BNPL Update

BNPL advocates chimed in this morning with feedback following yesterday's post.

Can I show you something?

Home ownership is a classic example of BNPL. You buy the house, and then spend each month "paying later".

Let's assume you buy a new home today at a cost of $500,000, with 20% down. You finance $400,000 at 6% for 30 years. Let's assume your home appreciates by 5% per year, meaning in the year 2032 you sell the home for $709,018. This is a profit of $209,018. Who gets all of the profit you generated?

• You Get $709,018.
• You Must Pay Off Your Mortgage = $357,930 subtracted.
• You Must Pay Real Estate Fees = $42,541 subtracted.
• You Must Pay State / Local Taxes = $17,725 subtracted.
• You Paid Interest For Seven Years = $158,759 subtracted.

If we take the $709,018 and subtract $357,930 / $42,541 / $17,725 / $158,759 we are left with $132,063. Remember, you paid 20% down, so you are getting the $100,000 back you originally put in to start the process, leaving you with $32,063.

Who made more money off of Buy Now Pay Later (i.e. your mortgage) than you made?

1. Your bank.
2. Your real estate agent & firm representing your real estate agent.

And yes, you can pick some nits about possibly writing off interest via itemized deductions and writing off closing costs (which I didn't include above but those will get you as well) and writing off real estate fees & state/local taxes) and the net present value of money blah blah blah. It doesn't change the story one bit.

• You get approximately 16% +/- of the profit of your home sale, everybody else gets 84%.

So when I read the following message (below) this morning, I can see that third parties are telling you to do something ... because ... it benefits third parties! Life is designed to benefit third parties, not you. Don't be a Lemonhead.