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Denmark has introduced a negative interest rate mortgage. That's an interesting one because if you borrow $200k today and only owe $195k in 10 years, what happens?

First, since you don't have to make payments, you can't default.

If you can't default, why bother with qualification?

If you don't have to qualify, is there an upper limit to how much you can/should borrow?

If there's no upper limit and you never have to pay, it doesn't matter whether the seller charges $100k or $1M or $10M.. it demonstrates that the entire system is entirely made up.

You can definitely default on a negative rate mortgage, by not paying your monthly payment. You cannot pay nothing each month. Instead, the principal reduces each month by more than the amount you paid. You still have a term over which you have to pay the mortgage off. No-one is offering (or will offer) a negative interest rate _interest only_ mortgage.

Negative interest rates make sense if you consider them as a lender trading current cash-on-hand for future cash flow. That is, the bank has $200k today, but it would rather see that broken up into payments over 10 years, even if it has to pay you to do it.

When viewed through this lens, it becomes clear that the factor driving this is likely that the bank is being disincentivised from storing the cash directly.

No, I'm pretty sure there's going to be an upper limit, and it's going to be somewhat less than 100% of the purchase price. It's not carte blanche to borrow unlimited amounts of money.

In fact, I would be surprised if you could get away with no payments (a balloon payment loan, as it were). I would be rather shocked if they were offering such loans.

Absent data that they are actually offering such loans (balloon and/or untethered to the price of the property), I find your conclusions unwarranted.

It's not all the way there but the first steps are occurring:

"In Denmark, the ultra-low interest rate environment has in turn caused home prices to increase as borrowers could afford pricier homes."

Ref: https://www.msn.com/en-us/finance/markets/a-danish-bank-is-o...

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