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Elizabeth Feagin

Mortgage loans can lower the risk in the assets

How can mortgages lower risk and perhaps give you a profit and a tax advantage if interest rates rise? You can read about this in this blog.

Low interest rates increase your risk

Image result for mortgage loan riskInterest rates have been very low in recent years. Although the US National Bank has raised interest rates recently, interest rates are still record low in both the US and Europe. This gives professional investors trouble in generating returns by buying bonds. The risk-free interest rate is so low that there are no alternatives to investing in equities. This also applies to you as a private investor.

You currently have significantly higher risk when you invest in a portfolio of shares and bonds than you had 10 years ago. Part of this risk is due to interest rate sensitivity on bonds, ie. that rates on fixed-rate bonds fall when interest rates rise. There is currently a significant price risk on fixed-rate bonds.

 

Lower interest rate risk and save tax

We have become accustomed to this risk for many years, and it seems that many investors close their eyes to it. But you can actually do something about it and at the same time possibly get a tax advantage.

If you have real estate, you can mortgage it with mortgage loans. If you choose fixed interest rates on your mortgage loans, you can reschedule them if interest rates rise (and typically also when they fall). The longer the maturity you have on your loans, the more price sensitive they are, and you can take advantage of that. For the interest rate rises, the price of the underlying bonds decreases and thus your residual debt on the loan. It allows you to make a profit by redeeming the loan ahead of time.

In some cases, this profit will even be tax free. Overall, your loans can give you a tax advantage because you can withdraw any losses and expenses while the profits are tax-free.

Most important, however, is that you use your real estate to lower the overall risk in your assets. Consider which parts of your wealth will lose value if interest rates rise. It is probably quite a few parts of your wealth that increase in value if interest rates rise.

Use your options?

There are no roses without thorns. In this context, keep an eye on the costs. In addition, it is crucial that you place the proceeds from the loans you take in something else long bonds.

Also, be aware that you slightly shift your finances. However, under normal circumstances this will be an acceptable trade off in relation to a decrease in interest rate sensitivity on the total assets.

Has this opportunity been sufficient? If you have floating-rate mortgages, you should consider switching to fixed-rate loans to secure your assets.

 

Declaration on expensive mortgage loans

Expensive mortgage loans. Can expensive mortgage credit abroad justify price increases in Denmark? Can it pay to change a mortgage company?

This blog is based on last week’s blog Therefore you pay too much for your mortgage loan . Here I looked at the paradox that mortgage companies can raise prices, especially for floating-rate loans without losing customers.

The mortgage association’s reply was quick and hard in a comment on my blog and on the association’s website under the heading “Resolve claims on expensive mortgage”. Here, the Danish Mortgage Association tries to reject my points as unprovoked and unreasonable.

Mortgage rates in Denmark and abroad

Image result for loan hikeIt is worth noting that the Mortgage Credit Association completely avoids the consequences of price increases for their customers. According to the association, the customers obviously only have to accept price increases and praise themselves for the fact that prices are still lower than in other countries, such as Germany.

But it is a bad argument for raising prices and undermining a well-functioning Danish mortgage credit system that prices are higher in other countries. Mortgages are more expensive in Germany, because the German lending system is ineffective, and German mortgage loans are completely different to Danish mortgage loans.

If the Germans introduced a mortgage system similar to the Danish one, German homeowners would get significantly cheaper mortgages. It just doesn’t happen, because it’s not in the German banks’ interest, so they would make less money.

Since it does not make sense to compare mortgage-credit prices in Denmark and other countries, we may perhaps pay attention to the matter: the conditions on the Danish mortgage-credit market.

Mortgage loans on the banks’ terms

The mortgage-credit association’s response shows how mortgage-credit is thought to be at the executive board meetings in banks and mortgage-credit companies. After the banks have taken over the ownership, they have not wanted to continue the mortgage credit companies on the mortgage credit’s own terms.

Mortgage companies were former associations that handled lenders ‘and borrowers’ interests by providing cheap and secure loans. The banks now want the mortgage loan to generate profits and return on equity in the same way as the banking business. And since the banks determine the prices through their ownership, the recipe is ready, set the prices up! “Like in Germany,” it is tempting to add.

Evidence of lack of competition on mortgage loans

In last week’s blog, I argue that there is not enough competition in the mortgage market and that the prices are set by the providers more than the market. Mortgage rules and the resulting market transparency make it difficult for borrowers to change companies.

It is not surprisingly disagreed with the Mortgage Credit Association. However, when Nykredit can increase its market share in spite of significant price increases, this is a clear indication that competition is lacking. There can be many reasons for lack of competition. Let me mention 3 here because it is difficult to change the mortgage company.

The transparency goes to the whistle in the mortgage industry

Therefore, it is difficult to change the mortgage company

  1. Lack of confidence that the new company will not raise the price either
  2. It is too expensive to change the mortgage company
  3. It is next impossible to change the mortgage company if the mortgage is over 80%

In principle you should change company if there is money to make from it – even if the confidence in the market can be in a small place. After all, this is the only way customers can strengthen their competition.

There are only 4 ordinary mortgage companies in the market and 5 if you count Totalkredit, which is owned by Nykredit, with and omits DLR. It is obvious to few providers to create effective competition. As the situation is today, the mortgage market is fully functioning on the banks’ premises, and the mortgage system is quietly watered down completely!

New rules need to be made that make it easier to establish a mortgage credit company and which, in particular, makes it easier and cheaper to change the mortgage company. The Competition Authority should, therefore, in the review currently underway, recommend the Minister to change these parts of the mortgage credit legislation.

What does it cost to change a mortgage company?

Should you change your mortgage company now?

Of course, whether it is worth changing a mortgage company depends on your loans. For example, if you have loans with a fixed interest rate of 3-4%, it is worth considering.

The price increases for mortgage loans continue

Lack of competition on mortgage loans makes it easy to raise prices. New law on mortgage credit does not change this. Expect that the price increases for mortgage loans will continue.

Image result for loan hikeOver the past 5-6 years, mortgage companies have raised their prices significantly. For some types of loans, the price has increased by several hundred percent. At the same time, it has been impossible to change the mortgage company for many borrowers, because their loan-to-value ratio exceeds the legal limit. These people have actually been spelled to their company.

Need for increased competition on mortgage credit

Last year, the Minister for Growth set up an expert committee to come up with suggestions for greater transparency and mobility in the mortgage market. In September, the committee saw seven recommendations to make the market more efficient. So far so good…

Download Report from the Expert Committee on Transparency and Mobility in the Mortgage Market (pdf)

The recommendations have now become a draft bill following a political agreement in January 2017, and this is where the problems are manifested. For the bill that has now been submitted for consultation, it is unlikely that there will be any effect on competition in the mortgage market and the hard-hired homeowners. In the future, the companies will also be able to easily raise prices without customers being able to do anything about it, which will not change the new legislation.

New law does not go far enough

Now the bill has been sent in consultation with the following elements:

  • Restrictions on the redemption costs of the company that sets the prices
  • Limitations on why you have to make contributions, etc. up
  • Opportunities to change company even if the loan limit is exceeded
  • Extended notification period for price increases
  • Better transparency in market prices

As you can see, the proposal goes in the right direction, it just doesn’t go far enough to really do anything about the problems. For example, borrowers who terminate a loan must continue to pay redemption costs in accordance with the new rules.

It is totally unreasonable to incur the costs of borrowing from a mortgage company that raises prices. Preventing customers from moving when prices are raised is an effective way to limit free price competition.

Have mortgage rates peaked?

Vague formulations

Image result for loan hikeOn the whole, the bill is very vaguely formulated when it comes to limiting the causes of the price increases. For example, raising the warning period for price increases to 6 months does not have much effect when most companies have already done so voluntarily.

It is good enough that the proposal will create better market transparency by creating a new price portal. But if real transparency is to be created, the individual borrower must be able to decide which loan is right for her.

The transparency goes to the whistle in the mortgage industry

Spell binding of customers continues

The most serious error in the bill, however, applies to the possibilities of changing the mortgage company when the loan-to-value ratio is too high. Although the bill opens this possibility, it also requires the receiving company to accept the excess risk on the customer. Therefore, it is probably only the few who are attractive to banking or other businesses that get this opportunity.

It should be the company that sets the price up on the part of the loan that exceeds the loan limit if a borrower chooses to switch in connection with a price increase. This will make mortgage credit companies think before raising mortgage rates and fees.

What does it cost to change a mortgage company?

Mortgage price increases continue

Unfortunately, it is far too clear that the finance lobby has succeeded in diluting the bill. It does not contain the necessary changes needed to create mobility and competition in the mortgage market. It’s strange when the politicians are so eager to promise homeowners security. Instead, you have to expect the price increases for mortgage loans to continue.

 

 

Save money in January and avoid loans

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Is your finances all the way? Read here how to get through January without a loan!

It is typical in January that all major bills have to be paid, such as electricity and insurance. It can therefore also be difficult to get the money out of January, and it may be tempting to take a loan to pay the bills. However, it is possible to come through January without a loan – we will guide you to how!

Image result for avoid loan

Buy items on sale only

You do not have to cut down on your consumption to survive January without a loan. In the first month of the year there are sales in virtually all stores. Take advantage of this and buy only items that are on sale. Really many things are set at half price and therefore there can be a lot of money to save.

If you have Christmas presents to be exchanged, it’s also a good idea to wait until January to do it. It is true that if you trade a product that has been offered afterwards you have the right to get the difference paid or to buy new items for the amount your Christmas cost when purchased at the store.

Clean up and sell out

We are still riding a recycle wave, where it is considered smart to buy used. Therefore, there is also a large market for the sale of used items. Clear in your wardrobe and your nipsting – for what does not matter to you anymore, you can easily make a lot of pleasure with someone else.

You can sell your stuff on websites like dba.dk and trendsales.dk or through social media such as Instagram and Facebook. It is also an option to rent a stand on a flea market and sell out of your stuff there. You can check current flea markets at marketskalenderen.dk.

Go to the restaurant and in the cinema … at home!

Image result for avoid loanEven though January is a month when the money is small for a lot of people, it does not have to be a boring month without experiences. It’s expensive to go to the restaurant and in the cinema, but why not do it at home instead of out? It’s much more intimate and it costs a lot less money!

Plan a delicious dinner where you cook a bit of cooking and table cover. Try a new recipe, serve the food in dishes and bowls and cover up nicely with napkins and candles – it almost feels like being at the restaurant.

You can also arrange a home movie with movies, candy and enjoyment. Find a good movie on Netflix, HBO or an entire third streaming service. Mix sweets in the nearest candy store or supermarket and find duvets and pillows. You will find that it is actually as cozy as it is to go to the cinema!

Good opportunities for mortgages and other loans

As a customer at Bank, you can achieve a wide range of benefits and good opportunities for mortgages and other loans.

Image result for loan opportunityIf you sign up for Bank360, Bank360 +, or Bank360 premium, you can get even more benefits.

With the Bank360 benefit package you can get extremely beneficial interest on your loans. For example, create a mortgage loan with an interest rate down to 4.25% if you can set 80% of the value of the property in security.

To become Bank360 customer, you must meet three criteria. You must have a bank account or bank account of $ 100,000 or more in Bank; You must use 3 or more of Bank’s products (such as savings, pensions, investments, insurance or anything else); and then you must have your payroll account with an affiliate bank at Bank. When you meet these criteria, you can become a customer within the Bank360 category and thus achieve a wide range of good benefits and low interest rates.

With the Bank360 you get many benefits

Image result for loan opportunityAt Bank, there are also additional benefit plans that can give you some of the market’s very best interest rates. Where Bank360 only gives you extremely advantageous offers, the Bank360 + and Bank360 Premium can give you even better and the very best offers and loan options.

If you want to know more about Bank and the benefits that you can achieve, you can always, quite unobtrusively, arrange a meeting with a banknote advisor and learn how to achieve the great benefits of Bank360, and how you might be upgraded to Bank360 + or Bank360 Premium. Here you will be discussing your finances and how to make the most of your options. If you choose to become a regular customer at Bank, you will even be awarded a personal adviser, who can always provide you with qualified advice on your finances.

How to do an account at Bank combines good personal advice with some of the market’s best prices and offers.

Why popular online loans

Image result for different types of loans

The development of the Internet has allowed to accelerate many processes. Few people will ever remember how to transfer money to a certain bank at a specific address, losing half the day, or 5-6 hours to wait for their long-distance call. More and more procedures go to the network, and in the modern world, those companies whose Internet service is more convenient for the user will benefit. A wonderful example, for example, is an online loan , which made a loan of money as simple as possible.

What are the different types of loans online from traditional loans

Despite the fact that banks also issue loans, this procedure is more closely associated with microfinance organizations. Express loans appeared in Ukraine 4-5 years ago, and in the first years of obtaining loans in the IFIs it was possible only in the office, signing a contract with the company’s managers. Now, some MFIs do not even open branches, but work only on the network. Although companies that have their own branches are more trustworthy, they can not only remit money to a card, but also cash out, as in Cash.

Credits on the Internet quickly gained popularity because of obvious advantages:

  • An application for a loan can be left without leaving home, on the company’s website. The client can log in independently, create an account and receive money on the card – for this purpose only the Internet and any device with connection to the network are necessary.
  • For re-loans on the Internet enough smartphone – you just have to go to your personal office and apply.
  • Making a loan online takes 20-30 minutes if you need to fill out a questionnaire, and 5 minutes for regular customers.
  • Applications for online loans check the robot. He studies customer data and calculates his ability to return the debt by algorithm. This eliminates the human factor, and the percentage of failures tends to zero.

Image result for popular loansSince filing a credit request online can be done even in the middle of the night, this kind of loan often outsources people who urgently needed money at extra time. Online services work on weekends and holidays, credit will be given on the card at 2 o’clock on the night of January 1. With the help of a smartphone, you can take an online loan, just by walking through the street or in a cafe, finding that there is not enough money.

To get an online loan in Cash you do not need any help, a good credit history, a pledge or insurance. Only the original passport and IDN code is enough.