[sertorius]

I think 30-year fixed mortgages are somewhat of an American phenomenon (perhaps due to the luxury of having the global reserve currency). They are not generally available in Canada or UK, where 5-year fixed rates are the norm.

[smodo]

I'm on 30 years at 1.9% in the Netherlands. Figured rates would go up eventually and wanted to take advantage while I could.

[kaushikc]

1.9% gives you protection against rental raises and you build equity. This is an absolute no brainer if there is enough supply.

[monkeynotes]

You'd be absolutely nuts to think you'll ever get a rate better than 1.9% average over 30 years. I am deeply envious!

[bombcar]

Yeah that rate is basically a TIPS savings bond in disguise.

[jfk13]

When I bought (UK) five years ago, I went for a 10-year fixed rate, which was the longest I could find. Currently very happy with that choice. Shorter fixes were available at slightly lower rates, but at this point I still have 5 years of 2.64% in hand, by which time the house will be close to paid-off.

[Macha]

In my case I went for a 5 year fixed because if I save at the same rate in those 5 years as I have in the last 5 years (which given my mortgage repayments are 75% of the rent I was paying prior, for much more house, shouldn't be too challenging, even with the inflation), then if rates are shit in 5 years I can pay off like 40% of the mortgage after the fixed rate and still have lower payments than I do today.

[bombcar]

I almost grabbed an ARM on one refinance because the maximum amount it could jump at each adjustment was 1%.

Years ago my dad took an ARM at 18% because the anti-usury laws limited the maximum it could go to 20% and it turned out to drop each adjustment period after that (80s wheeee)

[hef19898]

20 year fixed interest rates are a thing in Germany. With an option for mortgage owner to buy out the lender after 10 years without additional costs. 5-10 years fixed rates are cheaper but way to risky IMHO.

[lotsofpulp]

>With an option for mortgage owner to buy out the lender after 10 years without additional costs.

What does this mean? Are there usually early repayment penalties for home mortgages in Germany, or is it simply not allowed?

In the US, I have never read about not being able to pay or a penalty for paying the entire mortgage at anytime.

[hef19898]

The lending bank finances the mortgage on the financial markets, the spread between their interest rate and the one the bank clients get is the banks profit. Part of the terms and conditions are that those profits for the bank are what you, as the oerson taking the mortgage, owns the bank for the duration of the interest rate fix. That is capped so, by law, at 10 years. Partial down payments are negotiable, e.g. 10% of the initial loan per year. Anything above that, and prior to that 10 years, will incure the clients obligation to cover the banks lost profits (part of what you agreed to pay the bank). If the explanation makes sense.

[infinite8s]

Canada is similar - usually you can prepay up to 15%/year, but any more than that and you need to pay a penalty (which seems to be calculated based on the interest they would lose). Also the yearly prepay amount is use it or lose it.

[jholman]

20% lose-it-or-lose-it yearly is my experience in Canada, and I believe that's on top of being allowed to make double payments.

And yes, the prepay penalty is generally based on the interest they would lose or a few month's interest, whichever is better for the bank at the time of payment.

But also note that if you paid the extra for a 10-year, Canadian federal law says you can prepay 100% at any time after 5 years with no penalty (or virtually no penalty?). Which is part of why longer-term mortgages are markedly more expensive.

[infinite8s]

Another interesting aspect of Canadian mortgages (as opposed to US ones) is that you can't just walk away if the mortgage is underwater (which is what a pot of people in the US did after the GFC). The bank can come after you for the difference between house value and mortgage.

[lotsofpulp]

That is only in states that legislate non recourse home mortgages.

https://www.loan.com/home-loans/how-non-recourse-loan-laws-v...

[yamtaddle]

> In the US, I have never read about not being able to pay or a penalty for paying the entire mortgage at anytime.

My parents (we're all American) were always very careful to check that early repayment didn't come with a penalty, on mortgages and all other loans, so I assume it used to be a thing. I've always asked (following their example) and not once had the answer be "yes, there's an early-repayment fee" so maybe it's a whole lot less common than it used to be.

[kgwgk]

If I'm not mistaken US mortgage rates are several percentage points above what they would be if prepaiment was not "free". You have to pay for that option some way or another.

[bombcar]

You can find them but they’re rare, because it messes up the resale of the loan.

Our 80/20 loan back in the countrywide heyday had a prepayment penalty on the 20 which also had a balloon. We structured our refinance to avoid the penalty.

[lotsofpulp]

If so, I wonder why the option is not offered when shopping for a mortgage. I have a 2.5% 30 year fixed, so it is hard to imagine a 0.5% loan, with an early repayment penalty since I would have no incentive to pay it off early anyway.

[kgwgk]

Negative interest rates were hard to imagine a few years ago but they have been a reality in many parts of the world for several years. Maybe it's not multiple percentage points and it's around one, I don't know the specifics of the calculations. But the prepayment risk in principle has to be compensated. Otherwise lenders would have no incentive to lend money to you - if you can pay it off early anyway.

https://www.ecb.europa.eu/pub/financial-stability/fsr/focus/...

"The prevalence and handling of prepayment risk differs in two respects between Europe and the US. First, while in the US prepayment costs may be priced into the interest rate, in many European countries lump-sum prepayment penalties are induced by statutory requirements. Often banks impose charges on homeowners for early repayment. These fees force households to bear part of the prepayment risk and, if the fees are sufficiently high, may deter homeowners from prepayment, thereby nullifying the prepayment risk faced by banks. An exception to this is the Danish mortgage market, where long-term fixed-rate mortgage loans with an embedded option of a penalty-free prepayment are typically offered, as in the US."

[jonatron]

France also does long term fixed mortgages. No idea why.

[bombcar]

It's to encourage home ownership, which may or may not be a laudable goal.

Personally I take advantage of it and think it's not necessarily a bad thing, but wish it was more direct about what it's trying to do.

[lotsofpulp]

If a government wanted to encourage home ownership, it would either incentivize building more homes to bring down price, and/or give cash to people so they are able to buy. The latter option would require government taking from richer to give to poorer, or issuing new money, which is sort of the same by reducing purchasing power of money,

The long term fixed rate mortgage is where no wealth gets redistributed today, but rather from future taxpayers or users of the currency.

[ClumsyPilot]

if government wants to encourage buying, it must make take private equity and wallstreet out of property speculation. They leave swaths of properties empty just for the purpose of land banking.

Secondary step would be to make landlord-ing less attractive by giving tenants a lot of rights, naking them hard to evict, thank kind of thing.

This would make houses less atractive as an investment asset.

Lastly you could increase property taxes, again driving down atteactivenes of hiuses to investment.

Beinging down price of houses is easy. The question is what do you do with all the people who bought a house for 500k and now its worth 250k and they are stuck

[bombcar]

The amusing thing about the 30yr fixed is the average lifetime of them - many people would do between with an arm with a ten year fixed period.

[lotsofpulp]

Depends how much lower the interest rate for 10 year ARM is.

For example,

https://www.mortgagenewsdaily.com/

Reports 30 year fixed is about 7.32% and 5 year ARM is about 6.75%. A 10 year would be somewhere between that, but if I was choosing with less than a 52 basis point difference, I would go with 30 year fixed due to less downside risk of my mortgage blowing up.

At 30 year mortgages of 2% to 4%, no brainer to just go with 30 year even though you might pay a $1k more in interest every year. But you might not, and you definitely will not pay more than a $1k extra in interest since it is locked in.

If the 10/1 ARM was 5% and 30 year was 7%+, I would think about the 10/1 ARM.

[akomtu]

When everyone is invested into society, we have incentives to defend the status quo, thus making our society stable. In the next generation or two we'll get to see what happens when half of the men of the nation don't own anything of substance and have no meaningful connections to society.

[bombcar]

Yeah there’s a secret dark opposite of NIMBY - WGASA (who gives a shit anyway) and that can end up much worse in the long run.

Part of the problem for communities starts when not all participants live in the community - if the grocers and workers and police are “imports” from the suburbs or other areas you start to get divergent goals and WGASA starts to take hold.

[imtringued]

Homeownerism sounds like a regional form of nationalism where an us Vs them conflict is actually the point. The problem is that once you understand the problem as a politician the only thing you can do is do even more nationalism by including the formerly excluded and doing an us vs the world because not having an enemy and cooperating with everyone else is unimaginable.