeks ago.cwell I'm gong to have to take out a second mortgage on my house. While he was talking to my dad