how do people own homes in countries where the mortgage doesn’t exist?
In: Economics
They save money and by their house when they’re older. With a mortgage you still have to pay for your house, you just get to use it sooner. Also people often build houses, not buy them from the developer. They also borrow money from friends, family, neighbors.
In my country, the mortgage industry is so nascent that only about 1% of the population buys a house through mortgage. Instead, there are a couple of other ways:
1. They rent their entire lives and use the end of service packages (Provident Fund, Gratuity Fund etc.) to buy a house.
2. They save for 5-6 years and use the money as a deposit for a new housing society in the suburbs. The remaining amount is paid as a monthly instalment. This is typically cheaper than a mortgage as the house prices are low due to being an new development.
3. The above two lead to inheritance for the next generation, who typically sell the inherited property to buy a house / condo in the city.
When I was in school, we didn’t know about mortgage, and it was perceived as a capitalist scam. Why would you pay twice the amount of what the thing costs. What was done is people inherited their homes, or saved enough money to buy in cash, or upgraded to a bigger home. Also sometimes people with good social standing would receive apartments from the government.
In Nigeria, most people( not estate investors because there a lot of those who build estates and sell) who build private houses take their time. So they keep adding to the house as money comes. My dad completed building his house in like 3 – 4 years. We moved in when a section of the house was completed. It’s a work in progress. I think that’s the reason for a lot of uncompleted buildings
I am a foreign resident in a country where foreign residents can’t get a mortgage for a house. I built one recently and paid cash to do it.
Where I’m from, you can get a loan to buy a property. You need to have a steady income and your company needs to be profitable. Then you pay back that loan over the next 30 years.
You cant take out a mortgage loan on a house you don’t own. You can on a house you DO own, but even then there are conditions you need to meet (what is the loan for, can you pay it back etc…)
Usually people put down a % in cash and the bank covers the rest. The more the bank covers, the more you end up paying them ofc. If you fail to make a payment you can do some refinancing (which is kind of like a second loan), or if you can’t the bank buys out your house, and maybe charges you rent till you pay back not sure entirely.
But even the market here is favourable towards big cash money buyers who acquire property and then jack up the rent. Nobody does nothing since we are pretty sure the private companies are in it with the politicians so the government is asleep at the wheel, just like America.
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