30-Year Mortgage Demystified: An Opinion on America's Single Largest Debt and Asset

An Opinion on America's Finance

For a lot of Americans in 2008, a paradigm shift occurred with institutional finances. As the mortgage meltdown and the real estate crisis continued from 2007 and has bled into 2008, a lot of Americans, who had previously been working long weeks and long hours merely to be good borrowers in the eyes of the big banks, have simply let go. They not only let go of their mortgage payments, which at times doubled and tripled almost instantaneously, but these Americans let go of the notion that their homes were assets.

Through these times of change, we have witnessed big banking at its best. We have witnessed how much your bank really does care for you. Only until George W. Bush passed legislation to do so, did banks begin to reach out to delinquent homeowners. Shocking right? Another realization, which will be important long after this crisis is over, is the fact that the 30-year mortgage is an outdated and obsolete financial tool. In fact, the 30-year mortgage is the most common, the most revered, and the most advertised for one simple reason: it is the most profitable loan for the big banks.

Simply put, the 30-year mortgage is a guaranteed and secure mortgage not only for the homeowner. It is a guaranteed and secure investment for the banks. What would you think if you could go out and obtain an investment that would yield you 6% for the next 30 years? What if you knew how to invest that 6% return and, while using compounded interest as banks do, make it grow to 12% or 15% or 20% in returns? Would you also lend an initial amount to get that 6% return, only to invest that 6% and make it equal to 12%, 15%, or 20%? Well, big banks have realized this concept and have been utilizing compounded interest, hedging, and investing since the inception of big banking in the United States.

A 30-year mortgage is by design a stable, secure, and guaranteed investment for the bank-not you. Here is why...

Our prime example will be based on a $300,000 loan amount you will borrow for a home mortgage at a fair and fixed interest rate of 6%, paying down both principle and interest over 30 years.