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by ztetranz
1330 days ago
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That's true. As a kiwi in the US, I was surprised by how many mortgages here are fixed term for a long time. When I last bought a house in NZ about 30 years ago floating rate (potentially changing every month) was the norm and "lock in your rate for five years" was advertised as an option you could take. My American father-in-law who is a retired realestate / financial industry professional seemed to have trouble getting his head around that when I told him. Not only that long term fixed rates were not available but also when you're in a short term (5 year) fixed rate, you can't easier refinance if the general rates go down. That seemed normal to me at the time because it's a gamble for both parties. If I sign a contract to pay X% for the next five years then it doesn't seem like I should be able to change my mind part way through any more than the bank can renege on the deal. That said, I never suffered significantly so that's easy for me to say. Likewise for deposits. It seems a lot easier to break a CD early (forfeiting some interest) in the US than it is to break a term deposit (like a CD) in NZ. |
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And then the 1929 market crash wiped out the banks so they called in all their assets (loans).
And so now the US Government steps in and says "banks you can't do that" and the banks said "then screw lending" and the government said "we'll buy and resell the loans with our guarantee" and the banks said, "oh really hmmm".
You can get ARMs for real estate in the US, and they may become more attractive as rates rise; the rates were so low it wasn't really worth it to even consider, but they exist - here are some: https://www.bankofamerica.com/mortgage/adjustable-rate-mortg...
The average American holds their loan for something like 7-10 years before either moving/selling or refinancing, so an ARM can be a worthy consideration. But you must plan around what it could do "worst case".