4 Countries Where Homeownership Is Way Different Than America
People living in the U.S., overall, are pretty comfortable with taking on debt. Northwestern Mutual estimates the average American carried $38,000 in personal debt in 2018—and that doesn’t include mortgages. Yes, Millennials are rallying against student loans, but think about it: Many of those arguments are framed around how, in an economy where housing costs rise faster than wages, student loan payments keep Millennials from saving up enough for a down payment on a home.
So much of our lives revolve around debt. In fact, the reason our mortgages usually come with 30-year terms is that, if we buy our homes in our 30s, we’ll have them paid off by the time we retire. I’ve definitely just accepted that this is what it takes to achieve the “American Dream,” even taking on my own debts to become a homeowner. However, on a trip to Sri Lanka last spring, I heard a new perspective on home financing:
On the first day of a 12-day trip, we were taken on a tuk-tuk tour through a village outside of Colombo, Sri Lanka’s capital. Unlike most tours I’ve been on as a travel writer, this one was far more intimate. Our guide had deep-rooted friendships with locals—which is how we ended up on a family’s expansive porch, watching the sunset together and sprinkling salt, pepper, and chili powder on slices of juicy pineapple. (Trust me on this: It’s the best way to eat the fruit). Our guide explained that while most Sri Lankans don’t have access to home financing like we have in the U.S., some will buy what land is available and, over the course of decades, build a family home. While these houses largely remain works in progress, each generation does their part, slowly laying bricks and making additions and renovations.
Entrenched in my ideas of 30-year-mortgages, this seemed unusual to me. However, our guide said it reflected a cultural ethos on debt, family, and happiness: “We sleep well knowing we owe no one,” our guide said. “And we are happy because we’re surrounded by family.”
This exchange led me to explore what other models of homeownership and home financing models exist around the world. After researching a handful of different countries, here’s what I found most interesting:
Apartment Therapy contributor Elizabeth Clayton Wester bought an apartment in Sweden and noticed how completely different it was from the home-buying process she experienced in the United States. Overall, there are fewer protections for buyers in Sweden—something she says reflects the deference to the group over an individual’s desires. For starters, you don’t use a broker but survey a large, nationwide listing site and place a bid with the seller’s broker.
Additionally, instead of a 30-year fixed mortgage, Swedes have floating rates or fix their rates for three to five years at most, refinancing again and again and mostly paying interest. For a while, many Swedes were not really ever completely paying off their homes. However a law that went into effect in 2016 requires homeowners to now at least make progress in paying off their mortgages. They must pay off one percent of their loans each year if they’ve financed more than 50 percent of the property value and two percent if they’ve exceeded 70 percent. That translates to a mortgage term of, at most, 50 years.
In Ghana, like in Sri Lanka, home financing is out of reach for many families. This is mostly due to astronomical mortgage rates, which can run to the tune of 30 to 36 percent APR, explains Dela Ainoo, a personal finance expert who lives in Ghana. Loan terms are commonly 15 to 20 years and require 15 to 20 percent down payments.
“For this reason, lots of people choose to buy land and build slowly,” Ainoo explains.
The average value of homes in Singapore in 2018 was $874,372 (in USD). It’s the second most expensive housing market in the world, according to CBRE Residential. (Hong Kong is No. 1).
However, 80 percent of the country’s permanent population live in Singapore government-built and subsidized units. Most of these Housing and Development Board (HBD) units are flats in high-rise, high-density developments. While the majority of Singaporeans own and occupy their units, a small portion are rental flats. While residents can secure private bank loans, the HBD also has a loan program for Singapore citizens who want to purchase the flats.
Unlike the United States, Canada doesn’t have 30-year term loans, explains Taylor Little, CEO of Neighbourhood Holdings, a Canada-based alternative mortgage company. They take a similar approach to Sweden: Interest rates are secured for, most frequently, five years. The max loan term is only 10 years. Additionally, rates are also lower than they are in the U.S. (for example, a five-year fixed mortgage can be 2.49 percent in Canada, as compared to a standard 3.75 percent in the states).
“What this means is that Canadians lack the certainty that Americans have when it comes to knowing what their interest costs are going to be over a longer period of time, making it trickier to budget.”
Interested in learning more about how real estate differs around the world? Here, seven things I learned about “home” from talking to an architect on every continent.
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