from this article.. http://finance.yahoo.com/family-hom...luYW1pYwRzbGsDdGhlaG91c2luZ2Zp?mod=loans-home I don't get it. How do you pay less than you owe just because rates went up?
What happens to a bond when yields go up? Each Danish mtge is an actual bond, with its own ISIN and its own mkt price. It's the oldest mtge mkt in the world and it's been working quite well for arnd 300 years now. The Danes have good cause to be proud of what they have.
It seems better than what we have here. It seems like a floating mortgage loan based on what home prices are selling for. It seems home prices fell by 20% so therefore the government will allow you now that you owe 10% less of a mortage loan. If only we could have that here.
The Danish system has very little to do with the government. The govt's role is relatively limited and is confined to providing support and regulation for the mtge institutes, which are the credit intermediaries. Everything that has to do with interest rates, prepayment, etc is handled by the mkt.
I see, its basically like owning a corporate bond. except the homeowner acts as the corporate borrower making payments based on the difference between coupon and market rates.
Up-to-date link http://finance.yahoo.com/family-home/article/109430/the-housing-finance-system-needs-a-redesign
Yep, kind of... As a borrower, you make payments that are based on the coupon. The other important aspect of the system is the way the mtge institutes (they're dedicated mtge banks) are structured and regulated. There's quite a bit of info on the web about the key tenets. Good question... Off the top of my head, I really can't think of any aspect where the Danish system could be considered inferior to what is practiced in the US.
Maybe, but, if I had to guess, I'd say it's because a tightly structured setup, such as the Danish system, precludes the use of the housing mkt to further a more comprehensive social agenda.