The Opposite is True: Mortgages

I was riding home the other day, thinking the deep thoughts of a bicycle commuter (pothole…car…squirrel) when I had a realization that almost made me fall off my bike: my understanding of my biggest financial decision was exactly backwards.

The opposite is true
With home-buying, the opposite is true.

In 2001, we moved into our home and started painting, planning a remodel, buying appliances, and worrying about the water heater—all the stuff that that goes with home ownership. I knew how home buying worked. We all do: You find a house, the bank finances it, you buy and own the house and pay the bank every month for 30 years.

But as Derek Sivers says, the opposite is also true. In fact, the opposite is more true.

The opposite truth is that I don’t own my house, the bank does. (In fact, my house is owned by a company in a giant office building in Illinois that looks for all the world like it is surrounded by a moat.)

The opposite truth is that I am financing the moat company’s purchase of my home. They will amortize their asset over 30 years and when it is fully depreciated, they will dispose of it.

The opposite truth is that while I found this asset, brought it to the bank’s attention, did the legwork to get the deal done, and am financing it, I am not being paid interest or even a finders fee. Instead, I have a contract that allows me to live rent-free in the asset for as long as I am financing it. I also get to have the asset once it has been depreciated.

The opposite truth is that while the bank (or the moat company) is the actual owner of the asset. I am responsible for paying the taxes, insurance, and maintenance of the asset. I imagine calling up the mortgage company and saying, “The garage door of this house of yours is broken. You to get it fixed so my bike doesn’t get stolen.”

They would probably tell me that I spend too much time on that bike thinking impertinent thoughts.