Mortgages have been in the news for the past few years, particularly in the early phase of the COVID-19 pandemic, when interest rates fell below 3%. Today, they are in the news again as interest rates rise and home sales slow.
With our eyes on the housing market, we thought it might be fun to take a look at some of the weirder and more interesting facts about mortgages.
1. Mortgage loans have not always been available to ordinary people
A mortgage today looks very different from a mortgage in the early 20th century. At that time, the home buyer had to make a 50% down payment and take out a mortgage with an amortization period of five years.
In other words, the buyers only had five years to pay off the mortgage in full. To make matters worse, the buyers only paid interest for those five years. At the end of these five years, the entire principal of the loan was due. Fixation excluded most Americans from obtaining mortgages.
2. The word is of dark origin
The word "mortgage" comes from the Old French phrase "mortgage." Translated by Mort Gage, the word means death. When the mortgage is paid off, the loan dies.
3. He can also speak Greek
CNN found that 33% of respondents don't know what "annual percentage rate" means. Also, 33% believe that mortgage lenders should charge the same fee to all borrowers.
The truth is that the APR represents the total amount (including interest and fees) that the borrower pays for the mortgage. And in terms of fees, the lender can charge anything they want for services such as a home appraisal and credit checks.
4. This is a success
When a Scottish homeowner pays off his mortgage, he will sometimes paint the front door red to celebrate his success.
5. A (very) gilded mansion - even without a mortgage
In the 1890s, in the heart of the Gilded Age, the coolest addresses in the world lay on Fifth Avenue in New York City. The Astors, Vanderbilts, and Carnegies are just a few of the names that have poured the family fortune into building bigger, more elegant homes.
Just 30 years later, many of the Fifth Avenue homes were demolished. At the time, it would cost up to $5 million a year to maintain the mansion, taxes, and pay the servants to keep the house running. In 1925 the Vanderbilt mansion was sold, demolished, and replaced by Bergdorf Goodman.
6. Most of us need a mortgage
Only 12% of homebuyers pay cash to buy a home. The remaining 88% take out a mortgage.
7. Mortgage amounts vary
The amount of mortgage a house buyer can borrow differs by number. For example, the maximum value in the United States is usually around 97% (although there are exceptions). UK homebuyers can mortgage up to 110% of a home's value. In the Netherlands, a borrower can take out a mortgage for 115% of the value of the house.
8. Mortgage tax credits are nothing new
Homeowners have been able to use mortgage interest as a tax deduction since 1894 when any interest was tax deductible. Mortgage interest today is one of the few types of deductible interest.
9. No, but thanks anyway
According to the New York Times, only about 50% of homeowners use the mortgage interest deduction at tax time.
10. Ah, that pretty boy Floyd
Although an urban legend, this latest bizarre fact is actually pretty fun to imagine. In 1933, bank robber Charles Arthur "Pretty Boy" Floyd stood by long enough during his bank robbery to destroy mortgage documents, thus freeing other "ordinary people" from an unencumbered existence.