Ask MetaFilter questions tagged with loans and mortgages

What are the effects of high inflation and high interest rates on an economy?

thewalrus — Sat, 04 Apr 2009 01:12:56 -0800

Economicsfilter: How do mortgages work in developing countries with high rates of inflation and high interest rates? For example, Pakistan has a 20% inflation rate and the average fixed term prime residential mortgage for people with good credit is priced at 17%. What are the effects of this on a market? Can anyone point me to economics texts or real world examples of the results of the following:

USD:PKR exchange has gone from 1:60 to 1:81 in less than one year.
Inflation rate steady at 18 to 22% per year.
Minimum mortgage costs for residential consumers in the range of 16.5%+

The Pakistan central bank sets a rate which results in a KIBOR (Karachi Interbank Offered Rate) of approximately 15%. The various big name banks in Pakistan mark this up a couple of percent and sell residential mortgages on 10, 15 or 20 year amortization terms for around 16.5 to 18.0%. These are not "sub prime" type rates but are for people who can put 20-25% down, with good credit scores and job references, the Pakistani equivalent of a non-jumbo Prime mortgage.

This obviously makes the purchase of an average 3-bedroom flat quite a bit more expensive than in the US or Canada, where mortgages for anything would be under 8%.

How did this work in Argentina when the currency dropped drastically against the US dollar? I know of people who got into the Argentine market at exactly the right time with a USD exchange (or Euros, or GBP, or whatever) and were able to buy up property at amazing prices. Were interest rates similarly high in Argentina during the same period?

Does a high inflation rate somewhat offset the effect of having a mortgage with a 17% fixed interest rate? If the mortgage contract is fixed at a certain payment, but the inflation continues, a theoretical Rs125,000 monthly payment will continue to get less expensive as time goes on...

Can you have two mortgages on the same apartment?

mjao — Sat, 20 Sep 2008 20:14:20 -0800

Can I go halves in an apartment with my brother? i.e., can we each have separate loans for the same apartment? No one I've asked seems to know. We are in Queensland, Australia. He would be paying his share off a lot more quickly than I would be able to pay my share. The plan then is that he would continue living in the apartment with me (or rent out his room) and buy a second house elsewhere.

I know this probably seems like a really simple question, but I know absolutely nothing about home loans :)

I just want somewhere to live, honestly.

Jimbob — Mon, 03 Mar 2008 23:15:26 -0800

Am I about to get screwed over in regards to the house I'm buying, that's currently being renovated? The story:
Moving to a new city (Hobart, Australia) for a job in about 7 weeks.
We went there in January to look at houses, found one that was far superior to others, but that was currently having some minor renovations done; new carpets, some rendering on the external walls. We made an offer subject to finance being approved.
Applied for a loan through a mortgage broker. Mortgage broker was incompetent, loan was denied.
Applied for a loan through someone else, loan got conditional approval.
Mortgage lenders sent a valuer to the house, discovered that the renovations to be complete were not clearly stated in the contract, and they couldn't loan me the amount I was asking for the property.
My solicitor gets an extension to the date for finance approval, obtains an undertaking that the renovations will be complete.
Today arrives. The day finance is supposed to be approved by. Mortgage lender rings me and tells me the finance now won't be approved until the renovations have actually been completed to a satisfactory standard, "for my protection".
So, we're now past the close of business on the day that finance was supposed to be approved by, and my vendors are going to be told that they have to have the renovations complete before my loan is approved. Except they haven't been told that yet, because everyone seems to be missing everyone else's phone calls.

Question: Am I about to be fucked over? It seems the risks in this situation lie completely with me. The vendors could pull out of the deal tomorrow. Or, the vendors could do the renovations, the bank could say they're not good enough and I don't get the house, but the vendors just go on and try to sell it to someone else.

I know this is probably a bit of a hazy question, with too many personal factors involved, but has anyone else had experience in situations like this? Are vendors likely to pull out of a deal because we keep asking for finance extensions? Or does the fact that we've been going about this for so long mean they're likely to stick with it? Is the bank leading me on? Does this sort of thing, demanding renovations are complete before approving the loan, happen often?

Tips for getting a mortgage with bad credit

dial-tone — Mon, 09 Apr 2007 09:32:08 -0800

The path to a house when you have bad credit... My wife and I are interested in purchasing a house within the next few years. She has a decent paying job, while mine isn't amazing, with a combined income of just under 60k. The trouble is that in the past I declared bankruptcy due to financial mistakes I made when I was in college (approx 5-years ago). To try to recover, I have taken out a few credit cards, and am in the process of paying them off.

With the credit cards, I haven't made a single late payment and always more than the minimal payment. I also pay my student loans and other debts on time. Our combined Credit Debt is equal to approx 12% of our yearly income. We also have more than 40k in students loans between the two of us, but I'm under the impression that student loans don't count horribly against you when going for a house.

My wife has better credit, though she may have made a reported misstep or two in college (five years for her as well). According to her last credit report, she only has one mark against her.

We're looking to buy a home eventually, with a long-term mortgage (15-30 years). To accomplish this, first we're paying off the credit cards, and then trying to save up the 10%-20% downpayment. We've found houses we'd love for 60k-100k.

We want to be in the best position possible when we start looking for a loan.

1) Should we cancel the credit cards as we pay them off which will apparently hurt our credit score in the short term, leaving only one with the highest available funds, or should we pay them all off and leave them open?

2) What other steps can we take to assure banks that we're the type of people they should lend money to?

3) How will we know when it would be worth trying for a mortgage (how much money saved up/bills paid off/etc.)?

Mortgage advice/opinion relevant to the UK?

squealy — Fri, 23 Apr 2004 06:17:30 -0800

Mortgage advice/opinion relevant to the UK? (More inside) I'm in the UK and the fixed rate period of my mortgage is due to run out in June. Now, I know little of economics and even less of financial planning, but it's fairly clear even from my limited knowledge that the 5.99% variable rate I'm due to move on to is not the best deal available. The mortgage is only for £40,000 and the house is now worth about £70,000, so there's no problem with equity. I don't intend to move house within the next five years. Anyone have any knowledge/opinions on what's the "best" type of mortgage or even a specific policy? I've seen a couple of financial advisers but they both had wildly differing advice. I'd be interested in a MeFi take on the issue as I'm a bit of a numpty when it comes to financial matters.