A bank doesn't build or create anything. It has zero contribution to society. You go to a bank and ask for a loan, the bank "loans" you money that they don't actually and charges you a massive fee called interest for loaning you what they don't have. You sign a mortgage contract and then you pay, for example, $2,000/month. On top of that $2,000/month you have to pay 20% down as a security deposit for the bank in case you default on your loan. On top of your security deposit, the bank forces you to pay for insurance that covers anything going wrong with the house. On top of the that, the bank probably has it's own insurance in case you default on the loan.
So you've given the banks tens of thousands as a security deposit that you lose if you are unable to pay your loan and you have insurance to cover any problems with the house. So the bank is completely covered and has nothing to lose and didn't really give you any money since they never had any money in the first place.
At this point, there is no reason whatsoever for the bank to charge any extra fees. Processing a monthly loan payment is most likely 100% automated, it costs them no more to process a payment than your local electric company processing a payment. Regardless that the bank is protected from loss and has almost no costs involved in providing your loan, they charge you massive interest on your loan.
At the beginning of your loan almost your entire monthly payment is interest, so if you pay $2,000/month, the bank collects $1,900 in interest. Over time this interest goes down and more goes to the principal. After 15 years your $2,000 is $1,000 principal and $1,000 interest. It's not until the very end of your loan where you pay very little interest.
What exactly is the bank doing with the $1,900 a month they are collecting in interest? You've already given them a security deposit and have insurance on the house. You already paid all your closing costs. We already know that it doesn't take $1,900 to process a payment. It's pure profit. Profit from loaning you money the bank doesn't even need to have. Even if for some reason the bank ran out of fake money, the fed would just print more and give it to them.
Someone paid the builders. That would be the bank. They are taking a risk on your loan as the builders already have the banks money. If you didn’t have a bank the construction company would have to be their own bank.
Unreasonable -2 points 2 years ago
Someone paid the builders. That would be the bank. They are taking a risk on your loan as the builders already have the banks money. If you didn’t have a bank the construction company would have to be their own bank.