Today we typically transfer the value of assets, like a house, over time with the use of debt. The following is a simplified sequence of steps taken to sell a dwelling.
A buyer finds a house to purchase. They go to a bank, and the bank gives them a loan. The bank does not take money from existing accounts but creates new money and provides this as a loan to the buyer. The buyer then buys the dwelling with the money. The buyer repays the bank the money over time and also pays interest on the money. The seller of the dwelling has some money which we will assume they deposit in the same bank. The seller earns interest on the money they leave in the account. It will be less interest than the bank charges. The seller’s money depreciates with inflation.
For the sake of simplicity, we will assume the buyer borrows $100 and repays the money in one amount after 30 years, and we will assume the seller leaves their money in the bank for 30 years. We will assume an interest rate of 5% for the bank, an interest rate of 3% for the seller and an inflation rate of 2%.
The amount of money transferred from the buyer to the bank is $432.
The money transferred from the bank to the seller is $242. The value of the money the seller receives after accounting for inflation is $134.
The total cost of using bank debt is $432-$134 = $298. This cost is born by both the seller and the buyer. To transfer an asset of value $100 has cost three times the value of the asset.
If instead of using bank debt to transfer the funds, the buyer paid the seller directly without using bank debt, then the seller would receive all the money the buyer paid.
The reason we use bank debt is that the banks guarantee the money gets paid. To replace bank debt and save three times the value of the money transferred we need to have a way that ensures the transfer of value.
Rent and Buy Mortgages ensures the transfer of value and links sellers with savers to finance the exchange. This means the seller gets their money immediately. By adjusting payments and interest rates, the buyer and the saver share the savings. Some savings can pay for insurance, lawyers, real estate agents and accountants who are needed to make the exchange. These costs will be lower than the current system because the money used for these payments is cheaper than debt money.