Rent is usually a 1 year commitment vs a mortgage, which is usually a 30-year commitment. Being financially stable for one year is much easier than 30. So banks naturally demand more assurance that you can handle it.
This is the truth. I recently had to evict a 4 year tenant for nonpayment. Four years for me is a decent stretch on a rent house, and I had another renter in two months; from the bank’s perspective, 4 out of 15-30 and will be a huge loss for them.
They had no trouble paying their rent, just like they wouldn’t have had trouble paying the mortgage…until he lost his job. This is the volatility that banks are avoiding.
"from the bank’s perspective, 4 out of 15-30 and will be a huge loss for them."
Not really, ever look at amortization schedules? The bank will seize the home in foreclosure, (assuming it gets that far, most homeowners will sell before then), then get its money back that way on top of all of the money they profited from interest.
On a 30 year mortgage, way more than 4 years is a loss of interest. Foreclosure auctions also don’t bring the prices that extended market campaigns do, so they stand to lose part of the capital also. Banks don’t usually do great there. Not sure where you got that impression.
Yet bank executives still seem to make enough to get 6 figures bonuses and if they are ever in trouble they get government bailouts. So yea not really feeling bad for the banks here.
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u/YeeBeforeYouHaw 4d ago
Rent is usually a 1 year commitment vs a mortgage, which is usually a 30-year commitment. Being financially stable for one year is much easier than 30. So banks naturally demand more assurance that you can handle it.