Z
z106
Guest
Ok FOlks - if anyone can answer this for me I would be VERY grateful.
So - as the subject says,the question is how do banks make money from mortgages?
I have asked many people this and NO ONE knows !!
Lets go through 1 example.
ANd before people anwer in general terems can yee try to just answer in the context of te example please.
SO - lets say for arguments sake that interest rates are the same as inflation at 5%.
At the beginning of the year I borrow €1,000,000 on an interest-only mortgage.
By the end of the year lets say I pay back the initial capital along with the interest.i.e. I have paid back €1,050,000 - which obviously due to inflation means that it is the same amount in real terms as the €1m was 12 months ago.
i.e. the banks have made no money in real terms.
Can anyone explain how they have made money in that example.
Obviously something goes on in the background.
What is that something?
So - as the subject says,the question is how do banks make money from mortgages?
I have asked many people this and NO ONE knows !!
Lets go through 1 example.
ANd before people anwer in general terems can yee try to just answer in the context of te example please.
SO - lets say for arguments sake that interest rates are the same as inflation at 5%.
At the beginning of the year I borrow €1,000,000 on an interest-only mortgage.
By the end of the year lets say I pay back the initial capital along with the interest.i.e. I have paid back €1,050,000 - which obviously due to inflation means that it is the same amount in real terms as the €1m was 12 months ago.
i.e. the banks have made no money in real terms.
Can anyone explain how they have made money in that example.
Obviously something goes on in the background.
What is that something?