Mortgage/Savings advice

Rand, a different way to approach this is to assign a dollar value to your Time. In other words, calculate how much Time you'll spend on crunching numbers, financing/re-financing, maintaining two residences, traveling back and forth, being a landlord, etc....and decide what's "worth" doing yourself (based on your hourly wage) or paying someone else.

Since you're going to be a new father come March, my guess is you'd assign a pretty high dollar value to any Time that's spent away from your wife and child. If you can't afford to hire a property manager, that means you'll be doing all that work yourself....and that can cost a lot of Time away from home/family you may not want to spend. At least not during the first couple of years in your new family life, that's going to be crammed with momentous occasions in rapid succession.

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Originally Posted by Dreadnaught

Well I have read that, because of our government subsidy for housing, our mortgage market is unique. It's true that the US "standard" 30 year fixed mortgage is something of an anomaly. Though it makes a decent amount of sense for a long-term purchase.

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30 year fixed! :eek:

How much higher than the base rate is that typically?

How long has that been the 'standard'?

Over here it's varied quite a bit over the years. I hear many horror stories of difficulties with mortgages in the late 70s and early 80s, when rates were around the 14% mark, peaking at 17% in '79. I hate to think how much my mortgage costs would be with those kinds of rates.

UK standard mortgage length is a 25 year term, though longer is possible with most lenders. Fixed rates are typically 2,3 or 5 year terms, though 10 years is provided by some lenders. At the end of the fixed term, most buyers will then take up a new fixed term, shop around for better fixed rates at other lenders, or move to trackers.

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Originally Posted by Dreadnaught

Well I have read that, because of our government subsidy for housing, our mortgage market is unique. It's true that the US "standard" 30 year fixed mortgage is something of an anomaly. Though it makes a decent amount of sense for a long-term purchase.

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I suppose every mortgage market is 'unique', the Dutch system though knows the exact same government subsidies on housing for as long as I care to remember. The 30 year mortgage is so much a standard that even legislation is taking it into consideration; rates are usually fixed for 1, 5 or 10 years.

The main differences I see between the US and The Netherlands is that overhere not fulfilling your obligations on a home-loan leads to personal bankrupcy if the sale of the property is at a price that doesn't cover the debt. We have no such thing as handing over the deed and walk away. Which probably explains that even though there are enough people under water with their mortgages, the risk of them defaulting on their mortgage is significantly lower than anywhere else.

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Originally Posted by Timbuk2

30 year fixed! :eek:

How much higher than the base rate is that typically?

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We're currently at the zero rate bound, so prices are a little distorted, but currently: A 30-year fixed rate is about 4.25%, 15-year is 3.36%. A standard ARM (adjustable every year) is running about 2.8%. Remember that rates have been compressed because of the lower rate bound; normally the spread is larger. (Also, this is just one example of a loan value and geographical location... there can easily be a shift of more than 50 basis points as you shift those).

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How long has that been the 'standard'?

Over here it's varied quite a bit over the years. I hear many horror stories of difficulties with mortgages in the late 70s and early 80s, when rates were around the 14% mark, peaking at 17% in '79. I hate to think how much my mortgage costs would be with those kinds of rates.

UK standard mortgage length is a 25 year term, though longer is possible with most lenders. Fixed rates are typically 2,3 or 5 year terms, though 10 years is provided by some lenders. At the end of the fixed term, most buyers will then take up a new fixed term, shop around for better fixed rates at other lenders, or move to trackers.

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30-year fixed mortgages have been around since at least 1971 (that's when Freddie Mac data starts), probably longer. Rates used to be pretty high - they started in the 7-8% range - but they've in general moderated in recent decades. You certainly can get 'fixed' mortgages like in the UK - but in the US they're called adjustable rate since it's only fixed for a small portion of the loan.

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Originally Posted by Timbuk2

30 year fixed! :eek:

How much higher than the base rate is that typically?

How long has that been the 'standard'?

Over here it's varied quite a bit over the years. I hear many horror stories of difficulties with mortgages in the late 70s and early 80s, when rates were around the 14% mark, peaking at 17% in '79. I hate to think how much my mortgage costs would be with those kinds of rates.

UK standard mortgage length is a 25 year term, though longer is possible with most lenders. Fixed rates are typically 2,3 or 5 year terms, though 10 years is provided by some lenders. At the end of the fixed term, most buyers will then take up a new fixed term, shop around for better fixed rates at other lenders, or move to trackers.

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What Wiggin said. After some refinancing post-2008, I'm at around 3.75% for a 30 year fixed. Home loans here have basically no penalties for early refinance or prepayment.

It sorta sounds like it's hard to ever get out from the debt if you're always taking up new fixed terms, is that kinda how it goes?

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Originally Posted by Hazir

I suppose every mortgage market is 'unique', the Dutch system though knows the exact same government subsidies on housing for as long as I care to remember. The 30 year mortgage is so much a standard that even legislation is taking it into consideration; rates are usually fixed for 1, 5 or 10 years.

The main differences I see between the US and The Netherlands is that overhere not fulfilling your obligations on a home-loan leads to personal bankrupcy if the sale of the property is at a price that doesn't cover the debt. We have no such thing as handing over the deed and walk away. Which probably explains that even though there are enough people under water with their mortgages, the risk of them defaulting on their mortgage is significantly lower than anywhere else.

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Actually, was I reading correctly about the Dutch government considering a scheme to mimick the Fannie and Freddie home loan subsidies we have in the US? That's a good point about the differences in bankruptcy law. Though I think it's sorta hard to turn bankruptcy into a productive "cleansing" process if something huge like a home is basically impossible to discharge under bankruptcy.

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Originally Posted by wiggin

We're currently at the zero rate bound, so prices are a little distorted, but currently: A 30-year fixed rate is about 4.25%, 15-year is 3.36%. A standard ARM (adjustable every year) is running about 2.8%. Remember that rates have been compressed because of the lower rate bound; normally the spread is larger. (Also, this is just one example of a loan value and geographical location... there can easily be a shift of more than 50 basis points as you shift those).


30-year fixed mortgages have been around since at least 1971 (that's when Freddie Mac data starts), probably longer. Rates used to be pretty high - they started in the 7-8% range - but they've in general moderated in recent decades. You certainly can get 'fixed' mortgages like in the UK - but in the US they're called adjustable rate since it's only fixed for a small portion of the loan.

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Historical Reminder: mortgage interest rates in the 80's exceeded 10%, often hovering around 18-20%. It was a hard time to be a home-owner with a new mortgage, and partly why Volcker policies (during the Reagan administration) turned things around.

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Originally Posted by Dreadnaught

Actually, was I reading correctly about the Dutch government considering a scheme to mimick the Fannie and Freddie home loan subsidies we have in the US? That's a good point about the differences in bankruptcy law. Though I think it's sorta hard to turn bankruptcy into a productive "cleansing" process if something huge like a home is basically impossible to discharge under bankruptcy.

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There are some tentative talks yes, but it's not very likely those talks will lead to concrete results.

Once you are bankrupt and your assets are liquidated you an apply for a rehabilitation program, which basically puts your financial affairs in the hands of a curator who essentially gives you pocket money from your own income, but who also has the right to impose debt resolutions on your creditors. After 3 to 5 years you can be cleared of any remaining debt. This system is relatively new, and a huge improvement on the old bankrupcy legislation which merely was punitive and had no elements that enabled people a new start. The old system was definately medievel.

That's interesting. I was reading about it a bit more here: http://ec.europa.eu/civiljustice/ban...tcy_net_en.htm

I assume the curator is appointed/employed by the state? Or is it some kind of fee from the debtor?

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Originally Posted by Hazir

There are some tentative talks yes, but it's not very likely those talks will lead to concrete results.

Once you are bankrupt and your assets are liquidated you an apply for a rehabilitation program, which basically puts your financial affairs in the hands of a curator who essentially gives you pocket money from your own income, but who also has the right to impose debt resolutions on your creditors. After 3 to 5 years you can be cleared of any remaining debt. This system is relatively new, and a huge improvement on the old bankrupcy legislation which merely was punitive and had no elements that enabled people a new start. The old system was definately medievel.

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3 to 5 years to wrap up bankruptcy proceedings? And that's better than the status quo? And people wonder why Europe has such low levels of entrepreneurship.

I don't think you should just be able to determine that your liabilities > assets and preset a 1-day reset button. I think for many things entrepreneurial here it's standard to take 7 years for bankruptcy to be completely cleared.

1 day? Certainly not. But rapid resolution of personal bankruptcies (and debt discharge that is largely unconditional) is central to encouraging risk-taking and entrepreneurship. It also encourages lenders to do a lot of due diligence and risk analysis, which increases overall credit quality.

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Originally Posted by RandBlade

I don't think you should just be able to determine that your liabilities > assets and preset a 1-day reset button. I think for many things entrepreneurial here it's standard to take 7 years for bankruptcy to be completely cleared.

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I may be mistaken, but I believe you two are discussing different things.

Bankruptcies in America will sit on your credit for 7-10 years from the date of filing. They will hang over your head, but they don't absolutely destroy your credit worthiness.

That doesn't mean it takes anywhere near that long to go through the stages of bankruptcy, from the papers being filed to the debts being discharged.

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Originally Posted by wiggin

1 day? Certainly not. But rapid resolution of personal bankruptcies (and debt discharge that is largely unconditional) is central to encouraging risk-taking and entrepreneurship. It also encourages lenders to do a lot of due diligence and risk analysis, which increases overall credit quality.

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Those bankrupcy rules were developed by the same people who created the first limited liability company EVER in the history of this planet, then went to turn it in the biggest enterprise under the sun for a long time (with a turnover that outshone the budget of several big powers). So I have no idea why you would say something stupid like that. It's not like you guys invented capitalism or enterprise.

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Originally Posted by Ominous Gamer

I may be mistaken, but I believe you two are discussing different things.

Bankruptcies in America will sit on your credit for 7-10 years from the date of filing. They will hang over your head, but they don't absolutely destroy your credit worthiness.

That doesn't mean it takes anywhere near that long to go through the stages of bankruptcy, from the papers being filed to the debts being discharged.

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I don't know about the UK, but overhere the actual debt exists untill the final resolution; if you'd happen to come into funds you didn't have beforehand you could still be made to pay up full.

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Originally Posted by Dreadnaught

That's interesting. I was reading about it a bit more here: http://ec.europa.eu/civiljustice/ban...tcy_net_en.htm

I assume the curator is appointed/employed by the state? Or is it some kind of fee from the debtor?

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They are court appointed.

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Originally Posted by Hazir

Those bankrupcy rules were developed by the same people who created the first limited liability company EVER in the history of this planet, then went to turn it in the biggest enterprise under the sun for a long time (with a turnover that outshone the budget of several big powers). So I have no idea why you would say something stupid like that. It's not like you guys invented capitalism or enterprise.

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And you don't think entrepreneurship or economic theory has advanced at all in the intervening centuries? It certainly didn't used to be the province of individuals of average means, and proceeded at a glacial pace compared to today.

Let's ask Donald Trump, the Billionaire that Bankruptcy built. :bored:

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Originally Posted by wiggin

And you don't think entrepreneurship or economic theory has advanced at all in the intervening centuries? It certainly didn't used to be the province of individuals of average means, and proceeded at a glacial pace compared to today.

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The point is that the one obviously has got nothing to do with the other.