Mortgage Poker

Having read too many blogs, listened to too many podcasts, and watched too many interviews with “financial people” of various types, I’m predestined to think in their terms.

A manifestation of this is the framing of financial decisions in terms of bets. What are we betting on, and why?

Funding a 529 plan for your two year old is a bet that you’re going to want to pay for some sort of educational expense in the future.

Opening a coffee shop is a bet on yourself as a business operator, on your local market’s demand for coffee/wifi/toilets, and on commercial leasing rates.

What about a mortgage?

Today I skimmed, not finished, Byrne Hobart’s Medium post, alarmingly titled “The 30-Year Mortgage is an Intrinsically Toxic Product”.

I won’t dissect it because it’s too long and I don’t want to read the whole thing. However the first few paragraphs yield something interesting: Hobart’s breakdown of what factors the mortgage is a bet on:

  • The ongoing value of your specific home

  • Your local labor market

  • Interest rates

This is catnip for me as a mortgage/home-ownership-dream skeptic.

What do you know about your local labor market and interest rates that the rest are missing? And why do you want to make such a large, levered bet on it?

Robinson Crawford