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Comment by hn_throwaway_99 | Hacker News Reader

Lots of other good comments on this thread, but the Bloomberg title almost makes me want to join the r/antiwork crowd.

The housing market is simply insane right now. How is someone with a 3% mortgage going to be willing to move if it means their monthly payment will double for about the same amount of house? This is a complete logical, rational decision. But the framing in the title "Americans have never been so unwilling ..." plays right into the "nobody wants to work anymore" BS. The current economic conditions have just made it extremely stupid to relocate for a job in most situations.

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This was the tradeoff when you bought your house in 2021. Highest prices ever, lowest interest rates ever. Buy and you're locked-in for at least 5 years.

Or bought a long time ago but kept re-financing the mortgage over and over.

You have to be a moron to move right now unless you have to. Even a sideways move to an equivalent value house might be $50k of extra interest per year out the door. $50k you're putting into high yield investments right now. Finishing the mortgage in < 10 years versus starting over with a new 30 year mortgage at double the interest rate. Working 5 or 10 extra years before retiring just so you can move into that new house that you bought when prices were historically high.

Realtors are freaking out locally. Their game has changed drastically.

Bought and refi'd on the way down is what many people did. I was paying extra but at 2%, what's the point and why would I ever move unless I had to?

2014 - 5%/30y

2015 - 3.75%/30y

2016 - 2.75%/15y

2021 - 2%/10y

> You have to be a moron to move right now unless you have to.

Not necessarily. The current state of high rates and high valuations (due to few sellers) is very unusual. It is so skewed that, for example, I could sell my condo and use proceeds to pay off my remaining mortgage and buy, for cash, a large house in excellent condition in a smaller town. Someone close to retirement might do that and retire today instead of working another 5-10 years. My 2c.

Houses are still pretty expensive, even with interest rates where they are.

the market is still hot enough here to cover my 2021 price. but all the other hassles noted would make a move to anywhere but my dream regions for greater pay a no go.

Wouldn't it be nice if mortgages could be tied to the borrower instead of the property? Imagine that as a borrower, you could keep your existing mortgage terms when moving to new houses (assuming similar property values, etc.) and if you needed to buy a more expensive home then you'd have to get an additional loan to cover the difference or pay cash, etc.

Lol this would make home price inflation even worse. Great if you have a mortgage, terrible for FTHB. Kinda like Prop 13 in California.

This can 'sort of' be done thru loan assumption. But it is a provision that only some loans have. And it isn't tied to the borrower but to the asset. Example would be you were selling your house and a buyer wanted to 'assume' your mortgage. They could actually do that where they take over the remaining principal, a loan assumption provision would allow that. Granted, the buyer would still need to come up with the cash for the rest of the price of the home (selling price - remaining loan balance) and to do that, the buyer would either need to bring cash to the table or get a 2nd loan to make up for that difference.

I was told that my Canadian mortgage could be 'ported' like this, although I haven't had to look into it. From my experience Canadian mortgages have less fees up front at closing compared to US mortgages but typically they sway you towards a locked 3 to 5 year term where you might face penalties for breaking the mortgage. The 'port' options can be used in this situation to avoid the fees.

Aren't long term fixed interest mortgages basically unheard of in Canada though? Having portability with your mortgage would only really benefit people with fixed interest rates lower than the prevailing interest rate.

Yes, but when you're signing a mortgage with potential prepayment penalties and you're afraid that you might not live there for say 5 years, your lender will use the 'port' option to reassure you. I suspect that's the main feature. Not to lock-in a 30-year rate and have it follow you.

You can do this in UK, it's called Porting a mortgage.

Typical interest rate fixes are much shorter in the UK though (2, 5, 3, 10 year fixes are the most common)

Our approach sounds much more sane than the US. Who wants to fix at todays rate for 30 years with no ability to the port the terms to a new property?

Maybe I'm misunderstanding, but I don't really see the problem with the US system.

I can opt into a fixed 30 year mortgage, which I can exit at basically any point through a refinance or sale event.

I can't port my terms, but my rate is also fixed for up to 30 years unless I exit the arrangement. That's a safer deal for me than having 5 years of fixed interest and then being completely at the mercy of market rates.

At least for me - I'm fixed at 2.25% on a 20 year mortgage. Which was only possible because I exited a mortgage through a refinance to bring my rate from 4.4% to 2.25%. Right now if I refinanced, my rate would be much higher - so I will defer borrowing lots of money again.

Basically - The US system only feels weird when we experience particularly strong movement in interest rates. If the rate stabilizes at 7%, no one is going to bat an eye at getting a loan at 7%. It's only during this window where 18 months ago I could get 2.25% and now it's 7% that feels off. And even now - it's not off, there are just lots of folks in a position where their current mortgage is now a steal, and selling sucks since they lose the benefits.

There's no prepay penalty in the US. I got a fixed rate at 5% on my current house and currently pay 3% due to having taken out new loans to pay off the old one (a.k.a refinancing).

A 30 year rate fix with no prepay penalty is incredibly borrower friendly because you can (nearly) always take advantage of lower interest rates, but don't have to worry about your rate ever going up.

Is it illegal to have prepay penalty, or not done out of tradition?

I honestly don't know. The way many restrictions work in the US though is that legally is on a state-by-state basis, but the main driver is whether or not Fannie Mae (and similar federal entities) will underwrite the loan. That's where the 30 year maximum term, and 80% loan-to-value limits come from

American mortgages are also designed to pay out disproportionately more interest up front, and much of the cost of the loan is also paid directly at closing as up front fees.

Ex: closing costs for new mortgage in my area average around 5k.

Except that fixed term mortgages have the option to prepay - so people in the US signing 30yr fixed mortgages are locking in a fixed ceiling for the duration of their mortgage, and if mortgage rates come down in a couple of years, they just refinance the whole thing, but they pay a spread over an ARM for this option. For some people it’s more prudent to pay a few hundred extra basis points over the next several years, than risk their mortgage resetting at a higher rate, and having the option of refinancing at a lower rate…they’re purchasing insurance…

Nah, it's better in the US. 30 year fixed being the norm means that you don't need to worry about rate hikes. The advantage of shorter fixed rate periods are usually lower rates, but 30 years are already low. The peace of mind is valuable.

Those 30 year mortgages also makes the economy less sensitive to interest rate raises, allowing you to run a higher interest rate than a comparable country where 30-year mortgages is not the norm. This makes the dollar stronger.

You could accomplish this in a roundabout way outside the mortgage system:

-You rent out your home and retain and continue to service your low interest rate mortgage.

-You relocate to new city and rent from someone else with a low interest rate mortgage (and thus, presumably, attractive rental terms).

I predict this will become an increasingly common solution (for the subset of homeowners who need to/want to relocate) and that some sort of new middleman/platform will emerge to serve this market (think longer term residential leases, better vetting of renters, etc)

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