03.05.2013 - How 30-year mortgages saved the housing market
In most of the world, homeownership isnít seen as a natural step in the progress toward responsible adulthood. Outside the U.S., mortgages are for small amounts, for shorter times, and have adjustable interest rates. The popular U.S. 30-year mortgage with a fixed rate, which makes possible low monthly payments and a more certain future, is an oddity. How did Americans develop such a peculiar financial practice? The New Deal. In many ways, the mortgages of the 1920s resembled the more exotic ones of today. Balloon loans with terms of just three to five years were common. Homeowners, like those of the 2000s, simply expected to be able to refinance. The money for these mortgages, in an eerie echo of today, came from debt that banks sold to investors, and the bond-repayment periods were equally short...............................................Full Article: Source
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