[age_bronze]

I think mortgages as a concept are bad, and do more harm than good to the people who need to take them. I think gradually banning mortgages, by increasing the minimum required percentage of house price required to start a mortgage all the way to 100% (when you can't really take a mortage), will be a good thing.

The way house investors view mortgages is as a very cheap leverage. So investing in housing will always be fundamentally skewed, because every single person can so easily get cheap leveraged investment in a house, so housing as an investment can perform much more poorly compared to other investment as still beat them by far because of the mortgage. This is so skewed up that a house now has an extra value: as a 'token' to get a cheap loan. This extra value is paid by everyone buying a house.

The way the average family looking to buy a house is completely different: they are looking to compete in the housing market with other families with similar financial abilities, to purchase a house. When you offer all sides of the competition the ability to enter a cheap loan, the side that doesn't take the loan loses the house. But if all sides didn't have the possibility to take a loan and pay more for the house, they would all pay less. Allowing buyers to take mortgages sets them off in a prisoner dilemma against every other buyers, and they all come out losing. If you outlaw mortgages, everyone interested in the house itself wins.

Moreover, once you have lured a family into strangulating themselves with a mortgage, they are now prone to financial stress that will cause them to take loans with much worse terms than a mortgage, therefore nullifying all the possible gains they had from taking the cheap loan. So while investors fully benefit from the cheap credit of the mortgage, families often follow up with mistakes and bad loans which, in total, make the mortgage costly loan.

The more you think about it, the more you should realize the winners from the concept of mortgages are real estate companies, investors and banks, and the biggest losers are the average family which are forced to take it from the Nash Equilibrium of a prisoners dilemma.

Moreover, if mortgages didn't exist, overall spending across the economy would rise, which will be a good thing.

[evanlivingston]

Almost no one in the US has the cash to purchase a home. How would eliminating mortgages not dramatically shift land ownership to the wealthy and turn everyone into renters?

[age_bronze]

Because it would make houses an unattractive investment. Once you get rid of the cheap leverage, housing will never compete with other investments. You always need to pay for like 40% of the house to start a mortgage anyway, this will not change the fact you need a significant savings before you can buy a house.

[evanlivingston]

As another sibling said it's fairly usual in the US for put down between 3.5%-5% for a house. Additionally, There are a ton of assistance programs for low-income people to get cash grants or loan assistance.

If the only way to purchase a home was with cash I suspect that nearly every home would be owned by a real estate investment company. Who else would have the cash to purchase a home? You already are seeing this happen on the west coast. I'm very skeptical that consolidating ownership of land into even larger businesses would be accompanied by fair and equitable renter's rights. I believe that the entire stock of housing in cities being owned by large, far away entities would have a negative impact on living standards and mobility.

[chii]

why would having large commercial landlords be any different than individual landlords?

I'd say that a big commercial landlord has some edge over an individual landlord by being able to operate at scale, and thus lower the cost of maintenance. This would be reflected as lowered rents.

[evanlivingston]

Because large commercial interests have increased power in city, state and national politics. Rent control? Screw it! Background checks for rental units? Mandatory. If there is a monopoly on housing there's the potential for some pretty nasty stuff.

[blueline]

>You always need to pay for like 40% of the house to start a mortgage anyway

in the united states, literally the exact opposite is true. you can get a mortgage with almost nothing as a down payment. By agreeing to take on PMI, private mortgage insurance, you can get federal loans with something like a 3-3.5% down payment

[0xffff2]

>You always need to pay for like 40% of the house to start a mortgage anyway

What does this mean exactly? Even these days (i.e. post-2008), you can get a loan on a primary residence with 3% down. Closing costs are comparatively minimal. Where does the other 37% come from?

[refurb]

If there are 150M homes in the US and suddenly only 5M have the cash to buy them, what do you think would happen to prices?

The inverse has already happened - the US gov't backs mortgages, allows 30 year terms, etc. All that does is drive up prices because everyone's purchasing power increases.

[evanlivingston]

I believe prices would fall a small amount and then foreign and domestic investors would swoop in buy them all up, much like what's happening in Vancouver, BC.