How the heck did mortgages become so OK??

[Beppington]

I'm a person who does not like to borrow money for nuthin', if it can at all be helped ... including for my car & house.

Just wondering when mortgages became so darn common that not only do most people seem to consider them perfectly fine to enter into, but people even readily say things like, "I have no debt whatsoever!!! Just a mortgage."?

Were mortgages common in say 1800? 1900? They obviously are now.

[wfhouses]

It is likely due to the low interest rates and the fact that the interest is tax deductible in many cases. If rates were higher they would not be as popular.

[GREENBACK]

I believe it was the 30's and 40's. The FHA was created about then and of course the idea of the "american dream" really took hold. Not many could afford a large real estate investment like a home without borrowing money or saving a very long time. Guess that's still the case.

I think the concept of the mortgage system is centuries old.

[jIM_Ohio]

I'm a person who does not like to borrow money for nuthin', if it can at all be helped ... including for my car & house.

Just wondering when mortgages became so darn common that not only do most people seem to consider them perfectly fine to enter into, but people even readily say things like, "I have no debt whatsoever!!! Just a mortgage."?

Were mortgages common in say 1800? 1900? They obviously are now.

In 1980 my parents told me one of my aunt's had a mortgage rate of 20% and that was COMMON in those days.

The length of mortgages keeps increasing. My parents talked about 5 and 10 year notes, with 15 being long. Now 30 is standard and some 40 year notes exist.

[kv968]

The length of mortgages keeps increasing. My parents talked about 5 and 10 year notes, with 15 being long. Now 30 is standard and some 40 year notes exist.

The length of everything is increasing. Look at car loans...5 years used to be the "norm" but now they offer 6-7 years loans. It's all because a lot people don't factor in the interest expense, they just look at the monthly payment and figure, "Hey, I can afford that." And of course the lenders are happy to do so since they get more interest.

It'll be interesting to see when the new credit card bills come out that show how much and how long you would actually pay if you were to only pay the minimum. I'd like to think people would stop and think at that point but I'm sure most won't.

[Ima saver]

I honestly don't know if my parents had a mortgage on their first house, but I do know that they saved and bought savings bonds to save up to buy their 2nd house. When my father retired from the army, they moved to Florida and paid cash for their 2nd home.
I bought my first house at a very young age (21) and had it paid off when I was 32. I have not had a mortage since.

[Beppington]

I honestly don't know if my parents had a mortgage on their first house, but I do know that they saved and bought savings bonds to save up to buy their 2nd house. When my father retired from the army, they moved to Florida and paid cash for their 2nd home.
I bought my first house at a very young age (21) and had it paid off when I was 32. I have not had a mortage since.

I'm gonna guess that, like me, you ain't ever goin' back either? Am I right?

There's an expensive (for me anyway) vacant lot I want (I detailed it in another thread), but I just don't think I could stomach going into debt to get it. Gonna have to wait ...

[wincrasher]

So what's your alternative? Pay rent for 20 years until you can save enough to pay for a house outright? How does that make you better off?

A mortgage is good debt. Regardless of what is in the media right now, buying a home is still a good investment in your future. It's an investment in lifestyle and is good for society.

You just need to buy what you can truly afford - not what the realtors/bankers say you can afford. Rates will probably never be this low again in our lifetimes. Once the economy recovers, prices will start going up again - especially after all the foreclosures are cleared.

If I were a renter with a stable job right now, and found a great bargain, I wouldn't think twice about getting a mortgage.

[disneysteve]

My parents bought their house in 1955. I think it was part of the GI bill after the war. They did have a mortgage and paid it off in less than 10 years. I don't remember the details but I saw the paperwork a few years ago when my mom sold the house.

I think mortgages have been around for a long, long time. Like so many other things, though, they have grown and grown both in amount and duration as people's wants (not needs) have changed. It is part of the overall upscaling of American lifestyles. The average new home today is more than double the size of the average new home in 1970. This is despite the fact that the average family is smaller. Bigger home equals higher price. People demand more and more space but the only way the average person can afford that is to borrow the money and repay it over decades.

Another piece of the problem is people constantly upgrading. As soon as they can afford a bigger payment, they move to a more expensive house. As I mentioned, my parents bought their one and only house in 1955, not long after they married. They stayed there and raised 2 children. My father died in 1992 and my mother stayed there still until 2006 when she finally sold it and moved to a senior apartment building and the age of 76. How many people do you know who have owned their current home for over 50 years. That just isn't what people do anymore.

Personally, we bought our one and only house in 1994, less than 2 years after we married. Almost 16 years later, we're still here and among our friends, we are probably the only couple still in their "first" home. Some of our friends have had 2, 3 or 4 homes in that same time period.

[disneysteve]

A mortgage is good debt.

I'm not so sure I agree and certainly not in all cases.

To me, "good" debt is money borrowed in order to make more money down the road. For example, it is fine to borrow a reasonable amount to get an education that will allow you to pursue a career that will earn you more money for the rest of your life.

I do not consider a primary residence to be an investment. I did not buy my house in order to make money when I sell it. I bought it in order to have a stable place to live after living in 6 different places over a 10-year period. I bought it to have a place to raise my family. I bought it to be in a good school district for my daughter.

[GREENBACK]

To me, "good" debt is money borrowed in order to make more money down the road.

Could be argued that paying a long low interest mortgage that has tax advantages allows you to invest in other areas that will indeed make money for you over the long haul.

[jIM_Ohio]

My parents bought their house in 1955. I think it was part of the GI bill after the war. They did have a mortgage and paid it off in less than 10 years. I don't remember the details but I saw the paperwork a few years ago when my mom sold the house.

I think mortgages have been around for a long, long time. Like so many other things, though, they have grown and grown both in amount and duration as people's wants (not needs) have changed. It is part of the overall upscaling of American lifestyles. The average new home today is more than double the size of the average new home in 1970. This is despite the fact that the average family is smaller. Bigger home equals higher price. People demand more and more space but the only way the average person can afford that is to borrow the money and repay it over decades.

Another piece of the problem is people constantly upgrading. As soon as they can afford a bigger payment, they move to a more expensive house. As I mentioned, my parents bought their one and only house in 1955, not long after they married. They stayed there and raised 2 children. My father died in 1992 and my mother stayed there still until 2006 when she finally sold it and moved to a senior apartment building and the age of 76. How many people do you know who have owned their current home for over 50 years. That just isn't what people do anymore.

Personally, we bought our one and only house in 1994, less than 2 years after we married. Almost 16 years later, we're still here and among our friends, we are probably the only couple still in their "first" home. Some of our friends have had 2, 3 or 4 homes in that same time period.

Steve- I do not disagree with any of the facts listed, and if there is an opinion in there, I agree with it too I think...

the "flip" side to this

the school districts today are **probably** more important to your kids "success" than they were in 1950

Meaning there are more bad school districts now than 50-75 years ago. This creates more demand in a good neighborhood now than in 1950 (demand increased even if not much changed about the house itself)

Mortgage follow laws of economics- supply and demand... and they also fall into issue Steve pointed out of people wanting "more" and not being satisfied with what they have.

in 1950 most families had 1 working spouse, making a decent wage. There was a supply of houses for them at a cost we would think reasonable by that day's standards or even today's standards.

At some point, to get ahead, or not fall further behind, some families had two parents working, earning white collar incomes. This creates a bigger money supply, and people with houses either wanted more house than they had before, or could "afford more house" so they moved to the pricier neighborhoods because they like nice things. Law of demand says this drives up prices. Law of supply also says this drives up prices. Therefore prices go up because the laws of economics say they go up.

Eventually that two income household drives the prices up for everyone. "My sister and her husband just moved to that nice suburb and I want to move there too" syndrome. Never mind that the first family had no kids and second one has kids with only 1 working spouse. Or the situation where "we live in the town next door, and our trees are just as green, so I want more when I sell my house" and the similar situation "I cannot afford to live next door to senior manager 123 or CEO abc, but if I move close to that town crime won't be as bad as where I live now, so I will move closer to where things are good".

So it morphed into "keeping up with the Jones'" but supply and demand played their part along the way.

[disneysteve]

Could be argued that paying a long low interest mortgage that has tax advantages allows you to invest in other areas that will indeed make money for you over the long haul.

Good point. I've actually made that same argument as a reason not to pay off the house. We've had more than enough in savings to pay off the mortgage for years and haven't done it because I think the money is better off invested.

[Joan.of.the.Arch]

I'm old enough to have seen horrible, horrible shacks that poor people in the USA rented and still did not have dependable protection from the elements. You can bet these renters would jump at the chance to have a mortgage and live in a secure house with well fitting windows, plumbing, a furnace or boiler and water-shedding roof & tight exterior walls. Getting a mortgage and decent house was an achievement. For those not as old as me--I'm talking about the 1960's and 1970's. I can only assume that it was a similar day of pride and thanking-god-in-heaven for those who were able to get a mortgage to build or buy decent a decent home in the earlier decades.

My grandmother spent some time as a tenant farmer in Arkansas. Two rooms in a house that obviously did not belong to her. One room was for living in. The other room was for storing her and her husband's portion of wheat they had saved for themselves through the coming year! Gramma went through number of changes, living arrangements, and enterprises through her life, but it was not until after WWII that she and her husband were able to live in a house of their own. She and her 13 siblings (!) all entered the middle class at that time. They had VA mortgages and VA education for the men. I have no doubt the mortgages and the homes they got were welcome and celebrated.

In my urban neighborhood their are many garages that have fireplaces back from the Great Depression when people moved some portion of their families into the garage. When that is how you have lived for 15 or twenty years and finally you have the chance to get a house through a mortgage, of course you are happy to do it.

All those kinds of circumstances feed into an American culture of accepting a mortgage.

So I do not think that it is anything new to be pleased to have a mortgage. However, the notion that a mortgage is not debt is something that has been creeping up much more recently, I think. The idea that a house is an investment is new, too, really. For most of American history appreciation of houses was only equal to general inflation. But I do agree with the statement that house ownership is an investment in lifestyle. That is a good way of saying it.

[mdcrim]

I did not purchase my house for an investment, either. But, due to my large downpayment (from the equity we rolled in from the sale of a prior townhouse), I pay much less to my current mortgage than I would have to pay to rent my house. To rent, I would probably be out an additional $500 per month. Yes, I have upkeep that a renter wouldn't have, but I can also paint the rooms any color I want and hang things from the walls. It is a home, not an investment.

My in-laws bought their house in 1967 for $30,000 and it has been paid off FOREVER. Unfortunately for them, the neighborhood has gone way downhill but they would rather stay there without a mortgage than move.