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Danes Get 20-Year 0% Mortgages

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Re: Danes Get 20-Year 0% Mortgages

#101

Post by njarboe »

nostrademons wrote: post #89
acwan93 wrote: post #42

Earlier quoted context omitted.

I went through 3 refinances last year (also in CA) all at little to no closing costs for a 30 year fixed (4.00% → 3.25% → 2.5%). The math made sense every single time when factoring in the lower monthly payments and negligible closing costs. At this point I don't know what the point of the loan is anymore. Is there really any realistic intention to ever pay it off? Every single time I thought I had timed the bottom,…

The point of paying off loans at this point is so that when the whole system breaks down and people are looking for someone other than themselves to hold the bag, you have no business relations with anyone and nobody with a reason to point at you. Folks who are deeply entangled in the financial system will have a lot of potential enemies if the system fails to supply the expected standard of living to everyone. Folks…

If you own property there is not obscurity or hiding from the system. Your name is on the dead and on view for the public (especially with the new law recently passed restricting the privacy of shell corps).

Re: Danes Get 20-Year 0% Mortgages

#102

Post by ProfessorLayton »

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…

>What's weird about it to me is that this is one of the few places in US consumer markets where the seller cares deeply about your method of purchase and where the money came from.

Often times sellers are trying to buy another home and have put a contingency offer (depending on the market) on another home, so they're heavily incentivized to accept an offer that moves quickly so that they can close sooner. A tiny bit more money may not be worth the risk of having multiple deals fall though, hence all-cash offers and traditional loans being more attractive.

With that context, it's no wonder why sellers care so much about the method of buying.

Re: Danes Get 20-Year 0% Mortgages

#103

Post by jandrese »

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?

In the US according to my real-estate agent from 10 years ago it is common to take out a loan for the 20% down-payment so you don't get the long term penalties.

This seemed to completely miss the point of a down-payment, but apparently banks were willing to go with it. They even offered the dual loans as a single product for convenience.

If you work the numbers out it can theoretically save money over the long term vs. renting long enough to save the 20%, especially if it means you can put more money into risky stocks with high returns, but it also increases your risk of financial disaster if the bubble for some reason ever stops inflating, but that never happens as we all know.

Personally I though it was too sketchy and went for a more traditional loan, but I know several people who took loans like that.

Re: Danes Get 20-Year 0% Mortgages

#104

Post by jedberg »

SoSoRoCoCo wrote: post #86
tibbon wrote: post #69

Earlier quoted context omitted.

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 is one of the few places in US consumer markets Did you mean geographically? Or temporally? because if the second, I'm pretty sure that is a direct legal consequence of the 2008 housing meltdown that boned both sides of the lending equation.

Even before 2008 it's an issue. I bought in 2008 and cash offers were still preferred over 20% down, which was preferred over less than 20% down. It's because when you make the purchase agreement, the buyer can get a bunch of outs, many of which are based on financing not getting approved. The more difficult your financing situation, the more chance there is of it falling though.

Re: Danes Get 20-Year 0% Mortgages

#105

Post by lotsofpulp »

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…

>What's weird about it to me is that this is one of the few places in US consumer markets where the seller cares deeply about your method of purchase and where the money came from.

It's not weird at all. Buying a car or TV from Walmart with a credit card does not carry anywhere near the risk of the transaction failing that buying real estate does.

It's simply a function of the probability of the transaction succeeding (or "closing" as it's commonly referred to). With a loan, there are multiple parties whose requirements need to be met, from the lender, the home insurance, the title insurer, the seller, etc. The more entities you cut out, the less chance of the transaction failing. Underwriting a car is also much more simple and less risky for a lender than a house, which has much higher downside risk and unknowns.

Not to mention the myriad laws resulting in legal liability and opportunity costs relating to real estate purchases, as opposed to a car purchase or a TV purchase where the worst that can happen is the seller takes it back and sells it to someone else.

Re: Danes Get 20-Year 0% Mortgages

#106

Post by marcosdumay »

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…

> Right now it seems there is too much money searching for returns.

Or too little returns available for all the money. This is the expected end-game for a well developed society, where people have most of what they need so extra capital can't move the needle anymore...

What is kinda good. The problem happens where not everybody is included on that "well developed society" and the excluded people don't make a difference because they get too little money to participate.

Re: Danes Get 20-Year 0% Mortgages

#107

Post by cherrycherry98 »

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.

I reckon housing prices would be lower now too if interest rates were at that level. Most people care about what their monthly payment is going to be. If they're paying 20% interest the principal is going to have to be low enough to accommodate their budget. Increase rates and watch demand dry up as the monthly cost skyrockets for those financing the purchase. Prices should drop accordingly.

Re: Danes Get 20-Year 0% Mortgages

#108

Post by njarboe »

mywittyname wrote: post #52
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, be…

From your link the only real change that the law made was to reduce the deduction of interest from a loan cap of $1 million to $750k. The SALT limit of $10k hurt a lot of people, but the mortgage deduction is not part of the $10k SALT (state and local tax) limit.

Re: Danes Get 20-Year 0% Mortgages

#109

Post by majormajor »

linuxftw wrote: post #83
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…

We are in uncharted economic waters, and we have been for about 12 years. Not only is there 0% (or lower!) interest rates, we also have QE (central banks buying government assets directly), we have central banks buying corporate debt now! This is creating market bubbles. Worthless tech stocks is one place. Housing prices have soared. Whatever might happen might happen quickly.

Have we ever been in "charted" economic waters?

Re: Danes Get 20-Year 0% Mortgages

#110

Post by dcolkitt »

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.

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