Monday, May 12, 2014

Mortgages Around the World - interesting facts!

What is a mortgage like in Spain? How about Japan?

Canadian Mortgage Trends takes a look at a few interesting facts about mortgages in other countries. We've added how Canadian mortgages are in blue, just for comparison's sake:

  • German lenders sell interest rate risk insurance. They also offer forward rate contracts so borrowers can lock in rates up to three years in advance. (In Canada, we don't have this type of insurance, nor do we have renewals typically three years in advance of a mortgage due date - more common is up to 4 months beforehand)
  • Japanese lenders allow fixed-payment variables that permit negative amortization (in Canada we prevent negative amortization with trigger rates).
  • U.S. mortgages typically don’t entail pre-payment penalties (but U.S. borrowers often pay “points” up front and notably higher closing costs than Canadians).
  • France and Spain have laws to limit pre-payment penalties. (We don't have laws to limit penalties)
  • Amortizations in Finland go up to 60 years, while in Switzerland and Japan they reach 100 years (“inter-generational mortgages”). (Canada, the max amortization is 30 years - the highest amortization we ever had many years ago at 40 am)
  • 79% of the Netherlands’ mortgages are interest-only (Canadians have access to home equity lines of credit with interest only payments {i.e., HELOCs}, but our mortgages are all PRINCIPAL + interest. This helps consumers pay off their mortgage faster)
  • Payment holidays (skipped payments) are a popular feature in Australia and the U.K. (Many banks now have "skip a payment" options here too)