[sbierwagen]

>get it paid back in the NEXT 30 YEARS

Why emphasize that? 30 year mortgages are common in the US. At current rates of 5.5%, the total paid in interest will be bigger than the original loan.

Of course, most US mortgages are taken out on housing units that actually exist.

[kevinventullo]

I agree with you, and just wanted to add that saying one pays “more” in interest than the original loan value is implicitly ignoring the time value of money, in particular equating 2022 currency with 2052 currency.

[jollybean]

That's a valid point, but it's not hugely relevant to the situation, as all loans come with interest payments and loans over 30 years at ~6% or whatever will accumulate a lot of interest. It's something to talk about, but another thing altogether.

The mechanics of this are a bit scary, I wonder how much real data there is on it.

Paradoxically, if it were the US, it would be so bad it may wipe out the nation.

But Xi has the Central Banks politicized fully ... he can make currency worth whatever he wants. He has to reallocate/rebalance without causing a revolution.

And if it does get bad, they may try to start a war as a distraction. That sounds extremely cynical but it's a real thing that happens.

[imtringued]

Isn't it odd that money rules governments? It almost as if the government is just a lapdog for someone else.

[Animats]

> Of course, most US mortgages are taken out on housing units that actually exist.

Construction is usually financed by a construction loan, at a higher rate than a mortgage, and the builder is the borrower. But not always. Here are some US failures from the 2008 housing crash.[1]

China has an unusual problem - the Party really, really doesn't like elections. For anything. But China has buyable apartments, which work like condominiums. Some organization has to run the building and maintain the common areas. That led to the creation of homeowners' associations with elected officials. This got party officials upset, and now efforts are being made to make HOAs subordinate to the local Communist Party units.[2]

[1] https://www.mortgagefit.com/construction/loan-default.html

[2] https://ebrary.net/153835/law/condominium_china

[paganel]

> Of course, most US mortgages are taken out on housing units that actually exist.

To add to that, taking a mortgage for a house that doesn't already exist is a very used practice outside of China, too, I know over here in Romania lots of people do it.

It's called credit for "casa la rosu", basically all you need to show to the bank is a contract between you and the developer and a "registration" thingie for the house in question with the local city-hall (again, even if the house doesn't already exist, in practice). It comes with a price discount (I haven't kept up, I think it's in the 20-30% range, maybe bigger) but, of course, it's all very risky (or at least that's my opinion). That hasn't stopped lots and lots of people from taking those type of mortgages.

[inglor_cz]

I also bought a house recently in very early stages of construction (a year ago, now it is almost finished). In Czechia.

The difference is that the developer must be reputable and the price is actually paid in several tranches, as the construction passes defined milestones. The bank will require independent assessments of the state of construction before approving any partial payment.

But yeah, it is still risky. You need to contribute at least 20 per cent of your own funds as a downpayment, and the downpayment is paid first. I wouldn't dare do that with an unknown developer. I risked it with a corporation that has been in operation since 1998 and has a lot of references.

[bobthepanda]

The other difference is that the vast majority of US mortgages are insured by FHA and so are actually fairly cheap. It’s probably the single biggest market distortion in the housing market.

Most countries do not have this.

[ganyu]

What's the household leverage ratio there in US? That in CN is 72% in 22Q1, and even bigger in big cities.

Edit: CN definition: (household leverage ratio) = (mortgages paid in 22Q1) / (total disposable income in 22Q1)

[HPsquared]

What ratio is that measuring, loan-to-value or loan-to-income?

In the UK at least, a buyer can borrow up to 95% of the home's value and I think 4 or 4.5x the borrower's annual income.

[ganyu]

+HPSquared For total value it's up to 80%, and when comparing to income you can borrow up to 50% of the (before tax) monthly income, for up to 30 years.

[ganyu]

30 years are pretty common, but paying for some property that never came out of the blueprint (and seemingly never will) does sound a bit odd..

[dirtyid]

Preconstruction sells at 30% discount, people gamble with their life savings considering PRC housing prices to income, but flip side is also massive speculative profit if things work out.

[civilized]

Ah, so this is just crypto and ICOs. But at least you get rights to real physical property instead of virtual Pokemon cards.

[chaostheory]

Well, the CCP owns the land. At best they only lease it for a max of about 75 years give or take.

[civilized]

Somebody else posted that they tried to make renewal of the lease conditional on payments but backed down in the face of protests.

[unicornmama]

~96% of us humans don't live in America, most of us don't have 30 year mortgages.

[thriftwy]

I'm pretty sure large portions of Latin America, Europe, ex-USSR and perhaps India/South East Asia have 30 year mortgages.

[CapricornNoble]

Also Japanese mortgages are 30 years, or even 50 years. But the interest rates are <1% here.

[ethbr0]

But doesn't Japan also have some weird customs/rules around housing stock age? I remember reading that most things get torn down and rebuilt at 20(?) years max for {reasons}?

[bobthepanda]

In previous generations it was because

- there was a postwar housing shortage, so the housing quality that came up to meet that demand quickly was not good. even if the house is still maintained well (a later point), japan has seen meteoric rises with living standards over the past 100 years, so it probably isn't compatible with modern wants and needs

- Japanese earthquake codes were regularly revised until 1981 after lessons learned from disasters. buildings from before that time have a significantly higher rate of collapse during earthquakes, so buying one and keeping it is a bit of a gamble on your life

- because of the depreciation, there isn't a lot of incentive to maintain your house well to the point where it can last more than 30 years

of course, all these things might be less true now that Japan has stagnated since the '90s, so there are reports of more people accepting renovating a house they buy rather than tearing down.

[ethbr0]

That explains it! I hadn't thought about the systemic flywheel caused by real estate valuations. Where if depreciation is a market assumption, values depreciate, which impacts financing options. And people expect values to depreciate, so people don't maintain and renovate, which ultimately fulfills the depreciation prophecy.

[unicornmama]

No we don’t. You get 5 year fixed, 10 year max. Beyond is prohibitively expensive.

[thriftwy]

How expensive are we talking about?

Of course people tend to pay mortgage early to avoid paying many times over at 10%.

But, having small montly payment helps in case you have some temporary financial emergency.

[mysterydip]

Just curious what your monthly payments are like compared to your income.

[refurb]

I think people are confused by the term (length of fixed rate) versus amortization (total time to pay off debt).

In Canada mortgages are typically 25 or 30 year amortization periods, but you can only fix the rate for 10 years (usually less as you get a much lower rate).

After the 5 years you renew your mortgage at the current interest rate with the same bank, or try and refinance entirely which requires the same paperwork as a new mortgage.

The US and I believe Netherlands are the rare countries where you can get fixed rate for the entire 30 year amortization period.

[GekkePrutser]

In Spain too.

[mysterydip]

Ah thanks for the clarification!

[WheatM]

30 year mortgage are normal in New Zealand and Australia, as well as the UK and at least some parts of Europe.

[robocat]

You are confusing a “30 year mortgage” with a “30 year mortgage”. They sound the same, because they have the same term to repay the principal, but they are completely different because in the USA you usually know your repayments for the next 30 years, but in many other countries the repayments can go up a lot if interest rates rise.

In the USA, the usual mortgage has a fixed interest rate for the term of the mortgage. In New Zealand the interest rate is approximately a floating (edit:variable) rate over the 30 year period.

In NZ the mortgage interest rate (which controls your repayments) can be fixed for up to 5 years (the median is 2) but after the “fixed” period the interest rate resets to the current interest rates (edit: typically mortgagees lock in a new 2 year “fixed” rate at the current 2 year interest rate). NZ rates were around 2% to 3% since 2008 [1], but now they are closer to 6% [2] and most mortgage holders in New Zealand will have to pay twice as much for the interest component of their mortgage repayment, putting some people under financial stress (an acquaintance is being forced to sell an investment property because they were over-leveraged). The mortgage interest rate over the 30 year term is more of a stepwise approximation to the floating interest rate: I am unsure how much control the mortgage holder has over varying the principal repayments (I think I can pay 20% more principal per payment, shortening 30 year term to 24 years).

It is more complicated than that, and the USA has a wide variety of mortgage products you can buy including ones similar to NZ (not just the usual USA fixed rate 30 year). Other countries have their own quirks, so I am only speaking for NZ where I understand the details better.

[1] https://tradingeconomics.com/new-zealand/interest-rate

[2] https://www.interest.co.nz/borrowing

[viraptor]

> confusing a “30 year mortgage” with a “30 year mortgage”

No need for confusing naming. You're talking about fixed rate, variable rate and short period fixed rate mortgages.

[robocat]

I expect the meaning taken by the average person in different countries varies, without much overlap. My point is that mortgage products are very different in different countries, and the average person is very unfamiliar with the differences. Perhaps you are technically correct (the best kind of correct!)

For example, in Australia and NZ a “fixed rate”[1] mortgage is not the same as what you have called a “fixed rate” mortgage. Australia looks like it offers up to 10 years at a fixed rate on a 30 year mortgage (ANZ? some banks like Westpac only offer 5 years?). Banks in NZ offer up to 5 years, even though they are mostly Ozzie banks. Ozzie banks typically offer something called offset mortgages - that word doesn’t get used in NZ at all AFAIK (instead NZers can apply for a seperate revolving mortgage, I haven’t seen it bundled like in Oz).

What you call “variable rate” is called “floating rate” in New Zealand (and search completion hinted maybe the same for Canada & Singapore).

It is confusing.

[1] https://www.loans.com.au/home-loans/everything-you-need-to-k...

[rrrrrrrrrrrryan]

> What you call “variable rate” is called “floating rate” in New Zealand

And it's typically called an "adjustable rate" in the states.

[benjaminwootton]

It’s even weirder in the UK because you agree a mortgage did say 30 years on a “standard variable rate” but then take a mortgage for say 5 years on a fixed rate or discounted “variable rate” which might last for 2-5 years. People do usually take a new “mortgage” after each period.

Weird!

[netheril96]

All the new mortgages in China have floating interest rates.