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| Thread ID: 95800 | 2008-12-17 09:05:00 | Economics question | Ninjabear (2948) | PC World Chat |
| Post ID | Timestamp | Content | User | ||
| 730147 | 2008-12-17 21:16:00 | Yes. Buy house for $100 000 You have 20% deposit or $20 000 You get morgage for $80 000 Later you find your house is only worth $70 000 Issues arise and you cannot make your morgage payments or you want to move. Your house sells for $70 000 You still owe the bank $10 000 and are homeless. The figures and math you used are OK BUT you will find the poor people you mentioned did not start with 50% equity, it is likely the bank/broker had them morgaged up to 95%, only leaving them 5% equity to weather any storms. The key bit here is issues. If you don't have an issue you just keep paying your mortgage payments whats the problem. I am talking about NZ here. It doesn't matter if the house value drops down you signed a bit of paper so a gentleman sticks to his word and keeps paying. You shouldn't have issues anyway because you would have mortgage insurance wouldn't you? People are bailing out in yanky land because they don't like the idea of negative equity and there probably aren't many gentlemen there. A mans signature is his bond |
prefect (6291) | ||
| 730148 | 2008-12-17 21:49:00 | I thought part of the problem was that the initial mortgage payments were very low. After the first couple of years, the rates were being increased as high as triple? | the_bogan (9949) | ||
| 730149 | 2008-12-17 22:37:00 | I thought part of the problem was that the initial mortgage payments were very low. After the first couple of years, the rates were being increased as high as triple? Yup, that's right. Those mortgages are called ARM's: Adjustable Rate Mortgage. It means that the interest charged is determined by an index that takes into account economic and market factors. So some people might have been paying 1-2% interest and then suddenly it got raised to 7-8% and people simply could not afford it leading to more foreclosures and the cycle still carries on. The onion explains the crisis very well: www.theonion.com |
beeswax34 (63) | ||
| 730150 | 2008-12-17 22:39:00 | I thought part of the problem was that the initial mortgage payments were very low. After the first couple of years, the rates were being increased as high as triple? Yes, some "poor, stupidly advised" people with low equity locked in a morgage at a low rate, when this comes up for renewal they find they cannot get the same interest rate, therefor are unable to make the repayments. |
Rob99 (151) | ||
| 730151 | 2008-12-17 22:46:00 | Is this just a yank thing or is happening in NZ? I thought interest rates were dropping so it would be eassier to service loan. But we all know what thought thought |
prefect (6291) | ||
| 730152 | 2008-12-17 23:49:00 | unless the entire population in the states is stupid This. |
roddy_boy (4115) | ||
| 730153 | 2008-12-18 00:11:00 | It's no or very lo interest loans for banks not private individuals. The Banks are getting their money cheap and charging high interest rates, the greedy idiots. | zqwerty (97) | ||
| 730154 | 2008-12-18 00:28:00 | I seriously doubt the banks are getting their money "cheap". Where are they getting this money from? They are getting it from investors who want a fair return of the money they "lend" to (invest with) the banks. Banks generally operate on a 1-2 percent margin between the lending rate and the investment rate. | johcar (6283) | ||
| 730155 | 2008-12-18 04:09:00 | Property bubbles are not unique to the USA, we have experienced stellar growth in Real Estate prices here in Australia with housing affordability becoming a major concern, couple this with 90 - 95 % mortgages, increasing interest rates and the bubble is going to burst. Tightening credit due to major Bank problems with bad debts puts pressure on liquidity for businesses and consequently unemployment grows. The drastic reductions in interest rates unfortunately has come too late to save most of the victims of this downturn. Market re-adjustments is the euphemism for many families loosing everything they have. |
KenESmith (6287) | ||
| 730156 | 2008-12-18 04:12:00 | Talking about America. | zqwerty (97) | ||
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