6 ms·

How the f can you have such a big mortgage, with a variable interest rate, and sleep at night ? I'm french, and everyone I know has a fixed interest rate. dont

by malka 3y ago

How the f can you have such a big mortgage, with a variable interest rate, and sleep at night ? I'm french, and everyone I know has a fixed interest rate. dont know if it is mandatory, but God, I am so glad that my interest rate will never spike.

mgaunard 3y ago
You pay more money for a fixed interest rate.
- nkozyra 3y ago
  (hopefully)
KptMarchewa 3y ago
In 5 years you should have large portion of principal paid off so this would not matter. Average 30 year mortgage is paid off in 11 years.
- helij 3y ago
  Really interesting. Is it because people sell the property and get a new mortgage for a new place or they outright pay it off after 11 years?
  - quickthrowman 3y ago
    It is the former, very few people are paying off their entire mortgage in 11 years.
- rsync 3y ago
  In recent decades Swiss and Nordic societies have dealt with rising home values with 50 year mortgages and interest only products that are barely recognizable to US home buyers. Many Swiss have fairly dangerous interest rate exposure (to the SNB) based on the assumption that it will continue selling francs to keep exchange rates more competitive, etc. That will be true … until it isn’t…
- quickthrowman 3y ago
  The average duration of a 30 year mortgage being 11 years is due to refinancing or moving, it’s not due to large amounts of borrowers paying their debts early.
- bhelkey 3y ago
  In a thirty years fixed mortgage, each payment includes a portion to paying down the principal and paying interest on the remaining principal. In the beginning of the mortgage, the principal is higher, thus the interest portion is higher. In the first five years of a thirty year mortgage, a very small percentage goes towards the principal. Assuming a thirty year fixed rate mortgage and a 7.5% interest rate, less than 15% of the mortgage payments in the first five years go to paying down the principal [1]. [1] https://www.bankrate.com/mortgages/amortization-calculator/ https://www.bankrate.com/mortgages/amortization-calculator/
touisteur 3y ago
A good number of French people somehow still remember (or talk with awe or anger about) the crazy early 80s, with the rampant inflation, the variable interest rates frenzy, combined with successive devaluations of the Franc Français and the moment the French government decided to follow the example of the Deutschmark and aim for what became the Euro... Yeah when I asked (in France) about variable rates to a credit guy recently he looked at me like I was an alien. They probably still exist, but the loan-happy people won't even try to sell them, to me at least.
lokar 3y ago
Cheap 30y fixed rate home loans are an American thing. The federal government subsidizes them.
- sofixa 3y ago
  You're literally responding to a person in France with a fixed rate home loan (not mortgage, the housing isn't direct collateral for the loan). 30y is a bit on the long side, "traditional" is 20-25 years though.
- dangwhy 3y ago
  > The federal government subsidizes them. Curious how does federal govt subsidize them?
  - dragonwriter 3y ago
    > Curious how does federal govt subsidize them? Through the VA Loan, FHA Federal Home Loan, and USDA Rural Loan programs.
    - dangwhy 3y ago
      These sounds like specialty programs ? > Cheap 30y fixed rate home loans are an American thing. The federal government subsidizes them. This statement sounded like 3oy fixed rate is possible only because of fed govt. meaning if its wasn't for fed govt subsidies 30yr fixed rate wouldn't have been possible.
      - dragonwriter 3y ago
        > These sounds like specialty programs ? FHA alone accounts for something like 1/5-1/4 of all home mortgages, varying slightly over time; and, its entire purpose was to shift the whole market (which it did).
  - nradov 3y ago
    In most cases it isn't a literal subsidy. Fannie Mae acts as a government-sponsored market maker to purchase home mortgages from lenders, then package and sell them to investors. By providing an "artificial" source of liquidity and taking on significant balance sheet risk they keep mortgage interest rates much lower than they would be in a free market system. https://www.fanniemae.com/about-us https://www.fanniemae.com/about-us

by malka 3y ago

mgaunard 3y ago

You pay more money for a fixed interest rate.

nkozyra 3y ago
(hopefully)

KptMarchewa 3y ago

In 5 years you should have large portion of principal paid off so this would not matter. Average 30 year mortgage is paid off in 11 years.

helij 3y ago
Really interesting. Is it because people sell the property and get a new mortgage for a new place or they outright pay it off after 11 years?
- quickthrowman 3y ago
  It is the former, very few people are paying off their entire mortgage in 11 years.
rsync 3y ago
In recent decades Swiss and Nordic societies have dealt with rising home values with 50 year mortgages and interest only products that are barely recognizable to US home buyers. Many Swiss have fairly dangerous interest rate exposure (to the SNB) based on the assumption that it will continue selling francs to keep exchange rates more competitive, etc. That will be true … until it isn’t…
quickthrowman 3y ago
The average duration of a 30 year mortgage being 11 years is due to refinancing or moving, it’s not due to large amounts of borrowers paying their debts early.
bhelkey 3y ago
In a thirty years fixed mortgage, each payment includes a portion to paying down the principal and paying interest on the remaining principal. In the beginning of the mortgage, the principal is higher, thus the interest portion is higher. In the first five years of a thirty year mortgage, a very small percentage goes towards the principal. Assuming a thirty year fixed rate mortgage and a 7.5% interest rate, less than 15% of the mortgage payments in the first five years go to paying down the principal [1]. [1] https://www.bankrate.com/mortgages/amortization-calculator/ https://www.bankrate.com/mortgages/amortization-calculator/

touisteur 3y ago

A good number of French people somehow still remember (or talk with awe or anger about) the crazy early 80s, with the rampant inflation, the variable interest rates frenzy, combined with successive devaluations of the Franc Français and the moment the French government decided to follow the example of the Deutschmark and aim for what became the Euro... Yeah when I asked (in France) about variable rates to a credit guy recently he looked at me like I was an alien. They probably still exist, but the loan-happy people won't even try to sell them, to me at least.

lokar 3y ago

Cheap 30y fixed rate home loans are an American thing. The federal government subsidizes them.

sofixa 3y ago
You're literally responding to a person in France with a fixed rate home loan (not mortgage, the housing isn't direct collateral for the loan). 30y is a bit on the long side, "traditional" is 20-25 years though.
dangwhy 3y ago
> The federal government subsidizes them. Curious how does federal govt subsidize them?
- dragonwriter 3y ago
  > Curious how does federal govt subsidize them? Through the VA Loan, FHA Federal Home Loan, and USDA Rural Loan programs.
  - dangwhy 3y ago
    These sounds like specialty programs ? > Cheap 30y fixed rate home loans are an American thing. The federal government subsidizes them. This statement sounded like 3oy fixed rate is possible only because of fed govt. meaning if its wasn't for fed govt subsidies 30yr fixed rate wouldn't have been possible.
    - dragonwriter 3y ago
      > These sounds like specialty programs ? FHA alone accounts for something like 1/5-1/4 of all home mortgages, varying slightly over time; and, its entire purpose was to shift the whole market (which it did).
- nradov 3y ago
  In most cases it isn't a literal subsidy. Fannie Mae acts as a government-sponsored market maker to purchase home mortgages from lenders, then package and sell them to investors. By providing an "artificial" source of liquidity and taking on significant balance sheet risk they keep mortgage interest rates much lower than they would be in a free market system. https://www.fanniemae.com/about-us https://www.fanniemae.com/about-us