Mortgages are Bullshit!

volsci(46)

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If I told you that you paid 80% interest on your mortgage, would you believe me?

Mortgages are Bullshit

(If you want to go straight to the video explaining how we're all getting screwed on mortgages, scroll to the bottom.)

Getting my first car

When I was 17 years old, I got my first car

Ugly piece of shit, isn't it? 2000 Oldsmobile Alero. I will never miss that thing.

payment.

That's right, at a whopping $150 a month I got my first taste of adult life. It was a total sucker punch to my entire world view. I remember thinking it was the most horrible thing I could have thought of--I had to scramble to make sure I could come up with the payment every month or else I would lose the car. Whose idea was this whole thing? I couldn't figure out why people didn't just save up their money and buy something when they could "afford it".

What was even more unbearable to me wasn't just the $150/month. It was $150/month for FOUR YEARS. Shit, at 17, four years was enough to put me back at 13. That can be measured in aeons! While I had that loan, I felt like I no longer got to work for myself--I was working for the car. I became a slave to a material object, and my sentence was measured in years.

When I was 21, I got my first tax return from the first "real job" I ever had. I had landed a job as a laboratory technician at an oil refinery. During college, I worked on the weekends and full time during breaks. I was probably getting paid more than any college student that wasn't a stripper. I had a little over $700 owed on my loan, and my tax return came in at a few more dollars than that.

I marched right into the bank, slapped that fucking tax return down on the teller's counter, and told her to pay off my car. I was DONE. I had even managed to the end of my slave sentence by a few months! I practically danced back home and excitedly told my mother what I had done.

"That's great!" she said, "Are you going to buy a new car?"

...what? I couldn't believe what I was hearing. No mom, I paid it off. I'm done. Why the hell would I get a new car? The one I have now gets me does all basic car functionings: it gets me from point A to point B, it keeps me warm and dry in the process, and it plays music. Why would I sign up for another round of indentured servitude?

Houses aren't worth it

It wasn't too long thereafter one of my coworkers at the refinery bought a house.

I remember her sitting in the break room, legs crossed and in a hip fashion stirring her coffee. "Yup," she said, "just signed myself onto a 30-year mortgage."

My jaw dropped. For some reason, 30-year mortgages were news to me at 21.

"You did what?!" I said, "You're going to be owned by that house for thirty years?"

Still hip, still stirring her coffee, she replied, "Well, that's what you're going to have to do if you want to have a house."

That was it. I was done. Whoever invented this system where you fill your debt-load up to your gills then frantically work the rest of your life in order to stay abreast of it could suck it. By the time I graduated, I had already quit my job and it wasn't long before I got rid of as many material possessions as I could and ran off to Europe to live as a vagabond for almost 3 years. I wasn't interested in working all my life so I could pay off material possessions.

The Mortgage Secret

When I finally came back to Washington State to change my gears and I decided to get into real estate investing, I learned a deep, dark, dirty secret about mortgages.

It turns out you don't have to pay 30 years for a mortgage, even if it is a 30 year mortgage. In the US, our entire psyches are oriented just flat out wrong when it comes to thinking about mortgages. The way we've been taught, if my mom and my old coworker were any examples, is essentially to shoot ourselves in the foot with debt products.

Because we use them wrong, we pay so much interest that it makes up the second biggest expense of our lives (the first expense, of course, being taxes).

So what do we do about it? The first step is understanding the basics of a mortgage and where you're messing up. In this video, I go over why most people, over the life of making mortgage payments, pay about eighty percent of their money towards interest. Check out the video to learn more.