# I pit mortgage companies **URL:** \ **Category:** The BBQ Pit\ **Created:** [January 3, 2009, 1:51pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698 "2009-01-03T13:51:32Z")\ **Posts on this page:** 20\ **Page:** 10
**Author:** ![Enginerd](https://avatars.discourse-cdn.com/v4/letter/e/bcef8e/32.png) [@Enginerd](https://boards.straightdope.com/u/Enginerd)\ **Post date:** [January 7, 2009, 5:49pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/181 "2009-01-07T17:49:37Z")
> [@Strassia](#): > > If banks had been doing busy the way George Bailey did (“They money’s in your house, and his house.”), they would not have been able to make as many loans, and the loans would cost more. Which means that **gonzo** ’s three mortgages would have either been denied or cost a log more. So which is it, are they crooks for taking too much or your money, or crooks for not taking enough? According to Gonzo? Yes. ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [January 7, 2009, 5:59pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/182 "2009-01-07T17:59:29Z")
> [@Giraffe](#): > > Math is a tool of the bourgeoisie, designed to keep the working man down. A survey of a hundred mortgage holders found that fully 95% felt they paid too much in interest. The other eleven were obviously sheeple, baaing out their support for their capitalist oppressors. I see what you did there. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [January 7, 2009, 6:23pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/183 "2009-01-07T18:23:10Z")
> [@Giraffe](#): > > Math is a tool of the bourgeoisie, designed to keep the working man down. A survey of a hundred mortgage holders found that fully 95% felt they paid too much in interest. The other eleven were obviously sheeple, baaing out their support for their capitalist oppressors. Goddamnit, I **am** paying too much interest! It’s great that I have found another bank willing to help me out by lending me money for less. Oh…wait… ---
**Author:** ![Yeticus\_Rex](https://avatars.discourse-cdn.com/v4/letter/y/a698b9/32.png) [@Yeticus\_Rex](https://boards.straightdope.com/u/Yeticus_Rex)\ **Post date:** [January 7, 2009, 6:58pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/184 "2009-01-07T18:58:03Z")
Hey, **Gonzo** …please…pretty please…pit me for taking advantage of this current downturn for buying a house on short sale, and mortgaging it back to my son for the paltry P&I of $375 a month ($70k, 30 year, 5.00%)…go ahead…just do it. I double-dog dare ya. ---
**Author:** ![HelenGawn](https://avatars.discourse-cdn.com/v4/letter/h/a88e4f/32.png) [@HelenGawn](https://boards.straightdope.com/u/HelenGawn)\ **Post date:** [January 7, 2009, 8:39pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/185 "2009-01-07T20:39:03Z")
**Yeticus,** I just became your long-lost lovin’ daughter. For those numbers I can afford to bribe a DNA lab. ---
**Author:** ![Musicat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/musicat/32/20189_2.png) [@Musicat](https://boards.straightdope.com/u/Musicat)\ **Post date:** [January 7, 2009, 9:53pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/186 "2009-01-07T21:53:50Z")
> [@Chief\_Pedant](#): > > As the Chief pedant, I’ve been wanting to correct this [“principal” spelling error] also. But since **Giraffe** used the wrong spelling back in post 7 (inadvertently, I’m sure), I’ve been nervous about saying anything even though it’s been driving me nuts. I don’t like correcting my superiors. It don’t bother me none. 🙂 What do they think they are, better than us? ---
**Author:** ![pulykamell](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pulykamell/32/3166_2.png) [@pulykamell](https://boards.straightdope.com/u/pulykamell)\ **Post date:** [January 7, 2009, 10:01pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/187 "2009-01-07T22:01:54Z")
Can we enact some sort of new rule, that the first person to use the word “sheeple” in an argument automatically loses? Every time this word comes up, it’s from the idiot in the argument. God, do I hate that word. ---
**Author:** ![Canadjun](https://avatars.discourse-cdn.com/v4/letter/c/76d3ee/32.png) [@Canadjun](https://boards.straightdope.com/u/Canadjun)\ **Post date:** [January 7, 2009, 10:13pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/188 "2009-01-07T22:13:55Z")
> [@gonzomax](#): > > I love you sheeple who defend the very people who have brought down our economic system as some kind of benign financial organization that is just trying to help you. They have pushed for dereg so they could have a free hand in manipulating the economy for their own gain. They packaged mortgages ,resold them in bulk and then sold swaps insuring them. They took the whole world economy down and it is still not over. It is getting worse. From your personal little mortgage to the systematic looting of the economy, they have set the system up in their favor. We have been looted macro economically and we have been looted micro economically. The tax money we gave those pricks to start lending has been used in a new wave of mergers and buyouts. They have lined their own pockets and have not eased lending. But they really just want to help you. Nothing you said in that message relates to the question at hand - how loan payments (combining principal and interest) are calculated and how they have always been calculated. The principal and interest payments for a loan (which is **all** a mortgage is) of $x at y% for z years is a matter of mathematics, not high finance. You can argue until you are blue in the face (or until your keyboard falls apart), but **that is how the mathematics works.** ---
**Author:** ![Liberal](https://avatars.discourse-cdn.com/v4/letter/l/848f3c/32.png) [@Liberal](https://boards.straightdope.com/u/Liberal)\ **Post date:** [January 7, 2009, 10:19pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/189 "2009-01-07T22:19:59Z")
> [@pulykamell](#): > > Can we enact some sort of new rule, that the first person to use the word “sheeple” in an argument automatically loses? Every time this word comes up, it’s from the idiot in the argument. God, do I hate that word. I hate “prolly”. Eww. Fuck. ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [January 7, 2009, 10:49pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/190 "2009-01-07T22:49:31Z")
> [@gonzomax](#): > > I love you sheeple who defend the very people who have brought down our economic system as some kind of benign financial organization that is just trying to help you. There is nowhere in this entire thread that anyone said the banks are out to help you. The banks sell you a product. They give a contract with written explanation as to what it does and how it works. There are a million web pages that explain how interest works. You sign a 30 year mortgage, bail out of it after 5 years, and complain that you aren’t being helped. You appear to be an idiot. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [January 7, 2009, 11:46pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/191 "2009-01-07T23:46:25Z")
> [@Giraffe](#): > > The funny thing is that it has looked wrong to me this whole thread, but since everyone kept using it. [smug]Not everyone.[/smug] ---
**Author:** ![Stratocaster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/stratocaster/32/16393_2.png) [@Stratocaster](https://boards.straightdope.com/u/Stratocaster)\ **Post date:** [January 8, 2009, 12:46am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/192 "2009-01-08T00:46:04Z")
> [@amarone](#): > > [smug]Not everyone.[/smug] Yeah, me neither! BTW, now that this elephant in the room has been pointed out, did anyone notice that the cite gonzo provided, a supposed expert source exposing the secrets mortgage companies use to fleece us sheeple, made the same misspelling in its table? A shame, it was an otherwise polished and accurate fount of information. 😃 ---
**Author:** ![clairobscur](https://avatars.discourse-cdn.com/v4/letter/c/839c29/32.png) [@clairobscur](https://boards.straightdope.com/u/clairobscur)\ **Post date:** [January 8, 2009, 1:37am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/193 "2009-01-08T01:37:20Z")
> [@Chief\_Pedant](#): > > As the Chief pedant, I’ve been wanting to correct this also. But since **Giraffe** used the wrong spelling back in post 7 (inadvertently, I’m sure), I’ve been nervous about saying anything even though it’s been driving me nuts. I don’t like correcting my superiors. And to my own defence, as a native French speaker who would normally use “principal” in his own language, I deferred to the superior knowledge of actual English speakers like you. 😉 (note that I have used the word “hypocracy” on this board for a long time for the same reason) ---
**Author:** ![kidchameleon](https://avatars.discourse-cdn.com/v4/letter/k/898d66/32.png) [@kidchameleon](https://boards.straightdope.com/u/kidchameleon)\ **Post date:** [January 8, 2009, 1:44am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/194 "2009-01-08T01:44:29Z")
> [@Mangetout](#): > > I accidentally my mortgage after 5 years. I burning your mortgage! Is that arson? ---
**Author:** ![bengangmo](https://avatars.discourse-cdn.com/v4/letter/b/50afbb/32.png) [@bengangmo](https://boards.straightdope.com/u/bengangmo)\ **Post date:** [January 8, 2009, 2:00am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/195 "2009-01-08T02:00:23Z")
> [@Throatwarbler\_Mangrove](#): > > This is completely incorrect. > > 1. Nobody leases a car for “the useful life” of the car. That would be identical to buying the car. > > 2. Give point 1, your comparison of lease payments is meaningless. I have already explained what a lease is in my previous post. > > **3) Many, if not most leasing companies don’t need to make money**, because the vast majority of consumer car leasing and financing is done through financing subsidiaries of the car makers themselves, who use it as another marketing tool. The other benefit is that both car leases and loans are collateralized debt obligations that can be sold as securities on the secondary market, giving car buyers access to a vastly larger market for financing and car makers a chance to make a profit through financing charges. > > Again, completely incorrect. See my posts WRT the risk premium paid by the renter to the owner. Bolding mine - but since when? Due to their size and market pull of course they get better deals on cars and loans - but they still need to make a profit. Unless I totall failed “common sense 101”. You may not lease a car for its useful life - which actually gets closer to the point that needs to made - for some people leasing is better, and for some buying is better - depending on indiviudal circumstances. If leasing were truely cheaper than buying NOBODY would buy. WRT to the risk premium, (on a rental property) this can also be repaid to the owner through capital appreciation, not all of it needs to come from the rental paid. I am deliberately oversimplifying the case for the sake of understanding, but the idea that a rational investor will always go for the highest return **everything else being equal**. Now we all know everything else is not equal - so we make assumptions and decisions and account for risk different ways, leading to the oversimplifications I have noted. The basic priniciple however remains the same - my return on capital for a rental property will be slightly greater than my next best option. Meaning Rent + Appreciation - risk premium is going to be slightly better than other things I could do with the money… (please don’t make me try to build any sort of mathematical model accounting for tax deductions and the feeling of security and myriad other things that can come into the decision) ---
**Author:** ![Throatwarbler\_Mangrove](https://avatars.discourse-cdn.com/v4/letter/t/8c91f0/32.png) [@Throatwarbler\_Mangrove](https://boards.straightdope.com/u/Throatwarbler_Mangrove)\ **Post date:** [January 8, 2009, 2:51am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/196 "2009-01-08T02:51:35Z")
You missed the part about the financing companies being subsidiaries of the car makers. They don’t need to make money on their particular leg of the deal, as long as the car makers are selling you a car for more than what it costs them to make. Leaving that aside, here are reasons why car makers like leasing: - As already mentioned, it is a marketing tool. People like flashy cars with lower payments. - The financing companies can themselves be profitable through the securitization of your loan and lease in the same way banks securitize mortgages. You may have recently heard in the news that GMAC, which use to be the financing arm of GM, was granted the status of a bank holding company by the Federales, making it true in both spirit and letter. Again, the parent car company can tweak the loan and lease provisions as it suits them. Suppose if investors suddenly stopped buying these leases and loans. Why, I suspect car sales would plummet through the floor, as the loan and leasing companies suddenly had no way to fund their leasing and loan activity, thus removing a huge segment of the car buying masses from the market! It would be disaster for the car companies! Let’s hope that never happens. - All this boils down to the fact that the car business is inherently an inflexible, capital intensive one. It costs a huge amount of money to design and build a car, and it costs a huge amount of money to have cars sitting around unsold, both in terms of tied up capital and physical space. If you’re a car company, and you’ve built the car and they are sitting on lots unsold, what can you do? You can’t un-build them, so offering people flexible options to induce them into moving the damn pile off your lot is one thing you can do to keep what flexibility you can when cash crunch time comes. > [@](#): > > WRT to the risk premium, (on a rental property) this can also be repaid to the owner through capital appreciation This is exactly why people buy into speculative bubbles. Capital appreciation comes as a result of your asset becoming more valuable. The value of an asset is simply the discounted present value of its future income stream. Never mind the common sense that residential real estate generally tracks inflation and is a poor long term investment. > [@](#): > > please don’t make me try to build any sort of mathematical model As long as you’re not asking me to buy your house or car, because I can’t wrap my head around any of that shit without a model, man. 🙂 ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [January 8, 2009, 4:57am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/197 "2009-01-08T04:57:55Z")
> [@kidchameleon](#): > > I burning your mortgage! > Is that arson? Funniest post of the thread (in the “intentionally funny” category). ---
**Author:** ![Mangetout](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mangetout/32/19_2.png) [@Mangetout](https://boards.straightdope.com/u/Mangetout)\ **Post date:** [January 8, 2009, 9:57pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/198 "2009-01-08T21:57:55Z")
> [@pulykamell](#): > > Can we enact some sort of new rule, that the first person to use the word “sheeple” in an argument automatically loses? Every time this word comes up, it’s from the idiot in the argument. God, do I hate that word. If there’s no way to kick such people in the face, then I’m prepared to settle for them losing the argument. Where do I sign? ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [January 9, 2009, 4:13pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/199 "2009-01-09T16:13:21Z")
> [@pulykamell](#): > > Can we enact some sort of new rule, that the first person to use the word “sheeple” in an argument automatically loses? Every time this word comes up, it’s from the idiot in the argument. God, do I hate that word. Agree. See also people who rail against “the corporations.” ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [January 9, 2009, 5:32pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/200 "2009-01-09T17:32:03Z")
> [@Rand\_Rover](#): > > Agree. See also people who rail against “the corporations.” Only sheeple complain about the term. Fact is most mortgages are 5 years or less. Therefore the amount of money paid to a mortgage company is far above a 6 percent. That is pretty simple to grasp. The idea that it would be more reasonable if it ran the term is not the point at all. They do not run full term. You pay a bucketload of interest and very little equity . Simple math ,easy logic. [Previous page](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698.md?page=9) [Next page](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698.md?page=11)