Loan and Credit’s proposal for amortization law
A little while ago, Loan and Credit sent a letter to the Swedish Financial Supervisory Authority asking them to introduce a law on mortgage repayment. This is because the banks themselves are apparently unable to comply with a good amortization rate among their customers.
Basic position is that everyone should pay off their mortgages
On the whole, I think this is an interesting thought but I can’t really agree with Loan and Credit. My basic position is that everyone should pay off their mortgages. The Banking Association already has a recommendation to its members that customers with mortgages above 75% should pay down to this minimum. This sounds perfectly reasonable, I think.
What I don’t like is that you have to have a law that says you have to repay. There can definitely be times when it is not good to amortize, although I generally think you should. So a team feels wrong to me.
Although I think that one should not have a law that forces people to amortize, I like the idea of amortizing. It gives good signals to yourself when you pay off the loans and do not rely on the house’s value remaining or increasing.
I myself have mortgages and these I will repay at a steady and fine pace with the goal of one day being completely without loans. I am then fully aware that a slightly lowered amortization rate could be good from an economic perspective if I managed to invest the other money well. But I myself prefer the increased collateral that comes with smaller loans. If I lose a few bucks on this, I take it easy, as I do not have to suffer mentally.
How to do with amortization is of course personal as there are arguments for both ways to go. But having a goal that is lower when it comes to the loan-to-value ratio seems to me to be an excellent idea. Just that it should not be a law that says so.