When you take a loan, the bank can “sell” your loan to an investor. What does that process look like, and why would an investor want to buy loans?
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If you actually add up all the interest you pay over the course of a 30 year loan, it can be just as much as the original price of the loan or more.
So if you have a good credit score, your loan is considered a fairly safe and reliable investment – you’re gonna pay your 5.275% compound interest monthly with just as much reliability as any business or government would, and if you don’t they can foreclose.
It’s not a super high-yielding investment, but it is a relatively safe one backed by the value of your home.
Banks sell it off because they’d rather just pocket the loan origination fees and flip that money into more loan origination fees or some other higher yield investments.
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