There needs to be a bill written capping the amount of interest charged on mortgages when buying a home. We understand that a bank needs to make money when they are lending it to a home buyer however at this point it is starting to feel like highway robbery and is making it increasingly harder for new home buyers to buy a home. We are currently at the lowest rate of home ownership in our country because banks are charging twice as much for a mortgage than the home is even worth.
Example: most people who have pulled a mortgage for 200k will have payed anywhere between 550k-750k on a 30 year mortgage. This is double to triple that of the actual cost of the home making it nearly impossible for new homeowners to obtain a home that does not need any repairs.
How could we determine the cap? I prose we change how mortgages are calculated. Instead the interest is given as a whole % of the purchase price and is capped between 25% for first time buyers and 40% for those who have previously purchased a home. Now for those who have owned homes in the past however have faulted on payments resulting in a foreclosure then the bank may charge up to total 75% interest as “earnest money” in the chance they fault on a payment again and the bank has to foreclose. Example: the home costs 200k, however the total amount paid at the end of the loan term will be a 25% more so 250k. Leaving the bank to profit 50k by the end of the term. For someone who has previously purchased a home the total loan amount would be 40% making it 280k, leaving the bank to profit 80k. Now for someone who has had a home foreclose before the total amount paid at the end of the term would be 75% the initial loan cost meaning they would have paid 350k, leaving the bank to have profit 150k.