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Danes Get 20-Year 0% Mortgages

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Re: Danes Get 20-Year 0% Mortgages

#141

Post by polygotdomain »

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…

This 1000%, I sold in March right at the beginning of the pandemic in an incredibly competitive market. The final buyer was determined by the specifics of their offer, not just their final price. FHA with 3.5% down just adds additional risk for closing that 20% conventional doesn't. That risk is minimal, but it's a risk the buyer doesn't have to take.

I'll also add that in competitive markets you also get into a situation where it's a bidding war and you're pushing what the property might appraise for. If you're doing 3.5% down, even though you might be approved up to X, the bank may not be willing to stretch the appraisal for the property. With 10% or 20% down, that's less of a concern.

Also FWIW, for new cars, how you pay does matter. The dealer makes money on the financing, so they will give you a different cash price vs if you go with their financing. The reason being is that they want to sell you a "zero percent" loan that effectively bakes in the interest up front, so their financing will look better, but the final price will be higher.

Re: Danes Get 20-Year 0% Mortgages

#142

Post by jwagenet »

qppo wrote: post #139
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…

Point 3 sounds made up. Banks are in the business of lending, I can't really imagine a scenario where they have an incentive to lend less.

I imagine there is a lack of incentive to take on additional 0% loans unless legally required, due to the repayment becoming a loss for not even covering inflation.

Re: Danes Get 20-Year 0% Mortgages

#143

Post by matwood »

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…

> 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.

Yes and no. This is also true in all markets. No one really buys a house based on the price. They buy it based on the monthly payment (price - down payment and interest rate). The price alone is mostly irrelevant for the buyer.

This means that for most people, the best time to buy a house is when interest rates are sky high since falling rates are easy to take advantage of in the future. High rates also mean the original principal is likely low.

Re: Danes Get 20-Year 0% Mortgages

#144

Post by oblongx »

qppo wrote: post #139
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…

Point 3 sounds made up. Banks are in the business of lending, I can't really imagine a scenario where they have an incentive to lend less.

How does the bank make money when it's zero interest loan? Serious question, the article didn't mention anything about it. I'm sure it still costs a few bucks in fees to get the loan but isn't the interest where the real profit is?

Re: Danes Get 20-Year 0% Mortgages

#145

Post by wrzuteczka »

mywittyname wrote: post #125
yuliyp wrote: post #121

Earlier quoted context omitted.

Where is the profit on a 0% loan? Who would pay more than face value for a stream of payments going into the future?

Lenders make money on the currency exchange. This doesn't make sense for Americans because they use a single currency for everything, but in Europe, there is a benefit to having a revenue stream in a desirable currency which is appreciating relative to the Euro. To the buyer, the loan looks like 0% because the buyer pays back the loan in Franks or whatever. The bank, meanwhile, gave out a loan of X Euros, and is rece…

Where is that Y coming from? The rates of say EUR and CHF diverging?

Re: Danes Get 20-Year 0% Mortgages

#146

Post by coliveira »

oblongx wrote: post #144
qppo wrote: post #139

Earlier quoted context omitted.

Point 3 sounds made up. Banks are in the business of lending, I can't really imagine a scenario where they have an incentive to lend less.

How does the bank make money when it's zero interest loan? Serious question, the article didn't mention anything about it. I'm sure it still costs a few bucks in fees to get the loan but isn't the interest where the real profit is?

Banks don't make money on interest rates, but on spreads. They lend the money at 0%, but in Europe banks can borrow at negative interest rates.

Re: Danes Get 20-Year 0% Mortgages

#147

Post by saberdancer »

matwood wrote: post #143
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…

> 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. Yes and no. This is also true in all markets. No one really buys a house based on the price. They buy it based on the monthly payment (price - down payment and interest rate). The price alone is mostly irrelevant for the buye…

But people sell houses based on price, not on the monthly payment. It's possible that high monthly payments reduce the ability to sell a house for a high price, but is this effect that strong?

Re: Danes Get 20-Year 0% Mortgages

#148

Post by asiando »

matwood wrote: post #143
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…

> 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. Yes and no. This is also true in all markets. No one really buys a house based on the price. They buy it based on the monthly payment (price - down payment and interest rate). The price alone is mostly irrelevant for the buye…

> The price alone is mostly irrelevant for the buyer.

Sorry but wow. This is not the kind of comment I expect on HN, but rather from my uncle:

“We got this new Lexus, it’s only $500/month!”

“Yes, for 200 years”

Re: Danes Get 20-Year 0% Mortgages

#149

Post by Triv888 »

matwood wrote: post #143
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…

> 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. Yes and no. This is also true in all markets. No one really buys a house based on the price. They buy it based on the monthly payment (price - down payment and interest rate). The price alone is mostly irrelevant for the buye…

> This means that for most people, the best time to buy a house is when interest rates are sky high since falling rates are easy to take advantage of in the future.

They can stay high or low for quite a long time...

Re: Danes Get 20-Year 0% Mortgages

#150

Post by saberdancer »

ganeshkrishnan wrote: post #118
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 su…

Does this work the same way in Europe?
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