The Perfect Mortgage

I could hardly believe my eyes: this morning I found a news piece on the internet from "The Age" in Australia. Apparently, the newest mortgage is one where you have no interest payments!

What will they think of next?

Here's the interesting part: this isn't a "reverse mortgage" or anything like that. It's an actual mortgage, but the lender capitalizes the interest and you don't make any repayments. In fact, you don't pay until you sell your home. At that point, the bank will take both the principal mortgage amount and any interest its owed.

Now, if that's not an "exotic" mortgage, I'll eat my hat.

Apparently, there are almost 20 lenders in Australia giving out this kind of mortgage and the amount that has been lent in this manner is up over $1.1 billion Australian dollars. In Australia, there's no tax on this money, because the equity in a home is tax free. As you can imagine, this is a boom for retirees, although apparently others are making use of this kind of "loan" too.

There's one catch: you have to have paid off your conventional mortgage first. This isn't a quick fix for financial problems or a refinancing option.

This loan also has its drawbacks. You are putting yourself back into debt after having paid off your mortgage. So, it's not something to do lightly.

I wonder how long it will be before we have something similar in the US?

Michael

2 comments
Posted by Michael on February 7,2007 at 10:59 PM
As I understand it, you normally would get a mortgage in the country where you make the purchase. The mortgage will be under the laws of that country. So, I don't believe you could mortgage a US property for instance with an Australian mortgage.
Posted by Jack D. Viau on February 5,2007 at 2:47 PM
Micheal,
Is a country like Australia could finance mortgages out of there country? Elsewhere Financing?

Jack
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