You need $300,000 for a house

If you have $300,000 you can just buy the house like you do anything else. One big lump payment and it's yours

But you don't have $300,000

So you go to someone that does. It could be anyone. A friend, a neighbor. A celebrity. Mr Beast. Probably the Bank though. And you say, "can you give me $300,000?"

If it's a friend or a celebrity or Mr Beast, maybe they just give you the money. You now have $300,000 and you can buy the house like you do anything else. Just give them the money and the house is yours

Probably you had to ask a bank

The bank does have $300,000 but it's not really their money. They're taking a few dollars from everyone who keeps money in their bank and they're investing it; they keep the profit and that's how banks make money (in simple terms). So the bank will say, "We will loan you $300,000 but you'll need to pay us back plus interest"

How much interest?

That depends on the government

You agree, or not, up to you. In this case, maybe you agree. The bank gives you $300,000. You buy the house. You own the house, except now you have to pay the bank back, plus interest, for the $300,000 loan they gave you

So while it is your house, the bank is holding on to the house so they can sell it in case you don't pay them back.

Remember, they didn't load you their money, they loaned you money that they took from everybody else bank account. If you default, other people lost money and the bank can't have that, so they'll sell your house to get that money back.

So you pay the bank, plus interest, per your agreement

This isn't crazy, it's how pretty much every loan works.

If you can pay off the house in 6 months, great. You didn't pay that much interest. Pay it off over 15 years, you paid a bit more interest. How much interest depends on the size of the loan, the interest rate, and how long you took to pay it back

This has been finance and loans 101

The joy is you get to pay pretty much the same each month for the entire 30 years. Insurance and property taxes will increase but that is fairly small increases. Now go look at what rent was 30 years ago. Imagine paying that today instead. Don't pay off your mortgage early, don't refinance (unless you can drop >1.5%), and ride the long con.

Yeah homeowners know this, you're buying into an elaborate pyramid scheme. The interest doesn't matter because you can count on the value of the house to far surpass it.

I'm canadian and our entire economy is based off of an artificially inflated housing market. Almost the entire canada pension fund is invested into REITs and the chance of housing ever going down in value is slim to none. The gov will do whatever possible to prevent that. The entire country could be in shambles and the gov will just keep bailing out homeowners and increasing immigration.

Take out a 30 year mortgage and join the club. If you can't beat em join em.

I have a 30 year mortgage on around $450,000 but my condo has already increased by $50,000 in the last year, but I've only lost about $15000 in interest. In 5 years I should be able to leverage the condo into a $1m house with yard, just outside city limits. I deliberately bought on an island that is insanely desirable and all the land is already spoken for. Eventually a developer will want my acreage and I'll cash out again, and then I'll move somewhere cheap and never work again.

Compound interest is a hell of a thing. That being said, $320,000 borrowing cost makes me think this guy is doing a 30 year mortgage with the absolute bare minimum down payment. Don't do that if you don't absolutely have to.

https://www.bankrate.com/mortgages/historical-mortgage-rates/

About where it should be, really. The kicker is that prices went way up when rates were so low for so long, anf prices are sticky.

Grandparents in the 70s were paying like 12 or 15 percent.

That's why you don't buy a house at first but a small flat. The loan is smaller, the bank receives less.

Once you have paid that off, buy a bigger flat and use the first flat as collateral. The interest rates are better.

https://en.wikipedia.org/wiki/Property_ladder

Well, no, because the 300k go to the owner of the house. And your house after 30 years is hopefully worth much more than 300k. But I understand your point. It's pretty nuts when you think of it like that.

Money now > money thirty years from now.