I just refinanced at 2.0% for 15 years in California and I was feeling like a champ for timing the bottom.
which provider did you go with to get the 2%?
Danes Get 20-Year 0% Mortgages
21–30 of 331 posts
Re: Danes Get 20-Year 0% Mortgages
#22What is the incentive for a bank to lend at 0%? Surely it’s more profitable to do nothing?
Hedge against negative rates?
Re: Danes Get 20-Year 0% Mortgages
#23My friends in Geneva tell me that this has been a thing there for a long time. It has some pretty bizarre effects on the market (according to my friends): 1. House prices rise to the point where the down payment is essentially the price of the house. The house price itself becomes imaginary. What you are really worried about is the down payment. 2. Since house prices are now super high, only people who have saved up…
Another potential consequence is that if the price of your house falls more than the down payment you invested, you may be incentivized to simply walk away.
The price could fall for any number of reasons: a market crash and country-wide depression widely impacting many people, or an individual owner who simply did no maintenance/upkeep over a period of years and the property is in disrepair. The disrepair scenario is common among elderly homeowners in the US.
Re: Danes Get 20-Year 0% Mortgages
#24What is the incentive for a bank to lend at 0%? Surely it’s more profitable to do nothing?
Central Banks can enforce negative interest rates.
https://en.m.wikipedia.org/wiki/Negative_interest_on_excess_...
Re: Danes Get 20-Year 0% Mortgages
#25But one forgets that even though the interest rate is 0% the COST of the loan is !=0, we still have to pay a "bidragsssats" which is an "administrative fee" to have the loan
The interesting part is that that this rate can be changed over time to whatever the lone-shark wants it to be, thus - as always - you need to look at the TCO.
ÅOP as it is in danish: "Årlig Omkostning i Procent" - aka the Yearly cost in percent...
Re: Danes Get 20-Year 0% Mortgages
#26> Back in 2012, policy makers drove their main rate below zero to defend the krone’s peg to the euro. Since then, Danish homeowners have enjoyed continuous slides in borrowing costs.
This is like a Canadian getting a 3.0% loan in USD to buy a house, then having the Canadian government fix the Canadian dollar such that it appreciate 3.0% pa against the USD. It's effectively a 0% loan, but due to obscure technicalities.
It seems, the lender still earns interest, it's just that the interest is covered by the variance in exchange rates between currencies. So your DKK1000 mortgage payment is worth €1030 after the first year, €1091 the next, etc.
Re: Danes Get 20-Year 0% Mortgages
#27My friends in Geneva tell me that this has been a thing there for a long time. It has some pretty bizarre effects on the market (according to my friends): 1. House prices rise to the point where the down payment is essentially the price of the house. The house price itself becomes imaginary. What you are really worried about is the down payment. 2. Since house prices are now super high, only people who have saved up…
Another potential consequence is that if the price of your house falls more than the down payment you invested, you may be incentivized to simply walk away. The price could fall for any number of reasons: a market crash and country-wide depression widely impacting many people, or an individual owner who simply did no maintenance/upkeep over a period of years and the property is in disrepair. The disrepair scenario is…
Can Danes just walk away from their loans simply returning the home? I believe that's true in the US, but I don't think that's universal.
Re: Danes Get 20-Year 0% Mortgages
#28I just refinanced at 2.0% for 15 years in California and I was feeling like a champ for timing the bottom.
What's the point of a 15 year when the 10 year nominal rate - inflation rate is less than the gains you will make in income?
Opportunity cost of the higher monthly payment surely factors in?
Re: Danes Get 20-Year 0% Mortgages
#29What is the incentive for a bank to lend at 0%? Surely it’s more profitable to do nothing?
They charge fees to issue mortgages. The 0% rate is not actually 0%. It's probably more like 0.25-1% and the bank is making up the difference through the fees.
Re: Danes Get 20-Year 0% Mortgages
#30What is the incentive for a bank to lend at 0%? Surely it’s more profitable to do nothing?
The Danish mortgage market is really strange. In practice the people buying property issues bonds in the private bond market (although in most cases it does go through an issuing bank).
So if an investor has no other opportunity than 0% for their cash it's a "good place". Many banks in Europe has negative rates on deposits so it might be the better alternative for some.
But there are no banking in a traditional way involved here where they have a product and lend to 0%.