Last updated on June 27, 2020
The American Dream Comes With 30 Years of Debt
A culture is only as great as its dreams, and its dreams are dreamed by artists.
– Ron Hubbard, founder of Scientology
Ron Hubbard was an artist.
He made up a crazy story about aliens on a spaceship 75 million years ago that were killed with hydrogen bombs by a dictator named Xenu.
Ron convinced millions of people that his stories were true.
And it worked.
The man died with a net worth of over $600 million. Every dime of that came from his ability to manipulate people through storytelling.
A culture is only as great as its dreams, and its dreams are dreamed by artists….
The American Dream Includes 30 Years of Debt
You might say Scientology is wack, and Hubbard’s followers are gullible to believe him.
But let’s not forget our own silly stories.
Have you heard of the American Dream?
We don’t know who created this story but it claims that happiness is achieved by following these steps:
- Go to school to learn to socialize, play and obey
- Graduate high school
- Take out loans to go to college
- Get a job
- Start investing in stock market through retirement accounts
- Get married
- Use a 30-year mortgage to buy a home
- Have kids
- Get promoted
- Take out loans to buy cars
- Use credit cards to go on vacation
- Keep investing into stock market through retirement accounts
- When you turn 60, you will be rich and can retire and do whatever you want
The government, media and society-at-large reinforce this story every chance they get.
Why do they want individuals living in the land of the free to live a scripted life?
Doesn’t seem very American, does it?
But if you’re like me, you don’t follow this script. You make life decisions based on what is best for you.
Does taking on 30 years of debt to buy a home make sense? Probably not.
Is taking out thousands of dollars in student loans going to make me successful? Doubtful.
The American Dream is a cultural paradigm. It is a story you’ve been told that benefits the purveyors of the story. Just like Ron Hubbard and his aliens.
You can read all about cultural paradigms here but the point is the American Dream is dead.
And the 30-year mortgage, that you’ve been told is a fabulous deal, is not.
Related Reading: Homeownership is Overrated
Who Invented 30 Years of Debt to Buy a Home?
Before the 1920’s, home mortgages were straightforward.
If John needs to borrow $5k to buy a home, he goes to his bank, they review his information and the two parties agree to terms. The bank uses the savings deposits from their other customers to lend $5k to John. If John doesn’t pay back the mortgage, the bank is in trouble since the other customers will eventually want the money they had lent to John. For this reason, banks were strict. They assumed all the risk. Repayment was expected within 5-10 years, and down payments were often 50% of the home’s price.
Despite these precautions, the stock market crash of 1929 surprised everyone and thousands of banks failed.
When the dust settled, the government passed legislation to prevent banks from ever failing again.
It created two agencies:
Fannie Mae (1938)
Fannie Mae was created to buy mortgages from the banks that issued them. So next time John borrows $5k to buy a home, his bank won’t use customer deposits. Instead, it will sell that mortgage to Fannie Mae for cash. That way, if John doesn’t pay his mortgage, the bank isn’t on the hook.
Federal Housing Authority (1934)
The FHA was created to increase home ownership in America. The FHA introduced a mortgage with a 30-year repayment plan, absolutely unheard of at the time. These extended mortgages came with low interest rates and minuscule down payments, only 5% – 10% of the home’s value.
So did the government’s plan work?
On the surface, it appears so: Banks issued 30-year mortgages at a record rate and homeownership in America soared. In 1940, only 43% of Americans owned a home. By 1970, that percentage increased to 64%!
That said, this was post-WWII America and the economy was exploding on all fronts….
There is no evidence that the FHA or Fannie Mae were responsible for the rise in homeownership.
After all, no other government in the world guarantees mortgages that banks lend to customers.
And using a 30-year mortgage to buy a home?
To the rest of the world, that’s just dumb….
30 Years of Debt to Buy a Home is Unique to America
No government in the world controls its housing market as tightly as in America.
For example, in England, France, Germany, Italy and Spain, people get mortgages that are variable-rate and short term: for 10 or 15 years.
Other governments don’t encourage or discourage homeownership. They view it as a personal preference that should be decided by the individual.
In Germany, for example, renting is not considered “inferior” and less than half the population owns a home. This is the result of decentralized politics in Germany that favors the individual.
In China, over 90% of citizens own a home but 80% of them did so using cash, effectively cutting out the banks and government altogether.
Over 80% of Mexicans own a home, but only 13% of them used a mortgage since lenders are often crooked.
America is the only country where the government controls every aspect of the home-buying process. It sets the rates, it guarantees the loans, it sells the loans to investors, it collects profits from the loans, it bails out the banks that make bad loans, it bails out the banks that cheat. And it does all of this using the US taxpayer’s money.
The US government even requires banks to issue a certain number of mortgages each month. In other words, they encourage bankers to convince poor customers to take out mortgages!
What the fuck?
And after all this intervention to “help” us, America is still at the bottom of the barrel when it comes to homeownership.
According to Wikipedia:
Looking for the US?
We are #43 with 65% homeownership.
Related Reading: The Untold History of the Student Loan Crisis
Only in America is 30 Years of Debt a Sign of Success
Not many Americans question the 30-year mortgage, which is exactly how cultural paradigms are designed.
The paradigm says that owning a home is a sign of success.
The bankers, by way of the government mandate, say take out a 30-year mortgage to buy a home, it’s how everyone does it.
So Americans, like drones, take on 30-years of debt because the banker said it was a good deal and the cultural paradigm says buying a home is a sign of success.
That is called manipulation.
This is how the government benefits from you taking out a mortgage:
Gross Domestic Product (GDP)
The housing industry’s economic activity represents over 11% GDP. Construction, realtors, architects, financial services, home furnishings, etc. all help stir up the economy. Also, when Fannie Mae purchases their mortgages, they package them with other mortgages and sell them to financial institutions. The financial institutions sell the mortgages to investors and this also helps keep money circulating.
The government guarantees conforming mortgages because it collects mortgage insurance to offset the losses. Mortgage insurance is a lucrative source of revenue. The banks created busywork called mortgage origination fees and this stream of revenue brings in $1 trillion annually to the banking sector. They also copied the government to offer private mortgage insurance and collect about $400 billion/ year through that.
Scientology is notorious for its members going broke because they give away everything to the church.
We’ve been told the 30-year mortgage is an amazing deal for us.
Is it though?
Or is it a great deal for the financial services industry and government?
Related Reading: What did Occupy Wall Street Accomplish?
The Marketing Message Behind 30 Years of Debt
The best storytellers make something sound fabulous even when it’s not.
The perks of a 30-year mortgage:
Low Monthly Payments!
Truth: You will pay twice as much for the home. If the loan issued in May 2020 for $180,000 at 5%, the borrower will have pay the bank back $347,859.84 by June 2050. Input any mortgage amount in this amortization calculator and see for yourself:
You’ll be a Homeowner!
Truth: After 15 years of making payments, you won’t even own half your home. This is because only a small percentage of your payments go towards the asset itself, most goes towards fees and interest.
You Can Pay Off at Any Time!
Truth: Unfortunately when Americans pay off their mortgage, it’s to refinance or buy another home.
You Can Buy Your Dream Home!
Truth: Banks approve borrowers for more than the borrower requested. They want you to buy more home than you need, and borrow more than you can afford.
You’ll Build Wealth!
Truth: They like to say: If your rate is 4.5% and you invest in stocks earning 8%, then even while paying off the mortgage, you’ll earn 3.5% on your money! But the interest rate you pay is guaranteed, the yield on investments is not…..
Payments Decrease Over Time!
Truth: They say a $1,000 payment is $750 after 10 years (inflation), and since you’ll earn more in the future, the payments will be a lower % of your total monthly take home. The truth is inflation hasn’t budged and wages aren’t going up.
Your Home is a Source of Income! You can borrow against the equity and refinance at any time!
Truth: Borrowing against your house is like a cash advance on your credit card. And banks love when you refinance because it sets the clock back on payments (you’ll pay 99% interest again….).
Related Reading: Is a 401k Worth It?
30 Years of Debt Robs You of the *True* American Dream
I want to be clear about something.
I own two real estate properties, and while I didn’t use a 30-mortgage, I did take on some debt.
Debt is a tool, there is nothing wrong with debt.
That said, the kind of debt the American Dream encourages you to take on just to be middle class is definitely wrong.
In 1950, the average income was $3,300. The average car cost $1,510, the average house cost $7,354, and annual tuition was $600. In percentages:
- Car to income: 45%
- House to income: 222%
- Tuition to income: 18%
In 2014, the average income was $51,017, average car was $31,252, the average house was $188,900 and annual tuition is $25,000.
- Car to income: 61%
- House to income: 370%
- Tuition to income: 49%
It’s time to wake up.
Stop blindly following the narrative and American Dream and use your head.
Every human’s objective in life is to align with their soul and express its desires. This is how we become our authentic selves.
But if we are running around to pay the mortgage, car loans, credit card debt to fund LIFE, how well are we connecting with our souls to listen and understand its authentic desires?
Please consider a 15-year mortgage.
For a $180,000 loan at 5%, you’ll pay $168k in interest. The same loan for a 15-year mortgage will only cost you $76k in interest payments.
Think of what you could do with that extra money!
Could you start a business? Partake in extended travel? Stay at home with your kids?
It’s sad when people stay at miserable jobs and lead miserable lives — because they have a mortgage to pay.
What are you really giving up in your life in exchange for the low monthly payments?
Related Reading: What is Spiritual Healing?
The American Dream is Dead and 30 Years of Debt is Stupid
The American Dream is dead.
And owning a home is great, but not when it saddles you with so much debt that it prevents you from thriving in life, from taking chances and going “off script.”
The 30-year mortgage is a well-funded program with a popular marketing message, but as with all cultural paradigms, the purveyors of the 30-year mortgage benefit more than you do.
It took Ron Hubbard years to mold the minds of his followers until they voluntarily opened their pocketbooks to the point of poverty.
Buy a home if you can afford it, but don’t buy a home because you’ve been conditioned to think it’s a sign of success.
We should want ourselves, our friends, family and neighbors to feel liberated and creative in life. We want them to spiritually heal and discover their authentic selves.
So stop. Think. Breath. Run the numbers. Consider alternatives. How do you want to live your life? What are your motives? What options do you want in the future? Is buying a home — and using a 30-year mortgage to fund it — truly the right decision?