Consumer Loans vs Mortgages
I went here: Consumer Loan Law. It seems that a consumer loan is anything other than a business loan or mortgage.  However, in California it seems to include a mortgage. It's a bit weird to see that a HEL can be considered a consumer loan even if it is the primary or the only loan on a property.  Getting a HEL can be a great low cost way to (re)finance a property as they tend to have low or no closing costs and lower interest rates. Here's a good definition of a consumer loan: What is a Consumer Loan? As@Pete B. pointed out, there are some states (California loves to be the oddball, doesn't it?) that treat some loans in a more unconventional manner, but the gist of it is that a consumer loan is normally unsecured, meaning there's no collateral or lien associated with it.  A signature loan would be a good example of a consumer loan.  Many times, loans made by non-banks (finance companies that loan for consumer purchases, for instance) would be considered to be consumer loans. I hope this helps. Good luck!
It depends on the terms. Student loans are often very low interest loans which allow you to spread your costs of education over a long time without incurring too much interest. They are often government subsidized.  On the other hand, you often get better mortgage rates if you can bring a down payment for the house. Therefore, it might be more beneficial for you to use money for a down payment than paying off the student load. It was both.  CDOs also contributed.  Unfortunately, when the bankers kept packing up their loans they lost track of the risk as did the financial institutions offering instruments to deleverage that risk.  So when the subprime borrowers began to fail the institutions started getting hit with risk that they hadn't prepared for.  Flippers and home owners who used their homes as ATMs then saw their home values crash and it all fell apart.   We are seeing some of this again with owners getting more HELOCs but the real concern is with car loans, credit card and student loan debt. Wait are you saying you have the opportunity to buy bonds at this rate and the company is issuing loans at this rate to consumers? Sounds like a win for the bank, a win for it's shareholders, and a win for the bondholder. (Of course, you'll probably be paying a premium for a 25% coupon bond if that's really what's you're talking about.) Can anyone recommend a good textbook that covers Fannie Mae and Freddie Mac, or more broadly the US home mortgage market? A basic search seems to mostly turn up books that aim to make an ideological point rather than attempt to provide an actual explanation.  I have a basic financial knowledge including a basic understanding of derivatives at the level of say the textbook by Hull, but know very little about the US mortgage market specifically. I don't mind technical detail, and am not afraid of math. I don't mind if the book is broader, as long as it includes a reasonably in depth look at these GSEs and their role.  This seems to be a pretty basic piece of knowledge for many financial professionals, so I assume there must be at least one standard textbook on this that I just haven't been able to find.  EDIT: I'm looking for something post 2008 of course. I'm not sure the reasoning still holds though.  If you default on your student loan, your diploma doesn't get repossessed.  There's a signifiant moral hazard associated with student loans.  A mortgage on the other hand is around a very physical item.  Though I can still banks lobbying for better rules, that would be hugely in the consumers disadvantage. This is generally wrong. For the vast majority of the time that underqualified alt-a and option-arm mortgages were being written, Fannie and Freddie were not buying, and they were never huge holders of these mortgages. Fannie and Freddie have minimum qualifications standards. However, as time went on, Fannie and Freddie did load up on the securities (not the mortgages), which were of course still problematic.   But the liquidity crunch of 08 was not substantially contributed to by Fannie and Freddie. I think the discrepancy you are seeing is in the detail of what happens once you pay off your student loan.  If you take your monthly payment for your student loan, and apply that to your mortgage once the student loan is payed off, paying the highest interest loan will cone out ahead.   If, on the other hand, you take your student loan payment and do something else with it (not pay down your mortgage), you would be better off paying on your mortgage.  Say you have $1000 to put towards either loan, and there is 5 years to pay on the student loan, and 25 years to pay on the mortgage.  By paying on the student loan you are, roughly, saving 5 years of 5% interest on that $1000.  By paying on the mortgage, you are saving 25 years of 3% interest. You can explore the scenarios in which it is better to rent or to buy using this application: http://demonstrations.wolfram.com/BuyOrRentInvestmentReturnCalculator/ In the possibly unlikely scenario shown below, at the term of the mortgage (20 years) the tenant and the buyer have practically the same return on investment.  At this point the tenant's savings would be sufficient to buy a house equivalent to the buyer's, and this would be the advisable course of action (based on the figures alone). "I am going to respond to a very thin sliver of what's going on.  Skip ahead 4 years. When buying that house, is it better to have $48K in the bank but a $48K student loan, or to have neither?  That $48K may very well be what it would take to put you over the 20% down payment threshhold thus avoiding PMI. Banks let you have a certain amount of non-mortgage debt before impacting your ability to borrow. It's the difference between the 28% for the mortgage, insurance and property tax, and the total 38% debt service.  What I offer above is a bit counter-intuitive, and I only mention it as you said the house is a priority. I'm answering as if you asked ""how do I maximize my purchasing power if I wish to buy a house in the next few years?""" When I bought my own place, mortgage lenders worked on 3 x salary basis.  Admittedly that was joint salary - eg you and spouse could sum your salaries.   Relaxing this ratio is one of the reasons we are in the mess we are now. You are shrewd (my view) to realise that buying is better than renting.  But you also should consider the short term likely movement in house prices.  I think this could be down.  If prices continue to fall, buying gets easier the longer you wait. When house prices do hit rock bottom, and you are sure they have, then you can afford to take a gamble.  Lets face it, if prices are moving up, even if you lose your job and cannot pay, you can sell and you have potentially gained the increase in the period when it went up. Also remember that getting the mortgage is the easy bit.  Paying in the longer term is the really hard part of the deal. Surely some borrowers and lenders make decisions about making and taking loans based on the actual interest rates on the actual loans? In which case it doesn't matter so much if the rates are calculated based on a fictional assumption about something. At the end of the day every borrower or lender in the market makes their own decision about which lending contracts they take part in. "This is the best tl;dr I could make, [original](https://www.cityfalcon.com/blog/investments/student-loan-debt-new-mortgage-crisis/?utm_campaign=ao_reddit) reduced by 94%. (I'm a bot) ***** &gt; Costs of living, especially for those attending universities in cities like New York or London, also account for a nontrivial portion of the debt.  &gt; Is the student debt bubble in the United States the next mortgage crisis?  &gt; One major difference between the student debt problem and the mortgage crisis is the lack of CDOs and CDSs. The thread that connected banks, governments, individuals and economies were the CDO and CDS. With a complex system of mortgage securitization and insurance against those securities, the system effectively collapsed itself.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/79mt1s/student_loan_debt_the_new_mortgage_crisis_in_2018/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~237528 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **debt**^#1 **student**^#2 **education**^#3 **economy**^#4 **borrowed**^#5" Cynical answer: Real Estate agents make money on commission from sale of houses, so their compensation is tied to the home price. Banks make money off loans, so it is in their interest to make larger loans (as long as the loan gets paid).  So their is a tension at the bank between selling a larger mortgage, and ensuring that their customer can pay the mortgage. Gross income is easier to check, and the taxes at a given income are fairly predictable.  And banks realized that people can change their medical and retirement deductions. "In a domestic setting, Letters of Credit are often used to build public works needed to support a development.  So if you're bulldozing a few 3 story buildings to build a 50 story tower, the municipality will build appropriate water/sewer/gas/road infrastructure, and draw from the developer's letter of credit to fund it. The 'catch' to the developer is that these things usually aren't revokable -- once the city/town/etc starts work, the developer cannot cut-off the funding, even if the  project is cancelled. A letter of credit definitely isn't a consumer financing vehicle. The closest equivalent is a ""line of credit"" tied to an asset like a home." You mentioned 15-20 years in your comment on mhoran_psprep's response. This is the most important factor to consider in the points vs. rate question. With a horizon that long it sounds like the points are probably a better option for you. There is a neat comparison tool at The Mortgage Professor's website that may help you build your spreadsheet or simply check the numbers you are getting.