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homestead - Re: [Homestead] The Usury Business, How To Avoid Going To Jail

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  • From: Gene GeRue <genegerue AT ruralize.com>
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] The Usury Business, How To Avoid Going To Jail
  • Date: Fri, 03 Sep 2004 06:41:51 -0700


>We already have interest-only loans

Gene, how do those work? Does the borrower only pay to service the loan but not any on the principal? What's the difference between that and rent?

Yes, nothing pays down the principle unless the borrower chooses to do so with payments greater than the interest. The difference is that the borrower has the deed to the property, subject to the note and deed of trust. The borrower can deduct all interest payments from income before computing income tax. And the borrower/owner receives the benefit of any appreciation on the property. It works fine in a rising market. It founders in a falling market. These loans may or may not require a down payment. Lenders make no-down-payment, interest-only loans to borrowers with excellent credit. The trend is to look more to the borrower's credit than the property. The theory is that those with superb credit will make payments come hell or high water. Top credit is equated with top character. I think of it as the same character as once was exemplified by a simple handshake between two honorable persons.






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