Essential Economics for Politicians

Bruddah IZ said:
The equity value of your house does not put money in your pocket until you sell it and therefore equity value is not an asset. Borrowing against your homes equity does not change that fact. It only increases the assets of your lender. The fact that you have expenses to maintain the banks assets as a condition of their $800k loan to you are contractual (PMI, taxes, HOA/mello roos) and increases your liability for the benefit of the banks asset, your home. Yes it does remain an asset, but at this point notice the direction in which the money flows for 30 years. It's not toward you and you are okay with it because you want to build equity. But I know how tempting it is to think that you own that equity. You don't. You have access to it at a cost.

So contrary to what you say above, the house you live in is definitely a liability to you and the loan is an asset to the bank when you consider who pays the bank.

In your example you have a loan of $800k. What was the purchase price?
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Dude, 3 strikes you're out. maybe take a class or something. In my example (which is over your head), my asset value ($2.2m) is worth far more than the bank's asset value (a payable $800K loan earning a mortgage interest rate). Do you really not know this stuff? And yet you cite articles and shoot off your mouth like you know what you're talking about?
I had a feeling you were a nutcake in a cubicle...now you've proven it.
 
Bruddah IZ said:
The equity value of your house does not put money in your pocket until you sell it and therefore equity value is not an asset. Borrowing against your homes equity does not change that fact. It only increases the assets of your lender. The fact that you have expenses to maintain the banks assets as a condition of their $800k loan to you are contractual (PMI, taxes, HOA/mello roos) and increases your liability for the benefit of the banks asset, your home. Yes it does remain an asset, but at this point notice the direction in which the money flows for 30 years. It's not toward you and you are okay with it because you want to build equity. But I know how tempting it is to think that you own that equity. You don't. You have access to it at a cost.

So contrary to what you say above, the house you live in is definitely a liability to you and the loan is an asset to the bank when you consider who pays the bank.

In your example you have a loan of $800k. What was the purchase price?
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Hilarious.
 
legend said:
Dude, 3 strikes you're out. maybe take a class or something. In my example (which is over your head), my asset value ($2.2m) is worth far more than the bank's asset value (a payable $800K loan earning a mortgage interest rate). Do you really not know this stuff? And yet you cite articles and shoot off your mouth like you know what you're talking about?
I had a feeling you were a nutcake in a cubicle...now you've proven it.
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Don't expect him to admit it. He is either really, truly that ignorant, or is just acting stubborn to impress loser joe.
 
legend said:
Dude, 3 strikes you're out. maybe take a class or something. In my example (which is over your head), my asset value ($2.2m) is worth far more than the bank's asset value (a payable $800K loan earning a mortgage interest rate). Do you really not know this stuff? And yet you cite articles and shoot off your mouth like you know what you're talking about?
I had a feeling you were a nutcake in a cubicle...now you've proven it.
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I do know this stuff. It’s pretty easy. What is your interest rate? If I assume a 4.5% interest rate which is about right today, the bank has a loan to you that will cost you just over 659k over the next 30 years. Your total payment on an 800k loan is just over 1.4 million. Notice who pays and who gets paid? So assuming you can sell your house for 2.2 million in 30 years, you will have labored for 30 years to gain 800k in equity. That’s 26k a year of equity compared to 48k a year in payments. See the difference?
 
espola said:
Don't expect him to admit it. He is either really, truly that ignorant, or is just acting stubborn to impress loser joe.
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Shhhh. Pour yourself another cup. Wiggle your onychomycosis toes and say “there’s no place like home”......when the bank still owns it.
 
Bruddah IZ said:
I do know this stuff. It’s pretty easy. What is your interest rate? If I assume a 4.5% interest rate which is about right today, the bank has a loan to you that will cost you just over 659k over the next 30 years. Your total payment on an 800k loan is just over 1.4 million. Notice who pays and who gets paid? So assuming you can sell your house for 2.2 million in 30 years, you will have labored for 30 years to gain 800k in equity. That’s 26k a year of equity compared to 48k a year in payments. See the difference?[/QUOT

In my example, i sold the house for $3m, remember? The $2.2m was the equity value of my ASSET, after I netted out the "LIABILITY" of the loan amount.

So the bank made 659K on its loan over 30 years, and I made $1.4m after paying off the bank and recovering my down payment. My house is an ASSET. In So Cal it's most people's most valuable asset.
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So the bank made 650K and the homeowner made 1.4m? And it’s not an asset to the house buyer? Who made about 45K per year on the house? And if the house was $1m, the house buyer only paid $200K down and the money collected interest while he made the mortgage payments? And Izzy says not an asset. LOL!!!
 
Bruddah IZ said:
I do know this stuff. It’s pretty easy. What is your interest rate? If I assume a 4.5% interest rate which is about right today, the bank has a loan to you that will cost you just over 659k over the next 30 years. Your total payment on an 800k loan is just over 1.4 million. Notice who pays and who gets paid? So assuming you can sell your house for 2.2 million in 30 years, you will have labored for 30 years to gain 800k in equity. That’s 26k a year of equity compared to 48k a year in payments. See the difference?
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legend said:
In my example, i sold the house for $3m, remember? The $2.2m was the equity value of my ASSET, after I netted out the "LIABILITY" of the loan amount.

So the bank made 659K on its loan over 30 years, and I made $1.4m after paying off the bank and recovering my down payment. My house is an ASSET. In So Cal it's most people's most valuable asset.
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Lol! Okay. Baby steps. At least you finally admitted that your loan was a liability (bolded above) prior to the sale which was not in your example. An assessment of "$3m value less the $800K you owe on it" was made but no sale was made for $3 million in bold below. If you had sold the house you nor the bank would have an asset and you would no longer be liable to the lender having paid off the loan. I addressed outright ownership of the home itself with the ongoing liabilities/expenses that go with continued ownership to include property taxes regardless of loan repayment. Your example also did not include an actual purchase price or a down payment that you $uspiciously and unspecifically mention here. A purchase price that is higher than your loan amount is not unusual. However, it does affect the amount of property tax and PMI that you pay unless your down payment eliminated the need for PMI through a 20% downpayment.


legend said:
OK, I will go slow here. The value of your house as an asset, whether you owe money on it or not, is the equity value less the costs (e.g. mortgage, maintenance, etc.)...although most wouldn't consider costs such as electricity and water, etc., to reduce the asset value.

The fact that you have expenses to maintain the asset may reduce the asset's value, but does not make it a "liability," it remains an "asset."

So let's say you bought a house for $1m and, due to CA real estate being what it is, it is now worth $3m on the market.

Let's say you have a loan of $800K on the house. The bank has an "asset" which is a secured loan of $800K against the collateral which is now worth $3m. But you, the "owner" of the house, has an asset worth $2.2m, i.e. the $3m value less the $800K you owe on it. Only you can sell the house, not the bank (unless the bank forecloses on you).

So contrary to what you say above, the house you live in is definitely an asset to you and the loan on it is an asset to the bank.

This is the MOST BASIC stuff about economics and budgets and value...indicating perfectly what I have been saying about you and economics...you know absolutely nothing.
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messy said:
So the bank made 650K and the homeowner made 1.4m? And it’s not an asset to the house buyer? Who made about 45K per year on the house? And if the house was $1m, the house buyer only paid $200K down and the money collected interest while he made the mortgage payments? And Izzy says not an asset. LOL!!!
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Izzy said since you didn't say what your interest rate (the price of money), purchase price and, downpayment is in your evolving example.....
Bruddah IZ said:
......a 4.5% interest rate which is about right today, the bank has a loan to you that will cost you just over 659k over the next 30 years. Your total payment on an 800k loan is just over 1.4 million. Notice who pays and who gets paid? So assuming you can sell your house for 2.2 million in 30 years, you will have labored for 30 years to gain 800k in equity. That’s 26k a year of equity compared to 48k a year in payments. See the difference?
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So how long did you own the home in your example before you flipped it for a profit?
 
messy said:
So the bank made 650K and the homeowner made 1.4m? And it’s not an asset to the house buyer?
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Not anymore. It's now a "profit" that has no equity. You have 1.4 million to use to actually buy an asset this time. I would recommend lending it out to someone like you that will either repay you quickly or pay you over time without you having to labor as much if any, for cash flow like you did previously.
 
messy said:
And if the house was $1m, the house buyer only paid $200K down and the money collected interest while he made the mortgage payments? And Izzy says not an asset. LOL!!!
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As a lender I would be happy to collect 48k worth of your wages a year while I labored not. You're happy to make a profit in 30 years and I'm happy to make a profit immediately off my asset, your liability with a mutual agreement. I'm happy to be your buyers lender as well.
 
Bruddah IZ said:
As a lender I would be happy to collect 48k worth of your wages a year while I labored not. You're happy to make a profit in 30 years and I'm happy to make a profit immediately off my asset, your liability with a mutual agreement. I'm happy to be your buyers lender as well.
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Again, showing your financial knowledge. Poor guy. You'd rather loan money at 4.5% (the interest being ordinary income) than own an asset that appreciates 5% per year and then sell it as a capital asset. Any year you choose to sell it you capture the gain...not the bank, dummy. Game, set and match.
Go take a class. Or maybe start investing in a diverse portfolio and watch your "assets" grow. You can learn that way!
 
Bruddah IZ said:
As a lender I would be happy to collect 48k worth of your wages a year while I labored not. You're happy to make a profit in 30 years and I'm happy to make a profit immediately off my asset, your liability with a mutual agreement. I'm happy to be your buyers lender as well.
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Can the bank sell the house? No.

Can the bank sell the mortgage? Yes.

Which is the asset?
 
legend said:

Again, showing your financial knowledge. Poor guy. You'd rather loan money at 4.5% (the interest being ordinary income) than own an asset that appreciates 5% per year and then sell it as a capital asset. Any year you choose to sell it you capture the gain...not the bank, dummy. Game, set and match.
Go take a class. Or maybe start investing in a diverse portfolio and watch your "assets" grow. You can learn that way!
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Actually I would rather lend it out for more than 4.5%. But you made a down payment and I gave you credit for reducing the probability that you would walk away from that kind of down payment. It helps me sleep easier knowing that I gave you a payment that you can afford and are not likely to default on. Besides I have about a thousand AAA loans like yours that I sell to big investors in one shot as a Mortgage Backed Security (MBS) so I can rinse and repeat. Your's was the 1000th loan. Tomorrow I close another 100 loans and in about two weeks I sell another 1000 loans in the form of an MBS to investors so I can make at least 100 times what you made. I like those kinds of assets better.
 
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