Imagine Legislation That
Promotes Universal Home Ownership
For secured loans made on a fractional reserve basis, NESARA replaces compounded interest with a simple monetization fee, thus making home ownership much more affordable.
Replacing compound interest with a monetization fee is fair and equitable to all parties because borrowers pay less and lenders still receive a sizable stipend for their efforts. Unlike compound interest, which is calculated on the unpaid balance of a loan, NESARA’s monetization fee applies to the repaid principal of the loan, all principal being repaid before any of the monetization fee is due.
For example, under current banking practices and laws, a $100,000 loan at 7.9% interest repaid over 30 years would cost the borrower a total of $261,649.95. The interest fee for that loan amounts to $161,649.95.
With a straightforward monetization fee replacing compound interest, that same 30-year loan costs the borrower $178,791.49 (includes a monthly service fee of $25). Under NESARA, the monetization fee for the loan is $78,791.49.
Furthermore, the monthly payment under the current banking system (excluding taxes and insurance) would be $726.81, whereas under NESARA that monthly payment would be $471.64 (excluding monthly service fees).
These numbers demonstrate how the new equations benefit borrowers. However, the new equations also benefit lenders. NESARA requires principal to be repaid before the monetization fee, greatly reducing risk for lenders. With principal repaid first, lenders free their reserves faster, thus providing more opportunities to loan money on a fractional reserve basis. Therefore, rather than making one loan every thirty years, lenders can make three loans every thirty years, increasing their profits and, incidentally, provide greater service to their communities by increasing total home ownership. A win-win situation for all.
Replacing compound interest with a straightforward monetization fee provides tremendous stability to the lending business. The buyer gains equity faster and at much lower cost while the lender makes higher profits at much lower risk. Reducing risk provides lenders with more incentive to loan, thus creating more opportunities for borrowers to own their own home.
With NESARA’s new bank loan equations, home ownership suddenly becomes more affordable to all, encouraging universal home ownership.
NESARA also changes the rules for home sales. Under NESARA, all current taxes on income are replaced with a national retail sales tax.
After NESARA becomes law, a sales tax on real estate sales will be due only if the cost basis for the property increases. During the transition, the sales tax basis of all real estate will be the previous purchase price of the property.
For example, the sales tax basis for a new $100,000 home will be $100,000. At 14%, the sales tax would be $14,000. If that same $100,000 home later sells again for $150,000, the subsequent sales tax basis would be $50,000 and at 14% the sales tax would be $7,000.
If an existing home was purchased years ago for $110,000 and now sells for $120,000, the sales tax would be 14% of $10,000, or $1,400. If the home sold for $110,000, no sales tax would be due. Under these rules, the new sales tax on consumption discourages the runaway effects of continually rising property prices, makes existing homes much more desirable, and slows the mad dash to abandon existing property.
What about inflation? NESARA is designed to end currency inflation. However, there will be an initial surge of home sales during the transition period while NESARA moves from bill to law. This action will superficially raise home prices simply because of supply and demand as people hurry to avoid the new sales tax.
After NESARA becomes law, existing homes probably will sell for a little more than actual value, simply because the sales tax bite will be less on them than that for a new home of equal value. Initially this will encourage sales of existing homes over new homes and sellers will take advantage by increasing their prices. Buyers also will be willing to pay the slightly inflated prices in order to avoid the larger sales tax bite on new homes of the same relative value.
In the end, however, once the effects of currency inflation are eliminated, real estate prices will shake out and settle down. Instead of appraisers having to always compensate for currency inflation, appraisals will reflect actual “replacement” value. Real estate appraisals suddenly have real meaning, particularly on multi-million dollar commercial or industrial property.
As a bonus, because real estate prices finally stabilize, property owners can finally say good-bye to the effects of property taxes rising due to acquisition values and currency inflation. With price stabilization, the local costs of continual appraisals also drops, reducing overhead at the local government level, thus further reducing property taxes.
Encouraging universal home ownership means NESARA discourages renting. As home prices fall and stabilize, landlords will be forced to respond to market pressures and lower rental fees. However, as home ownership becomes less expensive than renting, tenants will leave the lease behind in favor of ownership.
For example, suppose you rent an apartment for $625/month. After ten years you have paid $75,000 with “nothing” to show for those payments. Let’s say another landlord down the street converts apartments to condos and sells each condo for $75,000. Under NESARA, with a 15-year payment schedule at 4.9%, the total cost will be $100,935.88 (including the monthly service fee of $25) with monthly payments of $560.75. You save more than $64 per month and build equity at the same time. You could spend that $64 outfitting your new home. Of course, you also could apply that $64 toward your loan, reducing your total cost of the loan.
Let’s say after ten years you decide to sell the condo for $75,000. No sales tax is due and you’ve paid the lender almost all of the original principal. You roll over the original loan (you still owe some principal plus the monetization fee, a total of $26,460.61) and buy a nice $125,000 ranch home in the suburbs, using the $75,000 received from the sale of your condo as down payment and borrowing additional principal of $50,000. If the seller of the ranch home originally paid $125,000, no sales tax is due. At 4.9% and a new 15-year payment schedule on the $76,460.61 loan, your payments will be $571.19. You are still paying less than your original monthly rent and have quite a bit of equity too!
By the way, why the low monetization fee (interest rate) in this example? NESARA imposes an excise tax of 10% on monetization fees between 5% and 12%, and an excise tax of 20% on fees higher than 12%. This is a fair tax because banks do not really loan money—they have been granted a special government license to create money, that is, to monetize debt. As such, banks perform a public service and the excise tax promotes that purpose. Therefore, NESARA greatly encourages home ownership merely by promoting lower monetization fees!
With many people owning homes instead of renting, what will smart apartment building owners do? They cannot reduce rent by an absurd amount. They can convert the building into condos and sell at a profit further encouraging home ownership throughout the land. Everyone wins!
NESARA—A Proposed Bill | Status of the Proposal | NESARA v. Other Proposals
What’s In It For Me? | FAQs | Articles and Information
Spread the Word | What Can I Do? | Political Contacts
Op-Ed | Dictionary | Search
Contact Us | Notes and Legal Stuff
Draining the Swamp—The NESARA Story
The “Real” NESARA
Home