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I thought it may be interesting to share some information on how other countires handle their mortgage markets. Interestingly enough, most countries require much larger down payments to buy a home. Here are a couple of countries I found some information on. In Japan a buyer needs 10% down, in India a buyer needs to put 15% down, in most Asian countries including China that amount grows to 30% down payment, and lastly in Vietnam a buyer needs to put a whopping 40-50% down payment.
Here in the U.S. we still do not even have a down payment requirement in some circumstances. If you are a veteran you can apply for a VA loan which requires no down payment. You also can qualify for no down loan if you decide to live in less densely populated area through a USDA loan providing you meet the income restrictions those loans have in place. If you do not qualify for no down payment you can still get into a house with as little as 3.5% down payment through an FHA loan or 5% with a conventional loan. When you start comparing our down payment requirements in the U.S. with other countries you can really see the benefit of living in the “Good Ole USA”.
After looking more in depth into mortgage markets around the world, I also found that most countries have different kinds of mortgage terms then we do in the States. It seems as if it is more common for homeowners to opt for adjustable rate mortgage (ARM) loans instead of fixed loans in other countries. For example, in Canada and Britian prospective home-buyer’s cannot even get a fixed rate mortgage and instead have to settle for an ARM loan. If an individual does get a fixed rate loan they typically have to set up a meeting every 2,3, or 5, years with their bank to resign and extend their loan. The bank has much less risk with these shorter length terms because it is possible they would not renegotiate your loan especially in the unfortunate circumstance of an unexpected job loss etc. We do have loan terms like these in the U.S. and they are called “Balloon’s”. They are definitely not very popular. For good reason…
Lastly, rates in other countries also vary greatly. In Japan it is possible to get a short term adjustable rate mortgage at an unbelievably rate of .11%. On the other hand, you can also expect an interest rate of 9.5% in Vietnam. If you remember, Vietnam also had the 40-50% down payment requirement…OUCH. Here are some other rates from around the world- Canada 3.5-6.75%, Germany 3.5-4.5%, and finally Australia 7.1-7.9%. Our interest rates here compare favorably or are better then what you can find around the world.