[kkoste]

Well. First of. Maybe you didn't have the money at that particular time. In Denmark every single mortage has a matching bond.

I'll try to explain it as well as I can.

When you make a mortgage loan you can have either a fixed rate or variable rate. Depending on which you choose the exchange-rate differs. It hovers around 100. When you make a loan you would want that to be 100 or more. For example if the exchange-rate was 101 you would receive 101 kroners for every 100 kroner you loan. A dream scenario. But more realistically it is probably closer to 99.

Mortgages is a boring thing. But extremely interesting when it comes to your own loan. The key to take away here is the following:

When the mortgage rates are high the bonds are less valuable.

When the mortgage rates are low the bonds are more valuable.

Now let's take an example. I take 1.000.000 DKK loan for a house at an exchange-rate of 100.00DKK. Meaning I now owe the mortgage institute 1.000.000 DKK.

The mortgage security bond for my house is still 100.00 DKK at this time. Meaning if I want to payout my loan. I have to pay 100.00 DKK to pay off 100.00DK. But for if the rates are high then the exchange-rate might be 95. In which case I can then go down to the bank and say 'I want out of my loan'. The bank will then say 'Okay. You still owe the mortgage institution 1.000.000 and since the exchange-rate is 95 right now. You then have to pay 950.000 plus some fees'. The bank will then buy the underlying bond for me and handle the rest.

In general we have many options when it comes to mortgages. It all involves refinancing:

* If the rate falls you can do a down conversion. You replace your old loan with a new one with lower rate. You might have to pay more to payout the loan since the exchange-rate will certainly be higher.

* If the rate falls you can do an up conversion. Similar to the example before. But this time you replace the loan. You get a higher rate, but you might "pay off" a significant amount.

Hope that sort of clears it up.

[kkoste]

And then there is the 'slanted' conversion where you refinance from a fixed mortgage to a variable mortgage. Or vice versa.

In all cases it depends on your situation. How many years are left on the loan. Have your disposable income changed such that you can pay off more in which do you want to change the loean from a 30 year loan to 10 year loean instead.

It takes some serious thinking.