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Danes Get 20-Year 0% Mortgages

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Re: Danes Get 20-Year 0% Mortgages

#91

Post by nostrademons »

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.

Once rates go negative people have an incentive to take out the biggest mortgage that they can, because they're making money on each.

With negative rates the payments compound. If the interest rate is $900/month, you're paying off $1000/month in principal each month, and making $100/month in profit that is applied to the home equity. You can then go use that equity to take out another loan on the property, make $100/month in profit, repeat. Or go buy a different property with a different lender, if the bank starts getting suspicious. If you can't afford the increased payments...well, that's what a loan is for, particularly one that you're making a profit off. ;-)

Re: Danes Get 20-Year 0% Mortgages

#92

Post by pkaye »

beerandt wrote: post #77
tveyben wrote: post #25

But 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.…

In the US, this is basically why APR =/= APY. Where APR is the effective rate including fees.

I though APY is just APR with interest compounding.

Re: Danes Get 20-Year 0% Mortgages

#93

Post by useerup »

djanogo wrote: post #88
useerup wrote: post #78

Earlier quoted context omitted.

Danes can deduct around 25% of paid interests (and "contribution fees" on mortgages). A little more for paid interests below DKK 50000 yearly and a little less for paid interests above DKK 50000. A typical home can sell for DKK 4M. With a 20 year 0% interest and 80% of the 4M mortgaged (the maximum allowed), the "contribution fee" would be set at 0,75%. That would amount to interests (0%) and "contribution fee" (0.75…

Are the property taxes high?

There's a property tax of 1% for home values up to around DKK 3M, and 3% for the value above 3M.

That is the based on the "official estimated value", however, which is typically conservative and lagging and therefore somewhat less (like e.g. 60%) of what the property actually sells for.

The 3M is set so that the vast majority of homes will not exceed this value.

In addition to that we pay a "lot tax" which varies by municipality between 1.6% -3.4% of the value of the lot without the buildings.

Re: Danes Get 20-Year 0% Mortgages

#94

Post by matsemann »

sokoloff wrote: post #81
matsemann wrote: post #62

Earlier quoted context omitted.

But it keeps renters renters. I'd rather forego my tax deduction for owning my apartment and bake it into the normal tax. I feel it's unfair a friend can pay the same amount as me each month, but instead of paying down a loan he loses everything to a landlord. And in addition I also get to deduct the ~rents~ interest.

I'm not sure what you mean by "I also get to deduct the rents", but it doesn't match anything that I understand about the tax code.

Lets say I pay $2000 each month in mortgage. Some of that is interest that I get to deduct on my taxes. So in practice I pay maybe $1700/month, and most of that is really me saving by building equity in my apartment.

Before I bought the apartment, however, I paid more than that in rent. And all that was money going to someone else. If anyone deserves a tax break, it's those not privileged enough to yet own their own home.

Edit: sorry, in my language "rente" is "interest", so I mixed them up and meant to say I get to deduct the interest part of my mortgage payment in my previous post. Probably where the confusion stems from.

Re: Danes Get 20-Year 0% Mortgages

#95

Post by hbcondo714 »

DevKoala wrote: post #12

I just refinanced at 2.0% for 15 years in California and I was feeling like a champ for timing the bottom.

Would you mind disclosing which lender you went with to get 2.0%? Are you paying points? I'm using Better.com for a refi in CA also but the "best" I can get is 2.625% with 0.053% ($330) in closing costs. They don't even list 2.0%

Edit: Better.com is actually listing 2.0% rates but with $9,100 in points, based on my property and location in CA.

Re: Danes Get 20-Year 0% Mortgages

#96

Post by harel »

Before the financial crisis of 2008 you could get those in the UK. I had one just as the fan got hit by something back then. 25 years, 0%, no deposit. They were quite common. It was so good I didn't remortgage for 10 years until we sold and moved.

Re: Danes Get 20-Year 0% Mortgages

#97

Post by fifticon »

Dane here. A piece is missing. Interest rates may be 0%, but there is also an annual bank fee on the loans. As the interest rates have gone down, these fees have risen, and I believe the banks increasingly make their money on those. It's still good news for borrower, since the fees don't accrue interest.

Re: Danes Get 20-Year 0% Mortgages

#98

Post by WillPostForFood »

chenster wrote: post #85
supernova87a wrote: post #66

There is a more basic economic question that I am curious about. I don't know how / can't believe how in the 1980s we had the era of 15% interest rates, etc (ok, I have some idea, central bank policies, inflation, etc) -- but it seems now we're in a "forever-0%-interest" situation. The reason I think is that interest/mortgage/etc rates just reflect how much people/banks/etc are willing to receive in profit for parkin…

> I don't know how / can't believe how in the 1980s we had the era of 15% interest rates, etc (ok, I have some idea, central bank policies, inflation, etc) -- but it seems now we're in a "forever-0%-interest" situation. Yes, 17-20% interest rate was not unusual in 70s, 80s, but home prices were much much lower back.

Inflation adjusted, median price in 1980 was 180k, it peaked up to 280k in 2007, then dropped back down to 190k by 2011, and has now risen back to 280k in 2020. Feels like a correction is due, but if rates stay so low, who knows.

Re: Danes Get 20-Year 0% Mortgages

#99

Post by patatino »

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…

Well, I can't talk about Geneva or Zurich because both cities are very expensive. But generally, prices are going up, the down payment is normally 20% of the price. This is one problem, another one is how they calculate the risk. The "law" is you have to be able to pay the mortgage at 5% and that 5% cannot be more than 1/3 of your income.

So if you buy a 1.25m house and take a 1m mortgage 5% is of that is 50k, so your salary has to be 150k.

Point 3) is wrong, they make still a lot of money with loans, a lot of people still take 10 year loans for somewhere between 0.6% and 1%.

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