A Few Words (investment property specialist) on Mortgages

December 31st, 2009 admin Posted in realestate |

By Dannie Jensen

Real estate loan is what a lot of people use to buy their home. Real estate loans have been instrumental in bringing joy to people by making that unaffordable house affordable. Some real estate investors too make use of real estate loans for buying properties. However, real estate loan is not free money and anyone who buys real estate or plans to buy real estate using real estate loan must understand the concept of real estate loan very clearly.

Real estate loan (also known as mortgage) is the money that you borrow from someone (a financial institution i.e. a mortgage lender) for the purpose of buying a property. The real estate loan generally covers a part of your purchase price and the remaining portion has to be paid by you upfront i.e. as down payment. The amount (i.e. the percentage of total purchase price) that you have to pay as down payment is dependent on a number of factors and you can generally reduce it to even 5% by going for mortgage insurance. FHA and VA loans (i.e. mortgage insurances through FHA and VA) reduce the down payment requirement on real estate loan even further. Whatever you borrow from the mortgage lender as real estate loan needs to be paid back to the mortgage lender over a period of time (and, of course, you will also need to pay appropriate interest on that real estate loan).

The tenure of your real estate loan and the prevailing market rate will determine the amount of interest you pay for your real estate loan. Generally, you are required to pay back the real estate loan in the form of monthly instalments which are composed of both interest and principal portions of your real estate loan. Also, there are various types of real estate loans e.g. fixed interest rate loans and adjustable interest rate loans. So depending on what type of real estate loan you have gone for, your monthly payments might either remain constant (fixed rate) for the full tenure of the loan or keep getting adjusted periodically (adjustable rate) on the basis of a financial index. Besides that, some other costs are also associated with real estate loans e.g. there are closing costs, inspection costs, attorney fee etc. Also, in case the property needs some repairs, there will be costs associated with that too. Again, there is stamp duty and other taxes that you need to pay. So, really, you need to understand the concept of real estate loans and the related costs clearly before you actually go for the real estate loan. And understanding these concepts is really not that tough.

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How does Dubai
s Debt Impact Calgary Real Estate?

By Joe Samsone

Here we go again! Better hang on to what youve got because another financial correction of our not quite yet recovered economy is coming. Is it?

For many years during the real estate boom, Dubai seemed as a paradise with an indoor ski arena in the middle of the desert and skyscrapers reaching above sand storms or magical islands erupting from the middle of the ocean with dream like real estate on them.

Now that the storm started to settle a little bit, the bills are coming in and its creating some deer in the headlight feeling form many investors because its time to pay.

Right now there are more questions than answers at this point. But here is a snapshot of what the big fuss is all about. Dubai currently has an outstanding debt of 80 billion dollars of which 59 billon dollars is directly resulting from the major real estate expansions that they have been over building and bragging about to the west to prove to them that they can build bigger and better real estate

Dubais debt problems started to snowball just like the rest of the globes economy took a turn about a year ago. Their real estate market had also gone through a major correction the last couple of years creating major financial concerns from the imploding real estate prices. The sad thing for Dubais economy is that most of their growth was a result of foreign investments simply based on pure speculations vs. fundamentals.

Now what causing this panic reaction on the markets is the fact that Dubai had some of these loans worth billions of dollars becoming due in the next couple of weeks and they simply said that they are not in the position to pay it at this moment and are asking their creditors for an extension on their payments dead line until sometime in the future.

The great news for Canada is that there are no Canadian institutions involved with Dubais investments that are at topic here. Primarily some European and Asian banks are the ones that are running after their investment money right now. What the global financial market is really concerned here is the interconnectedness between the European/Asian banks and the rest of the word. We dont have to travel back in time to far to remember the sub-prime era in the US even though the real estate was a localized problem with mainly local banks, the rest of the word suffered just as much as the US banks because loans or investments are being sold amongst banks on a daily basis. Meaning that if a particular bank provides a mortgage to a customer that same bank may not be the sole owner of that mortgage a few weeks or months down the road.

So what is this have to do with Calgarys real estate market? Technically it shouldnt have a direct impact unless the rest of the markets begin to tumble and creating panic amongst investors who will decide to sit on their investment eggs for another few more months. Dont forget, real estate is something that you can drive by everyday to check on and you cannot liquidate it as you would sell a piece of stock on the Internet. Houses dont evaporate over night just as stock portfolio may due to a panic attack on the market. If you are thinking long term with real estate you shouldnt be too concerned with these little blips in the market.

The whole confidence factor might have got ahead of itself a little bit too fast and it would be a normal cyclical reaction of the market to go through a minor correction in the near future just to remind investors that we are not fully recovered yet.

For information about the Calgary real estate market, visit JoeSamson.com an excellent resource for Calgary homes for sale.

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