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I wonder if it would be feasible to crowd source mortgages. (sh.itjust.works)
submitted 7 months ago by to c/showerthoughts@lemmy.world
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My idea is some non profit gets setup to manage a system where someone announces their mortgage and then they can have friends, family and second and third degree friends and families finance your loan.

Let's say someone buys a $250k house. Each person puts in $100 and then they get a receipt showing they are owed $200 against their 1/2500th share of the mortgage. Repayments are paid the $200 in return in a random time frame of between the first month to the last month 30 years later. Repayment is completely randomized, meaning you could get your money back really soon... Or a really long time from then.

There are a lot of other ways you could build on this idea.

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[–] 38 points 7 months ago (7 children)

Former mortgage broker here. This is basically a credit union, or a private lender.

Now I'll explain why those exist, but your idea doesn't exist.

Repayments are paid the $200 in return in a random time frame of between the first month to the last month 30 years later.

Every year that $200 loses 2.2% of it's value. So you have to charge interest or else people would be signing up to lose money (buying power).

But that creates a new problem, who gets paid when?

Assuming 5.5% interest (low end of rates right now) and a 25 year amortization, the people who got paid out at year 1 would receive $207 while the people paid out at year 25 would get $788(~$450 of buying power though).

Than there's the aspect of insurance. Your mandatory mortgage insurance covers the bank, not you. So now you need to find an insurer that can work with up to 2500 beneficiaries.

Or how bout when the bank forecloses for non payment?

It gets messy really fast and I'm just scratching the surface.

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  • [–] 5 points 7 months ago

    I think you may have jumped the shark with the "loses 2.2% of its value" comment. I feel like most of the world doesn't understand inflation / the difference of real vs nominal dollars.

    I tried explaining it to someone once and they kept just saying, "but the money in my bank account is real".

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  • [–] 1 point 7 months ago (1 child)

    Assuming 5.5% interest (low end of rates right now) and a 25 year amortization

    Where is that ? That seems crazy high to me. I bought last year in Germany, at a "bad time" and my interest rate is 3.4% fixed for 10 years.

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  • [–] [S] 1 point 6 months ago* (2 children)

    So the idea is its a cross between charity and gambling, who gets paid when is the gambling. It's a feature.

    Also, I don't think your math is taking into account the $200. You borrow $100 and pay back $200, the interest is baked into the repayment amount. It's a gamble, the people paid in year 1 get hella interest. The people paid back in year 26 basically break even on inflation and people paid back in year 30 lose money.

    But I am fascinated to know what procedural hurdles one would face trying to set something like this up.

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  • [–] 1 point 6 months ago* (1 child)

    Oh I missed the part about $100 buy in. That makes a bit more sense. But where are you getting the cash to pay out the investors? You buy the house and then every 4.4 days you're on the hook to pay out $200 for 30 years. Where is that cash coming from?

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  • [–] [S] 1 point 6 months ago*

    From their job or the same place they get money to pay a traditional mortgage?

    Let's say the borrowed amount is $250,000, so you owe $500,000. That's a 1,400 monthly payment. So 7 people get paid each month, or 84 a year. By the end of the period you have paid out all 2,500 lenders.

    (I am using $100 and $200 repayment and $250k to make the math easier and more round. Oddly it is close to current interest rates)

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