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Margin calls are the primary difference. (InteractiveBrokers and Robinhood have pretty good margin rates: <=3.05% and ~5% respectively) Being forced to sell at
by jdashg 7y ago
Margin calls are the primary difference. (InteractiveBrokers and Robinhood have pretty good margin rates: <=3.05% and ~5% respectively)
Being forced to sell at during a temporary low is the major threat, whereas most people who kept their house during 2008-2009 are doing fine today.
- refurb 7y agoThat's true for the US market, but what I learned is a "margin call" is a potential scenario in Canada. Unlike the US, mortgages typically have 5 year terms (can range from 1 to 10). The amortization period is still 25 years (on average), but you refinance every 5 years. If you put 20% down on a house, which then loses 10% of it's value, you can't refinance without coughing up enough cash to have the loan be 80% of the appraisal. As you said, at least in the US you can choose to ride out a crash if you have a 30 year fixed mortgage.
- astura 7y agoDuring the housing crisis in the US a lot of mortgages were ARMs, which are basically the same thing as your describing. https://www.cbsnews.com/news/adjustable-rate-mortgages-make-a-comeback/ https://www.cbsnews.com/news/adjustable-rate-mortgages-make-...