Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Danes Get 20-Year 0% Mortgages

bloombergquint.com

Post reply on HN
Print view View original

241–250 of 331 posts

Re: Danes Get 20-Year 0% Mortgages

#241

Post by kasey_junk »

apta_ wrote: post #238
ganeshkrishnan wrote: post #174

Earlier quoted context omitted.

Its works the same across the world as everywhere there is fractional reserve banking. The other "Shariah Banking" is also just repackaged fractional reserve banking.

As a Muslim, almost every "Shariah compliant" financing contract I came across is not compatible with Islamic Law (Shariah). Unfortunately, we're just taking modern parasitic and usurious financial contracts, and wrapping them under "Islamic" terms, and selling them as such. Any actual investigation of such contracts reveals that they're nothing but interest and usury in disguise. Islam seriously warns about this sor…

What about futures contracts?

Re: Danes Get 20-Year 0% Mortgages

#242

Post by nelgaard »

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?

It is not banks. It it credit unions and based on bonds. (banks are sometime affiliated with credit unions with similar names)

The bonds have a 0% coupon but the value is now 96.725: https://www.nordea.dk/privat/produkter/boliglaan/Kurser-real...

So the buyer of the house (seller of the bonds) would have to sell 3.3% extra bonds. And the buyer of the bonds gets a discount.

As for why anyone would buy such bonds: The system is considered very stable (no US sub-prime mess) so if you have a lot of money, do not want to take risks (stocks and forex) and your bank charges you negative interest, it might make sense.

As for the house prices. Yes they are going up. But you still have to pay back the money in 20 years. Or remortgage, but then it might not be at 0%.

Another thing to consider is that property taxes are based on a public valuation that have some correlation with what you would be paying for a house (valuations is big mess now, but it will probably be fixed in less than 20 years).

Re: Danes Get 20-Year 0% Mortgages

#243

Post by jackcosgrove »

omgwtfbyobbq wrote: post #191
adam_arthur wrote: post #151

Earlier quoted context omitted.

> The price alone is mostly irrelevant for the buyer. The price is certainly relevant when it comes time to sell, and a high price due to low interest rates leaves you more vulnerable to price shocks in the event rates need to rise. Of course we haven't seen any major price depreciation due to rate increases in the last few decades :)

We did a little bit in the 90s when interest rates increased, and I think the rate increase in the late 2000s was responsible for at least some of the drop in home values, although how much was obscured by the housing bubble, and low interest really acted like a multiplier there. https://fred.stlouisfed.org/series/CASTHPI https://fred.stlouisfed.org/series/FEDFUNDS But you're right in the sense that we haven't seen t…

That's because interest rates having generally trended down from the mid-teens to zero in the past forty years.

Unless we're willing to go negative, that cycle is coming to an end.

Re: Danes Get 20-Year 0% Mortgages

#244

Post by 317070 »

volkerp wrote: post #237

Bought an apartment in Germany this year. My effective interest rate is 0.74% fixed 20 years with a downpayment of 40%. The bank guy said the bank will make no money on this loan. They do it anyway because they want the object in the portfolio. Inflation in the housing market has been tremendous in the last years in germany.

> The bank guy said the bank will make no money on this loan.

Ha, I believe that the guy told you that, I don't believe he is correct. :) The bank is not a non-profit and is totally making money on that mortgage. A considerable margin in fact, given how much effort goes into it.

Re: Danes Get 20-Year 0% Mortgages

#245

Post by ncallaway »

ZephyrBlu wrote: post #221
adewinter wrote: post #193

Earlier quoted context omitted.

When I decide to buy a $25k car because that's as much as I'm willing to spend I still need to determine what my "monthly" is. It matters what my monthly is because it is _a loan_ that I need to pay back every month. If I didn't need to think about what the monthly payment was I wouldn't need to take out a loan (unless I guess you got a magical loan that could only be paid off as a lump sum?). You're implying "worryi…

> You're implying "worrying about" or wanting to know what the monthly payment is on a loan is a bad thing and I don't understand why I believe what he is actually saying is that most people _only_ care about their monthly payment.

Yes, this seems like the critical distinction.

Caring about the monthly repayment is important.

But so is caring about the interest rate and the principal.

Re: Danes Get 20-Year 0% Mortgages

#246

Post by yrimaxi »

nemo44x wrote: post #204
matwood wrote: post #180

Earlier quoted context omitted.

Yeah, the real return is the equity. The house can act as a small savings account over time. But even that is questionable unless you're prepared to move out at some point, which means transaction costs and buying something new. IMO, for primary residences you did the right thing (if you want a house of course).

I've come to terms with the fact that in most markets a home is not the best way to use your money in terms of return. However, you get to live in it and that's priceless. And like you said, it acts as a savings account over time and that generally works out as people will eventually downgrade after their kids have left. Another nice thing about owning a home is you can improve it (additions, adding bathrooms, etc) a…

The point of most things that you can buy should be the thing itself, not its investment-value. If not there is probably rent-seeking going on, i.e. a market failure.

All things degrade due to entropy. Things cannot truly become more valuable by themselves.

Re: Danes Get 20-Year 0% Mortgages

#247

Post by zhdc1 »

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…

I'm having trouble following (maybe it's because I'm thinking in terms of residential loans, and the commercial market works differently or something).

If I purchase property in Switzerland with a Euro denominated loan, I have to convert my payments from CHF to EUR. If I'm depositing into a CHF denominated bank account that is owned by the bank I'm borrowing from and they charge me currency exchange fee, ok, but if I'm savvy enough to go with a foreign currency denominated mortgage, I'm also savvy enough to find a cheaper way to convert CHF to EUR. Otherwise I have to take on the onus of arranging the currency exchange myself, in which case the bank I'm borrowing from doesn't have a chance to benefit from the exchange fee.

If I'm a European bank and I want to engage in currency speculation, like the other people said below, there's no reason for me to have to go through the administrative hassle of making the loan in the first place.

Re: Danes Get 20-Year 0% Mortgages

#248

Post by fock »

onion2k wrote: post #209
f6v wrote: post #186

Earlier quoted context omitted.

Some places a starter apartment is $25000, and you can work remotely as a developer earning, say, $4000 a month net. It's just hard to wrap my head around 20 year mortgage.

In that position you don't need a mortgage. That's quite simple. On the other hand, where I live a reasonable small house is £150,000 and senior developer wages are about £30,000 (net). People need mortgages.

and where I live, a "starter apartment" is €300000 and senior people might get €60000. A house? Well, starting at €1.2M I guess.

Re: Danes Get 20-Year 0% Mortgages

#249

Post by znpy »

adewinter wrote: post #193
stevehawk wrote: post #187

Earlier quoted context omitted.

You expect people on HackerNews to not accurately represent how society views something? There's a reason why the phrase "what's my monthly?" is a thing. Car dealers pushing 7 to 8 year loans is because people are worried about their "monthly." Same for rent-to-own places, mobile companies, and everyone else in the lending business.

When I decide to buy a $25k car because that's as much as I'm willing to spend I still need to determine what my "monthly" is. It matters what my monthly is because it is _a loan_ that I need to pay back every month. If I didn't need to think about what the monthly payment was I wouldn't need to take out a loan (unless I guess you got a magical loan that could only be paid off as a lump sum?). You're implying "worryi…

> When I decide to buy a $25k car because that's as much as I'm willing to spend I still need to determine what my "monthly" is.

I haven't owned a car and i'm almost 30, and have always enjoyed public transport so far.

When I'll decide to buy a car, I'll just f-ing pay it in full and be done with it.

Re: Danes Get 20-Year 0% Mortgages

#250

Post by apta_ »

kasey_junk wrote: post #241
apta_ wrote: post #238

Earlier quoted context omitted.

As a Muslim, almost every "Shariah compliant" financing contract I came across is not compatible with Islamic Law (Shariah). Unfortunately, we're just taking modern parasitic and usurious financial contracts, and wrapping them under "Islamic" terms, and selling them as such. Any actual investigation of such contracts reveals that they're nothing but interest and usury in disguise. Islam seriously warns about this sor…

What about futures contracts?

In Islam, there exists a notion of a Salam sale (بيع السلم), or (advance sale). These are sales contracts in which the price is paid for goods to be delivered at a later time.

> The Prophet (ﷺ) came to Medina and the people used to pay in advance the price of dates to be delivered within two or three years. He said (to them), "Whoever pays in advance the price of a thing to be delivered later should pay it for a specified measure at specified weight for a specified period."

Does that sale describe future contracts (without any other stipulations or clauses, e.g. no shorting, no leverage, etc.)?

Note that Islam places restrictions on certain sales. Currencies are to be traded hand by hand, on the spot. For example, it's impermissible to purchase gold using a credit card because the settlement does not take place immediately. So things are a bit more nuanced there, as gold and currencies cannot be bought using Salam sales for example.

Post reply on HN