A nifty way to buy that house

“If you want to steal don’t rob a bank…found one”

Mr Simple

In the last little, well forever actually… I’ve been pondering the stupidity of property ownership and mortgage debt.

Now I can understand the first family in the history of the world discovering a plot of land and saying: “This is ours!”.

So they build a little castle on it and live happily. Fast forward a few generations to the next family says: “Nice castle. We should buy that…oh but it is going to take the wealth from our entire life to afford it…boy that really sounds like a swell deal!”.

Its crazy stuff!

We don’t own houses. The banks do. After 30 plus years of paying them we finally get the keys. Then and only then does the house become our home. Problem is that it’s long past time to save for our retirement. Ultimately we lose our house. Sold to pay for the old age care that we need. So what was the point?

Also exactly what is this ownership that we believe we have? This sense of ownership for which we are prepared to waste our adulthood in mundane occupation? In the case of property it is really just some conventions that allow us to alter and amend our homes so long as it is permissible under local planning law. We don’t even have the full freedom to remodel our castle as we see fit. But, we see it as a better deal than having some landlord intruding into our lives whenever they please.

A thought I’ve had recently goes like this:

Sell your mortgage to your retired parents. This gives them a guaranteed income that is safer than the financial planner running off to Seville on their life savings. Instead you pay your parents the equivalent of market rent (a lot lower than mortgage repayment). When they pass they leave their house and your house to you in their will. You do the same for your children by letting them occupy and rent one of the properties. Basically your family takes the step of cutting out the bank completely. That way you get to keep all the wealth and all property within our family and grow it with every generation.

In a normal mortgage arrangement you pay the bank enough to buy two houses because of the cost of money (interest) that they charge you. In this arrangement, since there is no bank, your family would get to concentrate a consolidate a considerable sum of money. Your retired parents would also have a very safe stable income that would carry them into their twilight years.

It beats the alternatives like freedom camping, RV living or being a 90 year old couch surfer! Or maybe it doesn’t. But is sure is a better idea than donating 50% of your salary to the bank every month.

3 thoughts on “A nifty way to buy that house

    • You owe $100,000 on your home at 5.50% interest to Citibank.
      Your parents pay out the $100,000 to Citibank.
      Now they own part of your house and you owe them $100,000.

      You then pay back your parents instead of the bank.

      There are a range of different arrangements that you could agree – depending on your/their financial situation.

      One example would be to pay them an interest only fixed payment. You save the difference should they need the principal later. Maybe they ever require it to be paid back in full (e.g. they agree to waive the balance remaining as part of the settlement of will).

      Another option would be to pay back an interest rate proportionate to their living cost requirements so that this payment stretches to support their remaining life, but is less that the interest you’d owe the bank and perhaps you never need to pay back the full $100,000.

      Basically look for a win-win arrangement. This is not about ripping off elderly parents! 🙂

  1. Pingback: Rent or buy? Is owning your own home a financial mistake? | Less equals More (LeM)

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