If you take this idea a little further, you’ll eventually get a credit union.

No quicker way to negatively influence a friendship than loaning money. Doubly so with the expectation of interest.

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.

Yes - Building Societies

Like a credit union?

Isn't this what jeff Bezos is doing with fractional real estate investment, except evil?

Not pooping on the idea, I would totally toss money towards a fractional mortgage to help someone else get a home, just noting how the upside down universe version of this idea is already out there.

sauc: https://arrived.com/

A form of this exists but only compatible with smaller money amounts or whatever your entourage can bring in a bout a year maximum. I don't know how you call it in English but a dumb translation from Moroccan practice would be "turn around" or "random drawing".

Basically you just gather a bunch of people, as many as you can manage and decide on a single share amount, periodicity and number of participants. Each month, every body contributes with the share and somebody takes it home.

For example, you gather 10 people, and decide periodicity is 1 month. And decide the share is $200. You randomly draw the order of distribution. Some people do ask and negotiate the order of turns. Each month one person gets $2000 ($200 times 10) acorrding to the turns planing.

Some people can contribute in 2 or more shares. They simply pay a multiple amount of the share and get to get paid in multiple turns. For example you can have only 8 people but 10 turns.

You could call it turn based contribution.

Once the whole period is elapsed, every body should have had all of their money back.

People that have late turns feel like they simply saved money. People that have early turns feel like they got interest free, halal, loans from their friends.

That's good, but for it to scale everyone should participate. Maybe we could manage it centrally to maximise the outcome, I guess maybe the state could do that? Kinda like taxes? And then the government could buy or build the house and give it to whoever asked for it... Wait a second!

Non-profit community financial institutions are credit unions. They're generally disappearing though, in many segments, especially as regulators force organisations to merge for 'scale' to pretend like they need to compete on scale with big banks.

Loans can have cosigners. There's generally a limit on that based on logistics. Theoretically you could incorporate a business, and take out business loans, with convoluted payment schemes like you've indicated for users of that business, but such things are generally not approved by FIs due to the high risk of default on such things. Crowdsourced projects already have a very "I sent the money, maybe one day they'll deliver star citizen" type feel to them. Imagine trying to balance that risk, against the interest amounts you need to pay on deposits... it's practically a non starter.

Another issue is that interest gets paid to the bank, and the bank pays interest on deposits, on a routine/regular basis. Trying to shif the payouts overtly into a scheme where its a lump sum after a long duration, introduces even more risk to it all. Like mortgages typically have something like an 80% LTV minimum (loan to value of security), so that if the borrower defaults in the first year, the bank can still foreclose and maintain the interest payment commitments to depositors. If you didn't have to pay that depositor their interest for 25 years based on the agreement, you'd pretty much guarantee that the organisation fails to make its financial commitments to the depositors.

Put slightly differently, Credit Unions are already "crowd sourced" mortgage options with established repayment functions for the depositors, which follows a more stable and lower risk approach -- but their "crowd" is just their memberbase (which has generally been declining for decades, as people don't care about this sort of thing in general). When you "buy"/lock in a deposit, something like a $5000 term deposit for 5 years at 3% per year interest, that money basically gets combined with a bunch of other peoples term deposits, and used to provide a loan to someone in the community wanting to get a home. That person then commits to a 4-5% interest mortgage, where their interest payments cover the operating costs of the organisation, plus the deposit payout to the depositor with the term deposit. If the borrower can't make payments, the CU can foreclose on the property and continue to make the 3% annual interest payment on the term deposit -- so your deposit is pretty much assured, and is very low risk compared to other savings options. Stocks yield higher returns, but involve much more risk -- s'why people aim to diversify portfolios once they get to a point where they can save a bit.

And as a side note: most times you hear complaints about savings / deposit interest from a bank/CU, it's because the person just has their money sitting in a demand account like a chequing account, or a chequable savings account. You gotta lock it in to a term/gic or something for it to get an interest rate that matters -- and CUs/Banks pay out on those more, because they can do exactly what I described above with those funds.... while if the funds remain available to you 'on demand', it's arguably useless.

Isn’t this effectively what getting a mortgage from a co-op bank is?

I see no benefits to me owning even 1/2500th of somebody else's house. I'd rather give my friend $100 so they have a place to live and be done with it.

Not the same, but we had a crowd source house insurance setup. Basically, all the costs of the year were added up and then split between members. It was about half the cost of regular insurance.

If you asked everyone in the US to give you one dollar you could buy a pretty nice house

there was a microloan thing to get some small stuff for people from poor countries to get equipment they need to farm or start a business. I would imagine something like that might work. Um but the whole friends and family you need to realize we are talking over a thousand people.

Your better off getting 10 people and starting a commune

This idea got me thinking, and I started coming up with ideas to streamline it and pay investors more consistently and then I realized that between the two of us, we've invented banking.

LendingClub used to do crowd sources loans with shares of 25$/pc

That mortgage officer's answer is better than anything I can contribute, just saying something closer than credit unions to what you described was around a few years ago (depending on your perspective)

I think this is an amazing idea. I would treat it like a charity though. I would much rather give $100/month towards this, than some random charity where the ceo makes millions per year.

Set it up so it's kind of a co-op non-for-profit, where there are legal papers that can be bought instead of a head entity. That way, there's no ceo in the future making millions per year.

Crowd funding is a thing for loans already. Haven't seen one that goes to the lengths and size of a mortgage but I've both gotten and helped fund loans through one platform called Prosper. I expect there are similar ones out there.

Yes in general that has been done for a long time. It's sort of what the Bailey Brothers Building & Loan company (bank) was about in "It's a Wonderful Life"

https://www.richmondfed.org/publications/research/economic_brief/2019/eb_19-01