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Danes Get 20-Year 0% Mortgages

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Re: Danes Get 20-Year 0% Mortgages

#51

Post by JacobDotVI »

ghshephard wrote: post #9
api wrote: post #4

Earlier quoted context omitted.

If that happens house prices will go apeshit.

What's the argument for negative interest rates having any impact on house prices? I would think it would be mostly linear compared to 2%, 1%, 0%, -1%, etc... For example - if I have a 20 year mortgage on a $240,000 house @ 0%, I have to pay $1,000/month. If the interest rate is -1% then I have to pay ~$900/month. I don't know if that extra $100/month really moves the market on home prices that much.

I think you need to look at it from monthly -> house price and not the other way around. If your budget / purchasing power is $1000 /m then your house budget is roughly as follows:

  $190,000 @ 5% interest
  $210,000 @ 4% interest
  $235,000 @ 3% interest
  $275,000 @ 2% interest
  $310,000 @ 1% interest
[Note - not exact numbers; 30yr mortgage; mortgage calculator.org via guessing numbers until the monthly was close enough to $1k]

Re: Danes Get 20-Year 0% Mortgages

#52

Post by mywittyname »

disown wrote: post #19

Do Danes get tax deductions on mortgage interest? One of the best tax deductions we get is the one on mortgage interest. Also this isn't really that great since lower interest means higher home prices. I'd rather have high interest and low home prices if I were a buyer and try to pay if off ASAP or refinance to lower interest when the rate drops. Buy when interest is high and home prices low and sell when interest is…

> One of the best tax deductions we get is the one on mortgage interest.

Not anymore. The rise in the standard deduction combined with caps on SALT deductions has drastically curbed the value of mortgage tax deductions. As a result, the number of people in the bottom 90% of income who itemize their taxes has fallen precipitously.

https://taxfoundation.org/standard-deduction-itemized-deduct...

This is a good thing, because SALT and mortgage interest deductions were horrible, regressive policies.

Re: Danes Get 20-Year 0% Mortgages

#53

Post by CogitoCogito »

gamblor956 wrote: post #43
CogitoCogito wrote: post #27

Earlier quoted context omitted.

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.

https://www.forbes.com/advisor/loans/recourse-loans-vs-non-r... 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).

Thank you to you and the others responding for the clarification. I guess I just took my California experience and incorrectly assumed it was similar in the rest of the US.

Re: Danes Get 20-Year 0% Mortgages

#55

Post by jorblumesea »

SoSoRoCoCo wrote: post #35
ageitgey wrote: post #13

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?

PMI is usually low-ish. Sometimes as low as 0.25% but up to 2% generally. Largely depends on credit, lender, financial situation. It also goes away once that final 10% is paid off (when the load is 80% principal). It also isn't held against you in the sense that, it impacts your ability to get the loan. It just means you pay more out of pocket per month.

It's definitely not ideal but it's not an overall huge drag.

Re: Danes Get 20-Year 0% Mortgages

#56

Post by vageli »

asdfasgasdgasdg wrote: post #8
api wrote: post #4

Earlier quoted context omitted.

If that happens house prices will go apeshit.

There's not a significant difference between a 0% and a -0.125% mortgage. If one doesn't cause weird changes to the housing market I don't expect the other to.

There's not a significant difference between 0°C and 1°C either, but drastic changes occur at one and not the other.

Re: Danes Get 20-Year 0% Mortgages

#57

Post by sokoloff »

andechs wrote: post #31
disown wrote: post #19

Do Danes get tax deductions on mortgage interest? One of the best tax deductions we get is the one on mortgage interest. Also this isn't really that great since lower interest means higher home prices. I'd rather have high interest and low home prices if I were a buyer and try to pay if off ASAP or refinance to lower interest when the rate drops. Buy when interest is high and home prices low and sell when interest is…

The tax deduction on mortgage interest is one of the most regressive pieces of tax policy. Those with more expensive housing benefit more from the credit. Non-homeowners do not benefit at all, and renters tend to be poorer than homeowners.

Renters are living in housing which is itself eligible for business loan deductions. If you believe that landlords use the cost of holding real estate as an input that shapes the supply side of the supply-demand balance in the broad rental market (as I do), then it seems that renters do indirectly benefit from the deductibility of the loans on the buildings in which they live.

The mortgage interest deduction serves to put the purchasers of owner-occupied real estate onto a more equal footing with commercially-rented real estate. That seems like a valid public policy purpose, even though the mortgage interested deduction became substantially less valuable with TCJA-2017.

Re: Danes Get 20-Year 0% Mortgages

#59

Post by 1stcity3rdcoast »

mywittyname wrote: post #40
1stcity3rdcoast wrote: post #28

Earlier quoted context omitted.

Opportunity cost of the higher monthly payment surely factors in?

Yeah, I got a 15 year loan to save about 25% on my interest payments (3% vs 4%). Looking back, that was totally stupid because had I got a 30 year loan, and invested the difference (which I absolutely would have), I would earned a substantially greater return from the resulting stock boom.

Exactly and makes total sense. Plus, not everyone has infinite income, so people are "rate limited" into choosing the 30 over a 15 or 10.

Re: Danes Get 20-Year 0% Mortgages

#60

Post by usrusr »

nugget wrote: post #23
ageitgey wrote: post #13

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…

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…

Disappearance of those "0%" things would already be enough for prices to collapse once they have sufficiently adapted to the 0% situation. I guess the winner is, unsurprisingly, whoever owned the land before.
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