14 Things Facts About Mortgages That Will Impress Your Friends
Over the course of my career in finance and in writing about mortgages, I’ve found that one good way to make conversation is to reveal little-known facts about mortgages to my friends and family. Mortgage facts tend to wow people because while most people end up getting a mortgage at some time or another, many don’t really take the time to think about where the idea came from. Here are a few facts about mortgages you can use to impress your friends at your next social gathering.
1. Mortgage is Related to Death
The word mortgage stems from the Old French word ”morgage,” or “mort gaige,” which means “dead pledge.” Your mortgage dies once you pay it off or fail to make payments.
2. The First Use of the Word Had Nothing to Do With Housing
The earliest use of the word mortgage (spelled morgage) was in the poem Confessio Amantis, which was written in the 1300s. In that poem, the word was used to describe marriage, not a home loan.
3. The American Mortgage Has Changed Over Time
Thirty-year mortgages are a relatively new thing. In the time before the Great Depression, mortgages had short maturity times and usually required a very high down payment, according to “The American Mortgage in Historical and International Context.” Pre-Depression mortgages featured variable interest rates and were usually renegotiated on a yearly basis.
4. Plenty of People Are Clueless About Mortgages
According to CNN Money, more than a third of people surveyed had no idea what “annual percentage rate” meant and more than a third thought that lenders were required to charge the same fees to each customer. The truth is that your lender can charge you whatever it wants for your credit check and appraisal. That’s why I recommend shopping around when looking for a mortgage.
5. 30-Year Fixed Rates are the Lowest They’ve Been
While interest rates are expected to climb this year, they are still at an all-time low. When fixed-rate mortgages were first offered in 1971, rates were around 7.5 percent, according to Freddie Mac. Around 1980, they jumped to nearly 20 percent. Today, they’re just under 5 percent.
6. A Red Door Means Mortgage-Free
Some mortgage facts are just plain fun. For example, in Scotland, people paint the front door of their house red once they’ve finally paid off the mortgage. You might want to invest in a bucket of red paint for when that day comes.
7. There’s a Lot of Mortgage Debt
The total mortgage debt outstanding at the end of the third quarter of 2013 was more than $13 trillion, according to the Federal Reserve. The type of property with the most mortgage debt in 2013 was one-to-four-family residences.
8. There Are Fewer First-Time Buyers
Usually, first-time buyers make up 40 percent of the housing market. But recently, that number’s been lower. In 2013, 38 percent of buyers were buying for the first time, according to the National Association of Realtors (NAR).
9. Mortgages Are Pretty Common
According to NAR, 88 percent of buyers take out a mortgage to pay for their home. Most buyers financed 90 percent of the cost of the home, meaning they paid a down payment of 10 percent.
10. Skipping Down Payments Is Still Possible But Not As Common
The number of people who financed a home without a down payment peaked in 2007 for first-time buyers, just before the housing crisis. The number peaked in 2009, at 16 percent, for all buyers. Today, about 12 percent of all buyers don’t put any money down, which might be surprising to some.
11. The History of Freddie and Fannie
Fannie Mae dates back to 1938 and was created by President Franklin Roosevelt to free up money for lenders, according to Time. Freddie Mac was created in 1970, just after Fannie Mae became a publicly traded company. I don’t think the government ever anticipated the two organizations becoming as large as they are now. Today, Freddie and Fannie combined own or guarantee about half of the mortgages in the country.
12. In Some Countries, a Mortgage Can Be More Than the Home’s Value
In the U.S., the maximum value of a mortgage is typically 97 percent of the home’s value, though as I mentioned, you can get a mortgage for 100 percent of the value of the house. In the Netherlands, a borrower can take out a loan for as much as 115 percent of the home’s value, while in the U.K., people can borrow up to 110 percent of the value.
13. France Is a Friendly Place for Mortgages
Mortgages aren’t as common in France as they are in other countries. French mortgages make up just 25 percent of the country’s gross domestic product, for example. But most mortgages there come with a fixed rate and no pre-payment penalty.
14. The Mortgage Interest Deduction Has a Long History
When the idea of an income tax was first created in 1894, all types of interest were deductible. Things started to change in the 1970s when credit cards became much more common. In 1986, mortgage interest became one of the few types of interest you can deduct from your taxes. People debate whether the deduction is any good, as only about 50 percent of all homeowners take it, according to the New York Times.