If Only California Had Dutch-Style Mortgage Loans

Hats off to Amsterdam. It had legalized recreational cannabis long before California did. Maybe it is time for California to borrow another page from the Netherlands’ playbook. Like Amsterdam, California already has bike-friendly streets and a climate that welcomes tourists year-round, and we probably don’t need our own equivalent of Amsterdam’s red-light district. What we do need is affordable housing, and renting is beyond the budget of any California resident, let alone homeownership. Perhaps the Netherlands has a solution here, too. In the Netherlands, home mortgages are less risky for the borrower than they are here in the United States. The Dutch model of home mortgage lending is not widely available in the United States, and there are several obstacles to its widespread adoption here, but from a consumer’s perspective, it is certainly appealing. To find out more about getting your finances in order to qualify for a home mortgage or about getting out of trouble with an existing mortgage loan, contact an Oakland lawsuits, collections, and creditor harassment lawyer.

Behold the Incredible Shrinking Home Mortgages

This month, The Hill website is singing the praises of Dutch-style mortgage loans. According to its recently published article, when borrowers in the Netherlands take out a home mortgage loan and purchase a house, the bank does not promise them that the interest rate will remain the same throughout the lifetime of the loan, unlike fixed-rate mortgage loans, which are widely considered the most desirable type of mortgage loan in the U.S. Instead, in the Dutch system, the interest rate gets lower over time as the borrower continues paying down the principal of the mortgage.

The rationale behind a mortgage loan where the interest rate automatically gets lower over time is that, as the balance gets lower and the borrower builds a long history of making payments, the risk is lower for the lender. It is a similar phenomenon to borrowers increasing their credit score by keeping up with installment payments on debts and paying down the balance, thereby qualifying for lower rates. It stands to reason that American consumers would jump at the opportunity for such an affordable mortgage loan. 

Unfortunately, Dan Roccato, a professor at the University of San Diego, does not think that American homebuyers should get their hopes up about Dutch-style mortgages becoming widely available in the U.S. in the near future. Instead of mortgage interest rates that automatically get lower, the American market operates on the premise that homeowners will refinance when it makes economic sense to do so. Refinances make up approximately a third of all U.S. mortgages issued. In other words, lenders are unlikely to embrace mortgage loans that come with a built-in refinance when they can make so much money under the current refinance system.

Contact the Law Office of Melanie Tavare About Affordable Home Mortgages

A debt relief lawyer can help you assess your debt situation and make realistic plans about qualifying for a home mortgage. Contact the Law Office of Melanie Tavare in Oakland, California, or call (510)255-4646 for a free case evaluation.