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by jermaustin1
41 days ago
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> without a strong guarantee you'd get it all back? Mortgages are backed by the asset you are buying. $400k for a house is backed by the house. On top of that, almost every bank can sell off those mortgages and get the cash back immediately. So, you are correct, I would not lend hundreds of thousands unsecured to a random person, but if I had the disposable capital, though, I WOULD buy a house with that money, and price in their credit rating to their interest rate, and turn around and sell it to Fannie/Freddie and recoup the principal that I lent. Banks aren't on the hook for any of this (except for mortgages that don't conform, but most banks don't touch those, you have to go to brokers for those). |
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And the deposit. A bad faith actor could immediately default on their brand new mortgage and the bank would need to spend money going through the courts reclaiming then selling the house.... That simply costs money . The deposit covers that risk.
This is not to mention people burning a house down. Bank can hardly recoup the sale price from a burnt out husk.
If houses were such low risk assets, banks would be buying them. They wouldn't be selling you a shovel in a goldrush and letting you take all the risk