Quote:
Originally Posted by jyl
Rick, if the borrower fully repays a mortgage, the bank has taken zero loss. Disagree?
If there is a loss, but the bank has taken zero loss, then that loss is all taken by the borrower. Only two parties to this deal, after all. Disagree?
Assuming you agree to this point, the remaining question is, was there a loss? I suppose that depends on future house values and the rent vs buy economics in the meantime.
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The loss to the borrower is only realized at the time the note is paid off, and only then if his net cost of ownership is more than he can sell the house for or could have rented for the same time. However, the bank incurs risk every day there is an outstanding mortgage on the house.