Mortgage Interest is Economically and Morally Wrong.

The hot button topic at the moment might be fifty-year mortgages (which is a terrible idea), but here's the real issue… 

Mortgages should all be at 0% interest. Why? Lenders are taking on no risk when lending for residential real estate. No risk means no interest. There is no scenario where a lender doesn't make money (or at least break even) on residential property, even if a borrower stops paying their note. The property can be reclaimed through eviction, assets taken as collateral, and eventually the property is sold again. Any potential losses due to damage, acts of god, etc., can all be recouped through insurance claims and litigation. 

Think about it for a moment -- the value of land and permanent on-site buildings will never not retain their value, or at bare minimum have their lost value show cause for being recouped via other means. At its core, real estate is a fundamental store of wealth and tracks the natural rate of inflation in an economy. As inflation rises and falls, so too will the value of real estate. Considering that loans front-load their interest, it takes a number of years before a borrower actually begins paying a decent percentage into their borrowed principal. If anything, mortgage interest actually works to promote unnatural inflation within an economy as it expeditiously devalues the buying power of the dollar against a real estate loan. 

But Jared, what about the 2008 stock market crisis linked to mortgage-backed securities? Well, that crisis was not caused on its own by a flood of borrowers defaulting on their home loans. Sure, folks default on loans all the time, but this situation was different. In the case of real estate, the lender simply reclaims the property in question and evicts the borrower. Nothing is lost and the lender keeps any profit from the front-loaded interest on the loan. Nay, the 2008 crisis was caused by gamblers (for lack of a better term) in our stock market using bundled sub-prime loans as collateral to essentially short the whole financial system – they bet on those bundled loans to fail and sold them anyway… knowing that they would do just that. Those mortgages, of which the majority were adjustable-rate loans provided to low-income borrowers without variance in their finances to account for fluctuating interest rates, were bound to be defaulted upon eventually BECAUSE of the mortgage interest. Had those loans been provided at 0% interest, most of the borrowers would have never defaulted, meaning the crisis would have never happened. The gamblers in question played both sides of the system and made a ton of cash in the process, all at the cost of private individuals and the economy at large. 

The 2008 crisis was rigged from the start because of the interest charged on the mortgages, you see. Interest on a mortgage allows lenders, and subsequently investors that have a financial stake in seeing those lenders succeed or fail, to essentially commit legalized theft. Meanwhile, there is no recourse for the common person to participate in the real estate market without submitting themselves to this mechanism of theft.

Ultimately, mortgage interest acts as a deceptive means (one of many, I might add) to keep people economically controlled and prevents all members of society from participating equally in the real estate market. That's a much larger topic for another discussion, though.