41–50 of 331 posts
I just refinanced at 2.0% for 15 years in California and I was feeling like a champ for timing the bottom.
At this point I don't know what the point of the loan is anymore. Is there really any realistic intention to ever pay it off? Every single time I thought I had timed the bottom, but rates continue to drop.
Earlier quoted context omitted.
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.
Home mortages are recourse loans in all but 12 states (Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah and Washington).
My 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…
Where Real part is down payment and Imaginary part is land price?
Seriously though, this has been the situation in the UK for a long time. Today the down payment is equivalent to price of the house in the 1970's.
My 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…
> 2. Since house prices are now super high, only people who have saved up a big down payment can actually buy a house. Isn't this what is happening right now in the US, that the down-payment is one of the barriers, since less than 10% (forget 20%) down has huge penalties long-term?
What is the incentive for a bank to lend at 0%? Surely it’s more profitable to do nothing?
My 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…
> 2. Since house prices are now super high, only people who have saved up a big down payment can actually buy a house. Isn't this what is happening right now in the US, that the down-payment is one of the barriers, since less than 10% (forget 20%) down has huge penalties long-term?
Earlier quoted context omitted.
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.
I know several people in Denmark that were “stuck” with the house they were in after the price drops from the 2008 crisis until prices rose above the mortgages again.
You can probably make a deal with the bank somehow at higher interests, but they’ll want there money back.
You can also declare bankruptcy, but that is not simple and not without long term consequences I think.
What is the incentive for a bank to lend at 0%? Surely it’s more profitable to do nothing?
While a corporate bond can go sour and a government bond may well be legally wiped out, a mortgage is at least collateralized with the property. Assuming that that the negative interest rate regime continues - which it most likely will - property prices will be driven up even further. Even if the mortgage goes into default, the repossessed property may end up being worth even more at that point.
only a matter of time when we start seeing negative rates on mortgages.
In actuality, though, I also pay a 0.5% "contribution" fee which covers mortgage company administration and collective risk. So the effective rate is around 0.22%.
For the 20y bonds the 0% interest is also just the actual bond rate. The administration fee will have to be added.
The "contribution" fee rate depends on how much of the home value has been mortgaged. Below 60% it is typically around 0.5% because of the relatively low risk (you can probably always auction off the house at get at least 60% even in bad times). When mortgaged from 60 to 80% of the home value the fee is higher.