The Bookmaker of Business: A Financial Tale by Murray H. Williams

Author:Murray H. Williams [Williams, Murray H.]
Language: eng
Format: epub
Tags: Business & Money, Economics, Banks & Banking, Investing, Introduction, 90 Minutes (44-64 Pages), Industries, Investing Basics
Amazon: B00KPE7ULI
Published: 0101-01-01T00:00:00+00:00

“But here’s something even more shocking,” David said. “What if I told you that home ownership was an illusion?”

“How’s that?”

“Society teaches us from an early age that home ownership is one of the pinnacles of achievement. And most people believe it. Mortgages are marketed aggressively as a result. But the truth is that you do not truly own property until you have clear title to it. Whoever is in possession of the title, they are the real owners. Paying on a mortgage does not equal ownership.”

“Why not?”

“It’s sort of like motor vehicle loans. When you buy an automobile on credit, you may take physical possession of the vehicle, but it’s the finance company that possesses the title to it. You are finally given title when the loan balance is completely paid off. It’s more complicated with real estate, but a homeowner is not truly the owner until all liens have been satisfied and removed.”

“Are you saying that no one should ever get a mortgage? Then how could people ever buy a house?”

“Getting a mortgage is not necessarily bad. The problem is most homeowners only keep their homes for a short time, and during that time, most of their mortgage payment goes to interest instead of equity. The mistake most homeowners make is they never own their homes free and clear. Throughout their working lives they continually roll their mortgages over, buying bigger, more expensive homes but never paying off the balance of the loan. This is what I call the revolving mortgage. A sobering fact is that most homeowners end up paying more in interest throughout their lives than the entire purchase price of their homes! Another big mistake homeowners make is not having a home completely paid for when they retire. Many older homeowners lose their homes when they can’t service the mortgage after they stop working.

“The prospective home buyer needs to calculate if their home purchase including all interest, insurance, maintenance and taxes is less than what they would pay in rent during the same amount of time. If it’s significantly less and you can keep up the payments, then by all means, do so. And if the value of your property increases you are even more fortunate. But if not, and you fall behind on your payments, the bank will take possession of your home. If that happens you will lose your down payment plus any equity you’ve built up.

“But instead of getting a mortgage, what if you turned the whole idea completely around and bought your home outright? Even if the residence was ultra cheap, you wouldn’t have to worry about losing it due to a sudden loss of income, like a layoff. And since you owned the home free and clear, you could always trade up to a bigger, nicer home as your income and savings increased. This way you would save all that interest and own the equity. Wouldn’t that make more sense?”

Sean stared at David in disbelief.

“I understand that some of this may be difficult to hear.

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