How did people have homes before banks invented mortgages for the sake of profit?

Question

With a mortgage you don't even own the house until 30 years later after you make all the principal and interest payments which means you end up paying double the original purchase price. There must be a better way than being a prisoner of the bank?

Answer 1

They paid cash for the land, and built homes themselves.

Answer 2

As people started moving to cities to work in factories they started leaving their ancestral homes and stopped paying taxes to the Lords, who hired men to pursue them to the city and try to collect a portion of their wages.

An old ancestor of mine (of whom I'm very proud) King Richard II had the balls to in effect declare peasants were people and that the Lords owned the land and not the people and therefore couldn't tax people who didn't live on their land. needless to say the Lords were outraged by this, and also by Richard's decision to tax the Lords and not the peasants to pay for the wars in Ireland, Scotland and France, and further his ending the Irish and French wars and working on finishing the Scottish war. So they turned on Richard and supported a pretender to the throne who had Richard tossed into the tower where he allegedly died of hunger. He also promptly re-started the wars. The war with France later became known as the hundred years war, and as for the British Royal family....well, you've seen what they ended up like.

In the modern world, being prisoner of the bank isn't such a bad thing. About 10-15 years into the mortgage inflation has increased the value of your property and decreased the value of the money your paying to the point that it all works out better for you. If you can afford the payment, buy and hold. It's just about the only way to become financially secure in modern America. I'm 48 and retired, not because I ever made a lot of money but because I bought and held onto property that now pays for me to do whatever I want. You're not paying double for the property, you're purchasing an option that gives you the right to the increasing value. Also remember that you get to use the property in the mean time.

A word of advice, only buy property that you will use or that generates decent income, not bare land that will just sit and eat up your cash flow, and don't fall into the trap of refinancing and spending the money.

Also, now may not be the best time. Keep your eyes open and save up. Maybe in a few years.

Good luck!

Answer 3

Well in the not too distant past you could "homestead". That meant you could claim a 40 acre parcel of government land as yours. The requirement was that you had to build a house on it and live there for a certain amount of time and then the land would become yours. Most homes were then built by hand from the trees on the property and the person farmed the land.
In modern times about the only way you will get to own a home it to get a mortgage and buy one.

Answer 4

The issue is that because financing has become the standard way to buy a home (or any other major purchase for that matter), prices have been driven up because you’re expected to take out a loan for the purchase. The banks that earn our interest depend on that income to make more loans to individuals so they can put that money back into the economy and to businesses so that they can expand and create more jobs. It would take a major economic correction to bring the prices of those items back down so that we could all pay cash for everything. I don’t know about you, but I hope not to see that happen in my lifetime.

The US economy as it operates today needs us to spend more than we have; that goes for individual consumers as well as businesses. Credit literally is the life blood of our economy. If we all started living within our means (including the Federal Gov’t), we’d shoot into a nasty recession and it would take time for us to rebuild our economy. Even after we bounced back to some kind of equilibrium, I doubt the US would ever regain the economic and political clout (spare me the evening news propaganda) it current has.

Also consider that the salary you make now is based on our current economic system. If we reduced the price of housing to eliminate the need for financing, prices would drop across the board and along with them wages. We would all experience drastic changes in our standards of living.

Answer 5

Your statement is not true, and your outlook on life is negative. I look at the bank that gives me a mortgage as a partner in laying a financial foundation. Without mortgages, it would take far, far longer to save the money - after paying rent for a place to live that we all need - tp buy a piece of property and build a house. With the mortgage, I am in effect paying the rent I would already be paying, and at the end of the 15 years, the property IS mine. Thank you very much, Bank. You are entitled to your profit and I have my house, something I wouldn't have been able to do in 15 years without you.

Not all mortgages are 30 years and very few of the people who actually stay in one place for 30 years pay off that same mortgage. They refinance, sometimes several times, and often borrow against the increase in value to finance other things they might not have been able to afford otherwise.

Answer 6

It had a lot to do with the housing market being one of necessity and not merely for profit. While not everyone could own a home, a lot of people saved the money to buy land and built their house, sometimes over many years as the money came in. You can't even compare how things were then to today because nothing is done in the same way.

Answer 7

In Europe where I live, a lot of people are gifted homes from their parents. They stay within the family for generations.

Unfortunately, this also produces the situation were the rich get rich and the poor stay poor.

The banks are out to make money for sure, but they are in a competitive market too. They can't just gouge people for the fun of it. If they want to compete, they have to offer competitive rates.

Answer 8

"Prisoner of the bank"? I'm amazed by the number of people who view lenders as somehow evil. The people who make these sorts of complaints are the ones who will never earn enough cash to actually buy anything outright in the first place and, thus, they only way they'll ever own a thing is if someone will lend them the money to buy it.

Answer 9

Well, if you don't want to owe on anything, you just save until you have enough to buy it.

Unfortunately, people can't usually wait to save 6 digits to purchase housing...so they borrow.

One way you can make things more realistic, is to save and save, and then look for a really good deal (such as a forclosure) or a fixer upper...something that needs a lot of work but is habitable until the fixing is over. Then you just buy supplies to remodel with cash and pay as you go.

A friend of mine said she insulated her whole house over the course of about 2 years, debt free, by buying a roll of insulation every week...installing it, and when she came to the end of the space, instead of buying insulation that week, she bought drywall or whatever to cover everything up.

You can consider an industrial type space. By tricking out, say, a large storage shed, you can make a comfortable home. Consider using materials in different ways than they are intended....you can create an interesting space by using a garage door instead of anything fancier, and then you have a huge opening to blend the indoors and outdoors. Large open concept floor plans means you save on things like interior walls, and just have to worry about support beams and columns. And for supplies, with regard to things like brick and tile, the bigger they are the easier and cheaper to install...and the fewer you need. So there's that.

You can also look into a rugged piece of land with the resources you need to harvest trees for lumber, or gather rocks...and build your house with the bounty of your own land. This is how they did it in the old days. You just buy things like nails, and pay for milling the lumber, etc.

You can also look into things like sod houses, or hay and mud, etc. where primitive methods are used to create a more eco-friendly AND cheaper house.

You can buy a cheapass motor home for a lot less than a building....live in it. Save until you can set up a basic weatherproof structure. Use it for storage as you gather more supplies, and then use those supplies to fix it up after you have bought everything.

You might consider a flexible savings plan that gathers interest while you save...so that the money is working harder. Then buy all your stuff at once.

One place not to scrimp...is with things like solar panels, etc...these will help you save money later...build it INTO your original design. And the prices for eco technology are getting better.

Answer 10

There have always been banks or private finance people providing loans to people.

You could always go with a 15 year loan. Buy a smaller home that is more affordable. Or inherit a home from a riuch dead relative.

Answer 11

you could

1. build your own home
2.if buying an existing house paying all the upfront or paying the owner in instalments..it happened a lot in the East End after the war and my granfather bought his house this way...the owner would come roung once a week to collect payment...

This continues to happen in other countres to this day...