Loan Options in Other Countries

In the United States a 30 year fixed rate mortgage is very common, but it is not in the rest of the world.

Canada, Germany and the Netherlands: In these countries, rollover mortgages are popular. A rollover loan essentially requires the borrower to renew the mortgage at market interest rates at regular intervals, such as every five or 10 years. You can also refinance using another lender, but prepayment penalties are the rule, at least during the fixed-rate period. Throughout Europe, adjustable-rate loans are popular because their interest rates are considerably lower than fixed-rate loans. Also, hybrid mortgages play a larger role.

Many Dutch mortgages also are interest-only, which means you only pay interest for the life of the loan, which leaves the balance unchanged and ownership in the lender’s hands. If never actually gaining an ownership share of your home sounds crazy, consider that these products are popular because tax benefits encourage them.

Spain: Spanish mortgages often are part fixed-rate and part variable-rate. You can take out two notes secured by one property. Unlike our first and second mortgages, these are two pieces of a first mortgage. One is at an adjustable rate and one a fixed rate.

Japan: About half of Japanese mortgages are “convertible”: After a fixed period, the borrower chooses between an adjustable interest rate and another fixed-rate period.
Click here for the full article by Marilyn Lewis of MSN Real Estate

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