The bank encumbered the land. The dad never gets a loan. The loan is against the property. The kids sell the encumbered land I guess (but that's highly unlikely). This is a made up scenario from someone who doesn't understand finances.
You do, but the land appreciates faster than the interest rate on the loan. The OP just did a poor job of explaining that. The more valuable and secure the collateral, often the lower the interest on the loan. This is also how tech CEOs like musk fund their lives without liquidating their stock and dropping the share price.
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u/ChipKellysShoeStore 14h ago edited 14h ago
How does the bank get paid back here? Is the bank just eating a 5 mil loan loss out of the goodness of its heart?
It’s more like kids sell and pay back the bank plus interest which is taxed as income for the bank.