# 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:** 9
**Author:** ![Chessic\_Sense](https://avatars.discourse-cdn.com/v4/letter/c/7c8e57/32.png) [@Chessic\_Sense](https://boards.straightdope.com/u/Chessic_Sense)\ **Post date:** [January 7, 2009, 1:27am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/161 "2009-01-07T01:27:42Z")
> [@ntucker](#): > > Quick question for you, **gonzomax** : what would be fair? If you took out a 200k loan at 6% for 30 years, with a payment of $1199 per month, and you dutifully paid for 5 years and then bailed out, how much of the principal do you expect to be paid off by that point? That is, what’s the balance? Apologies if you’ve already answered this somewhere; I don’t see it. I get $197,612, compounding annually instead of daily, as they would in reality. Gonzomax will say that it should be 5/30 paid off, or 1/6, or $33,333, which is wierd since he’s only paid $14,400. But he’ll ignore this post and just say I (and you) don’t get it since we’re thinking about a 30 year mortgage (or something). ---
**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 7, 2009, 2:01am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/162 "2009-01-07T02:01:07Z")
I accidentally my mortgage after 5 years. ---
**Author:** ![Chief\_Pedant](https://avatars.discourse-cdn.com/v4/letter/c/a6a055/32.png) [@Chief\_Pedant](https://boards.straightdope.com/u/Chief_Pedant)\ **Post date:** [January 7, 2009, 2:08am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/163 "2009-01-07T02:08:36Z")
Ok, I want the whole class to be quiet, shut up and sit down. Just me and **Gonzomax**. The problem is we’re all chiming in and he’s getting flustered. **Gonzomax** : focus. Just you and me. If I lend you $100,000 at 5%/year and I come to you in a year to get my interest, would you agree you owe me $5,000 just for the interest? Would you agree that if you pay me less than the $5,000, you now owe me $100,000 plus the difference? Would you agree that if you pay me more than $5,000, you now owe me $100,000 minus the extra you paid over and above the $5,000? Please, please please focus ONLY on me. This has become a contest of which Doper can get you to capitulate on this, and I want to win that contest. I eagerly await your reply. Ignore those other half-assed charlatans trying to explain it. ---
**Author:** ![steronz](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/steronz/32/11765_2.png) [@steronz](https://boards.straightdope.com/u/steronz)\ **Post date:** [January 7, 2009, 2:16am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/164 "2009-01-07T02:16:58Z")
I was only using 1/8th of my ass. ---
**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, 3:59am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/165 "2009-01-07T03:59:21Z")
I’ve waited too long to say this. The word for the amount loaned is princip **al** , not princip **le**. PRINCIPAL. Got that? Look it up. It’s taking longer than I thought. ---
**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 7, 2009, 4:40am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/166 "2009-01-07T04:40:36Z")
> [@Musicat](#): > > I’ve waited too long to say this. The word for the amount loaned is princip **al** , not princip **le**. > > PRINCIPAL. Got that? Look it up. > > It’s taking longer than I thought. Seriously. These guys’s teachers shoulda taken 'em to the principle’s office at school cuz they can’t spell for shit. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [January 7, 2009, 5:01am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/167 "2009-01-07T05:01:21Z")
The principle is on a tread mill. When it goes fast enough will you get the principal or the principle . I am waiting for an answer. ---
**Author:** ![spinky](https://avatars.discourse-cdn.com/v4/letter/s/59ef9b/32.png) [@spinky](https://boards.straightdope.com/u/spinky)\ **Post date:** [January 7, 2009, 9:32am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/168 "2009-01-07T09:32:54Z")
> [@gonzomax](#): > > The principle is on a tread mill. When it goes fast enough will you get the principal or the principle . I am waiting for an answer. Oh, I get it. Now that you’ve realized how intensely stupid your position is, you’re trying to save face by pretending you’re just a troll. ---
**Author:** ![bengangmo](https://avatars.discourse-cdn.com/v4/letter/b/50afbb/32.png) [@bengangmo](https://boards.straightdope.com/u/bengangmo)\ **Post date:** [January 7, 2009, 11:11am UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/169 "2009-01-07T11:11:22Z")
> [@Strassia](#): > > Missed edit window: > > Think about it terms of a car. Leases are (and should be) cheaper than the payments to buy the car through financing. When you buy the car, you are paying for the use of the care for its whole life or the ability to resale it. Leasing is just for use during the period of the lease. > > Jonathan Except that if you lease a car for the useful life of the car (let’s say 10 years for the sake of arguement, at which point the car self destructs) you will pay MORE in lease payments than you would if you had purchased the car outright - otherwise how does the leasing company make money? Lease payments (over life of car) minus purchase price = profit. And rental for a house, in a purely rational market, is going to roughly approxiamate the return that I could have gotten on the money I used to buy said house. (my opportunity cost) i.e I have $150,000, I can either buy a house or place the money in bonds that return me 5%. If I can’t rent the house for at least 5% of the purchase price (per year) plus taxes and insurance why would I choose to buy the house instead of the bonds? (of course there is the question of capital appreciation, but let’s keep this simple first) ---
**Author:** ![Chief\_Pedant](https://avatars.discourse-cdn.com/v4/letter/c/a6a055/32.png) [@Chief\_Pedant](https://boards.straightdope.com/u/Chief_Pedant)\ **Post date:** [January 7, 2009, 1:05pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/170 "2009-01-07T13:05:00Z")
> [@Musicat](#): > > I’ve waited too long to say this. The word for the amount loaned is princip **al** , not princip **le**. > > PRINCIPAL. Got that? Look it up. > > It’s taking longer than I thought. 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. (Well, I do, but in this case it did not seem prudent since the main point was not about spelling.) **Gonzomax** , I see you have indeed ceased even trying to defend your sorry original pitting. You have two choices: Admit your error–apologize, even–or simply walk away grumbling. I am confident you do understand it now. You’ll notice the world is a better place when you can actually figure out when you are getting screwed and when you are not. There are a lot of charlatans out there who want to screw you over. You’ll never be able to sort out who is legit and who is a crook unless you make an effort to understand before you start bitching. ---
**Author:** ![Jayn\_Newell](https://avatars.discourse-cdn.com/v4/letter/j/f9ae1b/32.png) [@Jayn\_Newell](https://boards.straightdope.com/u/Jayn_Newell)\ **Post date:** [January 7, 2009, 1:14pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/171 "2009-01-07T13:14:32Z")
> [@ntucker](#): > > Oh, I get it. Now that you’ve realized how intensely stupid your position is, you’re trying to save face by pretending you’re just a troll. Pretending? ---
**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 7, 2009, 3:26pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/172 "2009-01-07T15:26:53Z")
> [@bengangmo](#): > > Except that if you lease a car for the useful life of the car (let’s say 10 years for the sake of arguement, at which point the car self destructs) you will pay MORE in lease payments than you would if you had purchased the car outright - otherwise how does the leasing company make money? > > Lease payments (over life of car) minus purchase price = profit. 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. > [@](#): > > And rental for a house, in a purely rational market, is going to roughly approxiamate the return that I could have gotten on the money I used to buy said house. (my opportunity cost) Again, completely incorrect. See my posts WRT the risk premium paid by the renter to the owner. ---
**Author:** ![Strassia](https://avatars.discourse-cdn.com/v4/letter/s/e8c25b/32.png) [@Strassia](https://boards.straightdope.com/u/Strassia)\ **Post date:** [January 7, 2009, 3:28pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/173 "2009-01-07T15:28:47Z")
> [@bengangmo](#): > > Except that if you lease a car for the useful life of the car (let’s say 10 years for the sake of arguement, at which point the car self destructs) you will pay MORE in lease payments than you would if you had purchased the car outright - otherwise how does the leasing company make money? > > Lease payments (over life of car) minus purchase price = profit. Which is why leases terms are never over the life of the car. I never said leases were cheaper than buying, what I said is that lease payments for two years are less than purchase payments for two years + down payment + purchase and sell costs - resale price. For the car company lease payments over term + eventual sale price - production costs = profit. Leases may or may not be more profitable for the car company, depending on how well the cars maintain their value. Even if they make less profit than selling outright, they may still want to offer the option if it will attract customers who could not afford the payments on a loan. > [@](#): > > And rental for a house, in a purely rational market, is going to roughly approxiamate the return that I could have gotten on the money I used to buy said house. (my opportunity cost) > > i.e I have $150,000, I can either buy a house or place the money in bonds that return me 5%. If I can’t rent the house for at least 5% of the purchase price (per year) plus taxes and insurance why would I choose to buy the house instead of the bonds? (of course there is the question of capital appreciation, but let’s keep this simple first) You are right in the long term. If I could get a 5%APR yield on a bond that is all I will ever get. For a house, this year I may get 0%, next year I may get 3%, the year after 4%. As long as my total return over the time I own the property is more then holding the bond for the same term, I am ahead. For a simple, conservative example, If I assume a 150,000 out of pocket upfront and the first year my rents just equal my operating costs (no net profit) and my return goes up 1% per year due to lowering interest payments and higher rents, then the break even point is 11 years. After 30 years, I have made almost 3 times as much on the house as I have on the bond. Using what I consider more realistic assumptions of a small loss (2%) the first year but faster gains (rent inflation averages more than 1% per year and interest payments will drop faster than that after the first few years) the house earns 4 times the amount of the bond after 30 years. So, bottom line, in a rational market a house is not a good short term investment. I contend that the only time it make financial sense to buy an asset is when your use period exceeds some minimum length. How long that period is varies depending on starting costs, appreciation/depreciation, and ongoing expenses. Jonathan ---
**Author:** ![Sarahfeena](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sarahfeena/32/519_2.png) [@Sarahfeena](https://boards.straightdope.com/u/Sarahfeena)\ **Post date:** [January 7, 2009, 3:41pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/174 "2009-01-07T15:41:28Z")
> [@EJsGirl](#): > > Why are we still doing this? He’ll never get it. It’s an entitlement thing, not a math problem. This is all that needs to be said in this thread. From what I have gleaned from his posting over the years, **gonzomax** hates the banks because he percieves the world in a paradigm of “us” (the average joe working poor) and “them” (rich banks and businesses that take advantage), and he thinks “they” shouldn’t be entitled to make a profit off his back. All logic & reason about the math, the ability for the economy to continue, the ability for banks to be able to continue to loan people money for purchasing homes, the ability for individuals to likewise make money by earning interest on the money they loan to banks…none of that matters in the face of his prejudice. ---
**Author:** ![Giraffe](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/giraffe/32/129_2.png) [@Giraffe](https://boards.straightdope.com/u/Giraffe)\ **Post date:** [January 7, 2009, 4:12pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/175 "2009-01-07T16:12:20Z")
> [@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. (Well, I do, but in this case it did not seem prudent since the main point was not about spelling. The funny thing is that it has looked wrong to me this whole thread, but since everyone kept using it, I assumed it was just me. And I blame **gonzomax** for my initial misspelling, since he used it in his OP. (You know your excuses are bad when you’re claiming to have taken spelling guidance from an illiterate.) Also, Firefox, for not using that little red underline thingy to tell me it was wrong. (Yes, I know it’s one correct spelling, but considering how heavily I depend on Firefox for all my other typos, I expect them to fix everything, damnit!) And also **gonzomax** , for starting this moronic thread in the first place. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [January 7, 2009, 4:46pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/176 "2009-01-07T16:46:26Z")
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. ---
**Author:** ![Ace309](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ace309/32/1050_2.png) [@Ace309](https://boards.straightdope.com/u/Ace309)\ **Post date:** [January 7, 2009, 4:51pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/177 "2009-01-07T16:51:08Z")
Right, but what does any of that have to do with the math associated with amortization? ---
**Author:** ![Giraffe](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/giraffe/32/129_2.png) [@Giraffe](https://boards.straightdope.com/u/Giraffe)\ **Post date:** [January 7, 2009, 5:06pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/178 "2009-01-07T17:06:11Z")
> [@Ace309](#): > > Right, but what does any of that have to do with the math associated with amortization? 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. ---
**Author:** ![zut](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/zut/32/2875_2.png) [@zut](https://boards.straightdope.com/u/zut)\ **Post date:** [January 7, 2009, 5:06pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/179 "2009-01-07T17:06:30Z")
> [@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. No one is saying that, you stupid, stupid man. Everyone is pointing out that you haven’t a clue about how mortgages work. Does the fact that \*every single person \*in this thread has pointed out that you’re \*doing the fucking math wrong \*mean anything to you? Spark a little self-examination? Or are you gonna be like George W Bush and stick to your guns, damn what the facts say? ---
**Author:** ![Strassia](https://avatars.discourse-cdn.com/v4/letter/s/e8c25b/32.png) [@Strassia](https://boards.straightdope.com/u/Strassia)\ **Post date:** [January 7, 2009, 5:24pm UTC](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698/180 "2009-01-07T17:24:49Z")
You know I am starting to get a very hypocritical vibe from ol’ **gonzo**. He is now critiquing, not the interest he pays, but the back end deals that lead to the current crisis. While there is certainly some merit in such critiques, it actually undermines his original point. 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? Jonathan [Previous page](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698.md?page=8) [Next page](https://boards.straightdope.com/t/i-pit-mortgage-companies/479698.md?page=10)