Finance Brain Storm: Pay Each Others Mortgage

The Conversation about housing got my wheels turning and I started thinking about different ways we might live creatively outside the box of what we are currently used to in our culture. I’m gonna write a few things this week about just ideas I’ve had of ways to live out our convictions creatively. This is the first.

Instead of taking out huge Mortgages and taking years to pay them off and effectively paying three times the cost of our houses, we should pay each others mortgages. I’m not quite sure how this would work as traditionally we all want a house and we want it now, not later. But really think about it.
If you could pay cash for your house today, then over the course of the next 30 years you could take what you would have spent in interest to the bank and give it to some wonderful cause you believe in. As one person or family this doesn’t quite seem possible, but collectively it’s not as difficult.
What if five or ten families got together and decided that each year they would take all the money they could muster and pay off one persons mortgage (assuming they already have one). Over that time the pay-off would speed up exponentially as a persons house is paid off and they no longer have a monthly payment themselves. By the end of the time (maybe ten years max) everyone has a house completely paid off and they are able to do a world of good with the rest of the money.

Or, what if folks lived communally in a house, that was fully paid off. And then they pooled their resources and were able to buy one house a year, which a family would move into and start a communal living opportunity for others to follow a similar pattern.

There are some assumptions I’m making here. You can’t be living paycheck to paycheck, nor can you be living just below your income, you need to make some radical life changes. Of course, those are things you should have done even before you bought a house to begin with.

Here’s a brief (I didn’t have much time) example…

So you’ve got five families, with differing incomes. The goal is for each to buy a $100,000 house. If they all contribute 25% of their income to a pot it would take 11 to accumulate $500,000 (enough for each family to have a house). If they lived on just $16,000 a year they’d have enough in 5 years.
The “5 Year House” column is just showing what cost of a house they could pay off in five years if they were putting 25% of their income to the house.
And the “Years to 100K” column shows how many years it would take each family to actually accumulate $100k if they were doing it themselves (by which time their house cost would be double if they were doing their own mortgage).

Of course these are simple numbers not taking into account other housing costs, inflation, etc, but hopefully you get the idea (or maybe your totally lost).

Any math geeks out there want to help me make more sense of something like this?

4 thoughts on “Finance Brain Storm: Pay Each Others Mortgage”

  1. I really wish I could remember where it was, but there was an article about this recently that came up in one of my policy RSS feeds. I believe it was talking about how mortgage lenders were getting pissed because members of churches were paying each other’s mortgages for the very reasons you just talked about? It was a cool article, and now I have no idea where to find it. Worth looking into, though.

  2. So I was telling some of my friends about this plan, and all of them said it totally wouldn’t work because 25% of the people involved would end up screwing over the rest of them once their mortgage was paid off. I still think it would would, you just need to be selective about who you decide to do this with, but they don’t think so. Finally I got them to agree that doing it could work by the families forming a corporation that holds all their homes as assets and where they are all equal partners with limited liability. I love your idea Ariah.

  3. it also depends on the area you live…for example my brother is working for a non-profit so he doesn’t make a ton of money, yet has to live in this area. so he is living about 45 minutes away from where he worked, and it was still next-to-impossible for them to find a home less than 200k. He and his wife have a pretty small ranch out in st. charles, and i’m sure they’d love someone to pay off that morgage! :o)
    I’m less cynical than zach, or at least his friends and think that people would want to return the favor if their housing was paid off. although, i guess if you had a tough year following, there’d be less incentive to stretch yourself for someone else than you normally would yourself, right?

  4. Zach,
    Mindy pointed out that your friends lack of belief that it would work was probably an indication of their own thinking, that they would “screw people over.” I certainly wouldn’t join them in this partnership, but I might hook up with you and the Duncans, people I could believe would commit to it. I think the corporation thing could work too though.

    Mel,
    Well, I’m also certainly not suggesting anyone actually buy a house if it doesn’t make sense. Sounds like it might not for them. I’m always curious though, I think most people (generalization obviously) could easily pay off their house in about 5 years if they actually lived a more frugal lifestyle (which I would advocate they do permanently, not just to pay off a mortgage).
    And as far as your willingness to stretch for someone else, I would say that’s the whole point of the Christian faith isn’t it?

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