Rant: If you think 50 year mortgages is debt slavery, you don't understand money \ stacker news ~econ

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Rant: If you think 50 year mortgages is debt slavery, you don't understand money

2530 sats \ 30 comments \ @SimpleStacker 3h econ

I noticed that a lot of people on the right, hostile to the banking system, reacting badly towards the proposed idea of 50 year mortgages. They criticize it as being a boon to the banks and prolonging debt slavery.

IMO, as a bitcoiner, I am happy to take on a 50 year mortgage. Someone is essentially lending me worthless, depreciating assets (dollars) so I can use it to buy a valuable, appreciating asset (a home). Moreover, my repayment of the loan is denominated in terms of the worthless asset, so the real value of that loan is only going to go down over time.

If someone is willing to offer this to me, I don't consider myself enslaved. I consider myself lucky that someone would take the other side of that deal!!

In fact, a 50-year fixed rate mortgage (assuming it's fixed rate) probably wouldn't exist in the free-market without some sort of government backing. That should tell you that this is actually a good deal for the borrower, and not a good deal for the lender. The only reason lenders would do this is if they can offload the risk to someone else, i.e. the taxpayer.

So -- if you want to oppose 50 year mortgages, fine. But oppose it for the right reasons. Oppose it because it is a subsidy whose cost is borne by taxpayers; don't oppose it because you think it's debt slavery or a boon to banks. It's actually a boon to the borrower, and you can bet lots of savvy rich people will take advantage of it.

Why do I react so strongly about this? Because I see that this is how plebs keep themselves under the oppression of the fiat monetary system, because they don't understand finance. When I see people try to pay off their mortgages early, so they can own their home "free and clear", despite the mortgage being lower interest than what they could earn elsewhere, I shake my head. You've been given a great opportunity to denominate your debts in a rapidly devaluating asset, yet you decide to forgo the opportunity to acquire appreciating assets in order to pay down this nominal debt. It's the opposite of what rich people do, which is load up on debt to acquire assets. Stop falling for this! Realize that nominal debt denominated in dollars is debt that slowly disappears over time without you doing anything, and make smarter financial decisions.

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593 sats \ 7 replies \ @freetx 3h

When I see people try to pay off their mortgages early, so they can own their home "free and clear", despite the mortgage being lower interest than what they could earn elsewhere, I shake my head.

Financially that is true, but there are other factors at play. When I was in my 30s I hit a big payday and paid off my house note - against the advice of CPA for exactly the reasons you mention. I was paying 4% interest and earning ~10%.

However, paying off the house afforded me something else: Complete freedom. I had no car notes, no house note. I only had to worry about food + electricity (both very minor expenses). I already very ample savings...so all in all it meant I was basically "retired". That is, I had complete freedom in what projects to choose to work on and which I didnt care for.

The result was, in the long run, I made much more money then I otherwise would've. I could turn down the "safe time-suck projects that made reliable income" and instead focus on longer term projects that may return nothing or might return a big hit. It was ok if I went 5 months with little to no income, because I had little to no expenses.

As a result, I wound getting involved getting an equity stake in a business that otherwise I wouldn't be able to do. That equity stake has continued to pay me for the last 20 years a monthly dividend.

27 sats \ 5 replies \ @SimpleStacker OP 2h

The thing is, since you hit a big pay day, you could have done everything you did without paying off the house note.

Maybe, psychologically, you couldn't have. But it would have been a mental barrier, not anything related to actual resources which would have constrained you.

130 sats \ 4 replies \ @freetx 2h

Maybe, psychologically, you couldn't have.

Thats right. But taking big risk are themselves rooted psychological issues. I had a wife + infant at home, so its one thing to take risk when you are single, but it becomes much more intense psychological / emotional pressure when you are taking big risk with your family well being at stake.

18 sats \ 3 replies \ @SimpleStacker OP 2h

Yeah, that's fair, and a totally understandable situation. I just think too many people make these choices in an uninformed way, thinking that paying off debt early is always good without really thinking of the implications.

148 sats \ 2 replies \ @ken 2h

The number of people severely affected by overwhelming consumer debt far exceeds those who are actively making extra debt payments using strategies that are not the most mathematically optimal. People should generally be wary of debt, imo.

20 sats \ 1 reply \ @SimpleStacker OP 54m

It's not just about mathematical optimality. It's about the realization that everything fiat, including your debts, are illusory and constantly devaluing.

You're right though about consumer debt. That's why it's important to distinguish between taking on debt in order to finance temporary pleasure, versus taking on debt in order to buy real assets.

41 sats \ 0 replies \ @ken 28m

I appreciate this perspective, I really do. I have an easier time seeing USD as an illusion than I do USD-based debts. But you're right, they are both illusory and constantly devaluing.

10 sats \ 0 replies \ @j7hB75 2h

You still have property tax and home owners insurance to deal with after you pay off your home. These are often overlooked when lumped in with the monthly mortgage payment.

55 sats \ 2 replies \ @Undisciplined 3h

Unpacking this a bit more, banks will offer these because taxpayers (who largely overlap with homeowners) are assuming the unacceptable financial risks rather than the banks. So, 50-year mortgages are probably not a good deal for homeowners in aggregate and are a good deal for banks.

What they are is good for individual homeowners, who have no power over the policy environment.

42 sats \ 1 reply \ @SimpleStacker OP 3h

I agree. As housing policy, it's terrible, and distortionary as all gov't interventions are. Though, I do think it will be a windfall for incumbent homeowners, who will see their house prices rise.

But my point is more that it's actually a really good deal for borrowers. I would take it in an instant (assuming an attractive fixed rate), as I believe most bitcoiners should, if you actually believe that monetary inflation will continue unabated.

30 sats \ 0 replies \ @Undisciplined 2h

I'll be lining up for one of these too, but only because I have no power over whether I'm forced to assume the banks' lending risk as a taxpayer.

30 sats \ 1 reply \ @0xbitcoiner 2h

What happens if someone dies before they finish paying off the loan?

44 sats \ 0 replies \ @SimpleStacker OP 2h

Under normal circumstances the heirs of the property will also assume responsibility for the loan. If they don't want to make payments they'll typically sell the property and pay off the loan.

41 sats \ 0 replies \ @SwapMarket 24m

Until you lose your job, and then a house. Moving to another city or country to find another job will be much harder compared to if you rented. That's freedom vs slavery.

30 sats \ 2 replies \ @DarthCoin 2h

as a bitcoiner, I am happy to take on a 50 year mortgage

If you take a mortgage you are NOT a bitcoiner. You are just a fiat normie.

0 sats \ 1 reply \ @SimpleStacker OP 1h

no bitcoiner is pure enough for you Darth

21 sats \ 0 replies \ @SHA256man 1h

the purity test gets harder the more tests u pass; that is why no one is willing to bust their ass as hard as Darth; weak broken men have no chance to raise themselves or others;

51 sats \ 1 reply \ @fishious 1h

0 sats \ 0 replies \ @SHA256man 1h

brilliant, funny interjection in a saloon of upset opposing factions ))

51 sats \ 1 reply \ @88b0c423eb 1h

fractional reserve is always and everywhere fraud. If you think fraud is fine you're not a bitcoiner.

0 sats \ 0 replies \ @SimpleStacker OP 1h

i assume you have no bank accounts

60 sats \ 1 reply \ @SHA256man 1h

cracks knuckles

y'all already know what Jesus wud say; actually, he wud whip the usury class's asses;

@plebpoet how are my phonetics?

21 sats \ 0 replies \ @plebpoet 58m

really awesome, im inspired tbh

30 sats \ 1 reply \ @BeeRye 2h

"In fact, a 50-year fixed rate mortgage (assuming it's fixed rate) probably wouldn't exist in the free-market without some sort of government backing."

No chance in hell there would be one. That's the same story for the 30-yr fixed, we currently have a nationalized mortgage scheme that started out quasi-private 50+ years ago but never was a product available in the wild (and still is not except in the US).

And you are right, this is a good trade IF you are OK with the risk of a structural housing re-price down. In that case, u might be fucked (devil will be in the details of the note developed for such a product).

0 sats \ 0 replies \ @SimpleStacker OP 1h

if you think money supply inflation will continue unabated, it's unlikely that housing will have a long-term reprice downwards. that's what I mean when I say bitcoiners should be relatively happy to take on nominal debts. If you think currency will keep getting debased, nominal debt will just keep shrinking in real value terms

30 sats \ 1 reply \ @j7hB75 2h

Moreover, my repayment of the loan is denominated in terms of the worthless asset, so the real value of that loan is only going to go down over time.

Are you talking about fiat being an asset here? Confused by your wording.

When I see people try to pay off their mortgages early, so they can own their home "free and clear", despite the mortgage being lower interest than what they could earn elsewhere, I shake my head.

What’s wrong with that when you can funnel the extra fiat towards other appreciating assets and stores of value?

0 sats \ 0 replies \ @SimpleStacker OP 1h

Yes, I am talking about the dollar like an asset. It's something you hold that retains value over time (in this case, it retains value poorly)

Paying off nominal debts early is like paying off a debt that slowly disappears on its own over time, due to currency devaluation.

30 sats \ 0 replies \ @OT 2h

It would depend on the interest rates and terms of the 50 years. I hear in the US you can get a fixed rate for 30 years. When interest rates are low like 1-3% thats fine. However if it's a variable interest rate that could be risky IMO.

30 sats \ 0 replies \ @Scoresby 3h

Oppose it because it is a subsidy whose cost is borne by taxpayers

Yes, sir! Spot on with this.

0 sats \ 0 replies \ @DP0604 18m

Your point of view is quite interesting. Although I don't live in the United States, I'm South American, and I really enjoy these topics. I hope we can continue interacting and discussing this. So, can a young person in the United States buy a house?