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Mortgages and How to Be Rid of Them

Someone certainly had a sense of humor when the name “mortgage” was given to home loans. It is a French word—or words (mort gage)—which literally means, “death pledge.” This meaning of the word must ring horribly true for the 1 in 11 American mortgage-holders with foreclosed-on or past-due mortgages, who must be thinking, “There has to be a better way.”

There is, of course. But the solution runs contradictory to America’s materialistic (and often unconscious) rat race for overflowing storage closets, crowded garages, and full basements. The answer is less: Less house. Less stuff. Less space. Live a smaller life.

While it may be hard to part with walk-in closets, three-car garages, two bathrooms, and a bedroom for each child, a reduction in the size of one’s material universe will lead to lower monthly expenses, less maintenance, and likely, less stressful lives.

Ten years ago, Rob Roy wrote Mortgage-Free!: Radical Strategies for Home Ownership. In it Rob offered a way around the mortgage trap using old-fashion barn-raising community-based solutions. Using renewable materials such as strawbale, cordwood, and masonry Rob explains the best designs and processes for building your own modern home.

Here’s a quick excerpt in which Rob partially explains his reasons for writing the book:

It is late January, 1997. I am nearing the completion of a three-week visit to Chile. A few days ago, my oldest son and I conducted a cordwood masonry workshop here, our way paid for by a visionary who wants to see a fairly large tract of land made into a “park-village” of homes that harmonize with nature in many ways, not the least of which is in the use of indigenous materials. It is an idea worth pursuing no matter where you build.

In this part of Chile, the indigenous people are the Mapuche Indians. Historically, these people have maintained a fierce independence. The Spanish, who had a relatively easy time conquering the rest of what is now Latin America, were repelled by the Mapuche for centuries. In the valleys of this beautiful lake district of Chile, the native people still live in their hand-made houses, mortgage-free of course. Though “poor” by the definition and standards of most Americans, they are free of debt. Whole Earth founder Stewart Brand’s outlook, however, is more to the point: “Living below your means is a cheap way to be rich. It’s the only way to be rich” (The Next Whole Earth Catalog. Random House, 1980, p. 292). By this standard, the Mapuche might be considered to be rich, as is anyone who is free of debt and has two pesos to rub together.

For over four years, in my recent past, I worked as a “housing rehabilitation specialist” for a not-for-profit company. My job was to administer federal HUD (Department of Housing and Urban Development) home improvement grants for “income eligible” people. Eligibility required that the household income not exceed a certain level for the family size, and that the home possessed certain “substandard” elements (foundation, roofing, plumbing, electric, etc.). And, if there was a mortgagor, that person or institution would need to give approval, in writing, for the grant to be made. My “target areas” were in townships in the two most northeasterly counties of New York State. Amazingly, out of roughly a hundred income-eligible clients that I worked with, only two or three had any kind of mortgage on their homes. The lower the income, the less was the likelihood that a mortgage existed on the property.

At the other end of the scale, the very rich are also mortgage-free, or could be. Some actually find tax advantages to having a mortgage, I hear, but this is not a strategy that has any meaning in the context of this book. Further, I note (with no facetious intent) that birds, bees, beavers, and other building species besides humankind, also build without “benefit” of mortgage. Indigenous people I have visited, like the Mapuche, the Mayans in Belize and Mexico, the Zulus in Southern Africa, and others, also find the idea of a mortgage to be a strange one.

But north of the Rio Grande, most people in the great middle class have mortgages on their homes (or, worse, pay rent to live in someone else’s home). This is troubling. How is it that the rich and the poor are mortgage-free and a large part of the other 80 percent (or so) of the rest of North Americans are not? How is it that indigenous peoples and other building species are mortgage-free while the middle class that you—I am guessing here—and I and most of our friends belong to, is not?

Without hard proof, I can only speculate, and my speculation runs like this:

Poor people cannot afford mortgages. As soon as they can, they are no longer poor, at least by the standard connotation of poverty. But they will remain less poor in the true empiric sense if they stay away from mortgage. Banks will not deal with “unqualified” borrowers. Thankfully, the rural poor often live on mortgage-free land, passed down through the family, in homes that were built by the people (or the forebears of the people) who live in them. One of the prerequisites of mortgage freedom is ownership of the land. Country people—Mapuche or McCoy—start with this prerequisite in many cases. The situation among the urban poor is entirely different. They are living on “land”—or, at least, “space,” for is there truly any land in the city?—which is incapable of supporting the people who live on it. It will take a more difficult book by a smarter writer to address the kind of desperation found in our inner cities. One of the parameters of this current work, by necessity, is that the strategies described to achieve mortgage freedom, are, for the most part, applicable mainly in rural areas. Readers preferring an urban lifestyle might still find this book of interest, in a dreamy, romantic kind of way, and some of the economic philosophies and strategies may be of genuine and positive value. The reality, however, is that it is much more difficult, though not impossible, to obtain early mortgage freedom with a purchased house in the city. And owner-building in built-up areas is all but precluded by expensive and restrictive bureaucratic regulations.

I have said that poor people cannot afford mortgages, but this rather simplistic and perhaps obvious statement is not intended to imply that if they could get one, they should. (They might entertain the idea with a view, perhaps, to improving the home where state and federal grant monies are not at work.) The North American population has come to accept the mortgage as an unfortunate but necessary part of living in their dream home. Even the rich, very often, wish to live beyond their means, and the mortgage, by its very definition, is a mechanism that allows them to do this.

And what’s so wrong with that? Maybe the mortgage makes a kind of sense. On the surface, it would appear that mortgages are the only means for many people to “own” their own home, or so we have been coerced to believe. (The reader, I hope, will excuse the use of conditional quotation marks around the word own. Make no mistake, it is the lending institution that has the greatest equity in the house over the longest part of the mortgage contract, not the person or persons actually living in the home. We can deduce this fact from the fragments of the typical amortization schedule appearing in the Introduction.) The indoctrination runs deep, but it can be overcome.

About 1847, Henry David Thoreau wrote, “The mass of men lead lives of quiet desperation.” I submit that today, 150 years later, his famous observation is more true than ever. Some residents of Concord, Massachusetts in the mid-nineteenth century had mortgages, but televisions, credit cards, and automobiles, the other major contributors to quiet—or not so quiet—desperation, did not yet exist.

For more than half of my fifty years on this planet, I have been haunted by the image of a young couple backing submissively out of a lender’s office, sophomoric grins on their faces, forever grateful to the loan officer for condescending to enslave them economically for the best part of their remaining natural lives. The young couple will pay the “points” (a point is one percent of the amount of the mortgage loan), perhaps the valuation costs, most closing costs, and, for the first few years at least, mostly interest payments and very little principal. The home, we will see, starts out at a higher price than necessary because it contains elements required not by the occupants, but by the bank, elements that do not necessarily grace the lives of the buyers, but just add further economic burden. Sometimes, in my vision, I see the young couple backing out of the office in bowed positions, bootblack on their lips. This may sound like a surrealistic nightmare, but events like this happen hundreds of times each business day.

Rob is updating the book as we speak and is calling the second edition Mortgage Free! Second Edition: Innovative Strategies for Debt-free Home Ownership. He makes great arguments for why (and how) the middle-class should avoid mortgages.

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