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Another potential consequence is that if the price of your house falls more than the down payment you invested, you may be incentivized to simply walk away. Th
by nugget 6y ago
Another potential consequence is that if the price of your house falls more than the down payment you invested, you may be incentivized to simply walk away.
The price could fall for any number of reasons: a market crash and country-wide depression widely impacting many people, or an individual owner who simply did no maintenance/upkeep over a period of years and the property is in disrepair. The disrepair scenario is common among elderly homeowners in the US.
- CogitoCogito 6y agoCan Danes just walk away from their loans simply returning the home? I believe that's true in the US, but I don't think that's universal.
- lotsofpulp 6y agoEven in the US, only 12 states are “non recourse”. https://www.financialsamurai.com/non-recourse-states-walk-away-from-mortgage/ https://www.financialsamurai.com/non-recourse-states-walk-aw...
- danhak 6y agoIt's not true in all of the US (recourse vs. non-recourse). In all but 12 states, a lender can come after your other assets if the value of your collateral does not satisfy your debt.
- gamblor956 6y agohttps://www.forbes.com/advisor/loans/recourse-loans-vs-non-recourse-loans/ https://www.forbes.com/advisor/loans/recourse-loans-vs-non-r... Home mortages are recourse loans in all but 12 states (Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah and Washington).
- CogitoCogito 6y agoThank you to you and the others responding for the clarification. I guess I just took my California experience and incorrectly assumed it was similar in the rest of the US.
- anonAndOn 6y agoThis had a profound effect on house prices in Arizona back in 2009-2010. The Phoenix market, in particular, was flooded with borrowers who walked away when they had negative equity.
- joakleaf 6y agoNo. You have to pay the loan back. You cannot just walk away. I know several people in Denmark that were “stuck” with the house they were in after the price drops from the 2008 crisis until prices rose above the mortgages again. You can probably make a deal with the bank somehow at higher interests, but they’ll want there money back. You can also declare bankruptcy, but that is not simple and not without long term consequences I think.
- chenster 6y agoBankruptcy has a 7 years bad credit sentence in US. You are good as new after that. Not sure that's the case with other countries.
- distances 6y agoMany countries don't have the concept of private bankruptcies at all. You may effectively be on the hook for the rest of your life if you really messed up. Don't know about Denmark though.
- nelgaard 6y agoIn Denmark you cannot just declare personal bankruptcy. You can ask a court to declare you bankrupt, but there are many requirements and rules. And the court may reject your application.
- marvin 6y agoIn Norway, personal bankruptcy requires an application to the debt enforcement office (a local government authority). If the application is accepted, the debtor gives up all their assets and submits to paying all of their earnings towards their debt, for five years. A politically determined subsistence sum is all they get to keep for themselves. After five years, the agreement ends and the debt is cleared. Each person can only apply once in their life. Any future runaway debts cannot be cleared without the consent of each creditor, which probably won't happen. Unsure how this is done in the rest of Scandinavia.
- usrusr 6y agoDisappearance of those "0%" things would already be enough for prices to collapse once they have sufficiently adapted to the 0% situation. I guess the winner is, unsurprisingly, whoever owned the land before.