I have a friend in Kópavogur, Iceland. She was able to take advantage of this mess to upgrade her family’s housing.
As you may know – housing is outrageously expensive in Iceland.
Rates have gone through the roof – which depressed housing prices but it’s still super expensive. So in order to upgrade she needed to find a better condo, with an assumable fixed rate.
They found a bank owned one – the bank was willing to write off 100% of the 2nd mortgage the previous owners had… and if my friend could come up with $62k (US), they could assume the fixed rate first mortgage. (62k was the principal that was paid by the previous owner.)
Their old condo mortgage payments kept going up (rate increases) even though the value was going down… but they were able to find a buyer to assume that loan and pay them part of their equity. (remember, prices had fallen so they couldn’t get all of the sunk costs back.)
For about 10k US (net) they were able to upgrade from a small 2 br condo with no parking to a very nice 4 br condo with underground parking. And their monthly payment is the same and won’t go up.
They were only able to do it because they had the cash reserves to pay the big chunk, up front, on the new condo while selling their old condo.
I know she feels a lot better having a fixed rate mortgage given the wacky economy there. And with 3 kids – a 2br condo was too small.
