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Danes Get 20-Year 0% Mortgages

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Re: Danes Get 20-Year 0% Mortgages

#111

Post by chrisabrams »

hbcondo714 wrote: post #95
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.

Better is gonna give you pretty high rates -- try shopping with a local lender.

Re: Danes Get 20-Year 0% Mortgages

#113

Post by foobarian »

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.

There is definitely a difference between APR and the nominal interest rate of a loan. APY is the same as APR if the compounding happens once a year.

Re: Danes Get 20-Year 0% Mortgages

#114

Post by eli »

tibbon wrote: post #69
jcomis wrote: post #45

Earlier quoted context omitted.

No, not really. People are still readily getting loans with far less than 10%.

In competitive markets, the issue isn't getting the loan - it's getting an offer accepted. Sellers will heavily favor a cash offer, as it's faster and far more assured of going through. One strategy I've heard about people doing is to take a pile of cash, acquire the property, and then refinance it pulling out 80% of what they put in so that they can both have a mortgage and have a stronger buying position. Add in th…

The buyer can just waive the financing contingency. To the seller that's almost the same as making a cash offer.

Re: Danes Get 20-Year 0% Mortgages

#115

Post by marvin »

chenster wrote: post #80
joakleaf wrote: post #48

Earlier quoted context omitted.

No. You have to pay the loan back. You cannot just walk away. 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 co…

Bankruptcy has a 7 years bad credit sentence in US. You are good as new after that. Not sure that's the case with other countries.

In Norway, personal bankruptcy requires an application to the debt enforcement office (a local government authority). If the application is accepted, the debtor gives up all their assets and submits to paying all of their earnings towards their debt, for five years. A politically determined subsistence sum is all they get to keep for themselves.

After five years, the agreement ends and the debt is cleared. Each person can only apply once in their life. Any future runaway debts cannot be cleared without the consent of each creditor, which probably won't happen. Unsure how this is done in the rest of Scandinavia.

Re: Danes Get 20-Year 0% Mortgages

#116

Post by asdfasgasdgasdg »

vageli wrote: post #56
asdfasgasdgasdg wrote: post #8

Earlier quoted context omitted.

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.

0C was the number given to that temperature specifically because that's where drastic changes occur in water. With most materials, there is no significant difference between 0C, -1C, and 1C.

On the other hand, 0% has no known special relationship with the housing market, so there's not really a good reason to expect substantially different behavior at that value compared to -.125% or +.125%.

Re: Danes Get 20-Year 0% Mortgages

#117

Post by im3w1l »

dcolkitt wrote: post #110
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.…

I'm curious why this hasn't been competed away. Short-term rates in Denmark are -0.6%. Couldn't banks just borrow short, write mortgages at 0% and pocket 60 basis points? It's a little screwy, because you're getting paid the lenders instead of the borrowers. But it's still fundamentally no different than a bank that borrows at 2.5% and writes mortgages at 3% APR.

It's very different, because it means you don't need the borrower to ever pay back. Meaning the banks will give loans to anyone the laws can be bent to allow lending to.

Re: Danes Get 20-Year 0% Mortgages

#118

Post by ganeshkrishnan »

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…

>Banks turn away borrowers because they end up with too many loans on their books and no real incentive to get more

Banks would never turn away borrowers even if there is 0 percent mortgage or even slight negative (where they have to pay borrowers for the loan). That's because these loans are then sold to investment banks and are packaged as CDOs (and swaps and synth CDOs and so on ad nauseam) .

This was the whole subprime mortgage credit crisis. The stock market goes up as there are now more 'SPEs' (https://en.wikipedia.org/wiki/Special_purpose_entity) being listed and more money being poured into stock markets.

Banks usually don't keep the loans. They are sold off quickly for a higher profit.

Re: Danes Get 20-Year 0% Mortgages

#119

Post by alkonaut »

When interest rates are as low as they have been now for a long while (sub 2% for homes), the interest rate portion isn’t the limiting factor for how much you can afford to borrow.

Instead, to prevent prices going to infinity, there is usually some kind of laws in place for maximum length such as 30, 50 or 100 years (infinite I.e interest-only was common at least in Sweden when rates were higher), a minimum down payment such as 15%, a maximum size of the mortgage relative to the income etc.

Sweden now has all of these (!) so for most buyers, whether the interest is 0.5 or 3.5 makes very little difference. Most buyers, especially first time buyers, will be capped by one of the other limits regardless.

As it has been pointed out, this loan isn’t 0% since it’s not the effective interest rate including fees that is 0%.

Re: Danes Get 20-Year 0% Mortgages

#120

Post by xorcist »

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.…

So how much is the effective rate, typically?
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