What is a Mortgage | by Wall Street Survivor


What is a mortgage?

Mortgages exist to solve a problem. Most people want to buy their own home, but a house costs hundreds of thousands of dollars, and you likely don’t have that kind of cash lying around in the crevices of your sofa. You’d have to work and save for decades to get that much money, and in the meantime you could easily end up paying out more in rent than the cost of the house you wanted to buy.

So to enable people to buy a house before they are too old to remember why they wanted it in the first place, we have the mortgage system. A mortgage is just a type of loan, pure and simple. If the house you want to buy costs $100,000, then you could pay $10,000 from your savings (that’s called the downpayment), and borrow the remaining $90,000 from the bank.

So if it’s that simple – just a housing loan that you pay back over time – why all the fuss and complexity around mortgages? Well, mortgages come in more flavors than Ben & Jerry’s ice cream, and not all of them taste good. You’ve got ARMs and balloon mortgages, fixed-rate loans and interest-only loans, bridge loans and refis and reverse mortgages.

Learn more about the different types of mortgages and find out which one is right for you with Wall Street Survivor’s Paying For Your Home course:

25 Replies to “What is a Mortgage | by Wall Street Survivor”

  1. or!! the value of the house can depreciate like it did in the last 5-7 years and you end up owing more then you can sell your house for. Now THAT is the information that NOBODY ever talks about because why would people need to know that? haha.

  2. Wrong. If mark and lisa sells their house for $600k right after they bought it for $500k with a down payment of $100k they don't keep $200k.
    After taxation and realter fees, they lose about 7% of the price of the house when they well it.
    So in conclusion if mark sells his house for $600k, he would get back around $550k so in the end they make $50k profit. However, this is unlikely to happen and if mark really does 40yr amortization he would be spending around 1.2mil for the house for a 500k house due to massive interest rates. I would recommend mark to buy a cheaper house and save up

  3. Thank you for this! simple and straight to the point. This is the type of stuff that they need to teach in high school. Useful in life

  4. 1:00 … ok, question, how old are Mark and Lisa and how did they manage to save all that money given they had to pay those ridiculously high tuition fees that you have to pay in the U.S.? (if this is about the U.S.?)

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