What Is A Real Estate Rent To Value Ratio?

Can You Afford To Buy A Home?

When borrowing to buy a house, there are many things you need to take into account. The value of your desired property should correspond to how much you earn in such a way that you can see a point in the future when you would be able to make a final payment and clear your mortgage to own the house outright. Opinions differ on what proportion you should stay within in terms of salary to mortgage, with many people being of the opinion that you should spend no more than five times what you earn in a year to buy a house. Certain experts on the market say that you should consider it on a proportion of rent to valuation. That is to say that you should consider how much you can afford to pay in rent, and multiply it by a certain amount to get the ideal value.

Those who view it as a rent/value issue tend to agree on a proportionate value for a new house as being $125-$150 on a house for every dollar you pay in rent. Looking at it like that means that if you were renting for, for example – $1,000 a month, you could buy a house valued at $125-150,000, and so forth. If you paid back the mortgage at the same rate as you paid your rent, you could own the house in just over twelve years, depending on the proportion at which you set the bar and allowing for interest rates and fees. This does seem like a reasonable ratio, taking into account that your income and your other living costs may begin to vary either within or just after the end of that period. It also allows for fluctuation in interest rates.

Due to the situation that we find ourselves in at the moment with a view to the global economy, there are currently uniformly low interest rates in most of the bigger mortgage markets throughout the world. If you are in a financially strong position at the moment, unlike many people, you are in a stronger position than ever to afford a mortgage because the lower interest rates make the extra costs over and above the value of the house negligible compared with the same situation three to five years ago.

Additionally, the ratio set out above (of 125/150-1, value to rent), will grow if interest rates drop and fall if the rates rise. Looking at how much you pay in rent right now and taking into account the likelihood of a further drop, you can have a justifiable valuation for the house you can afford to buy. Of course mortgage rates depend on your own financial situation and the likelihood of that situation changing, as well as other aspects relating to your personal situation. Financial experts are currently suggesting that if you can find a mortgage with an interest rate of less than 5%, it is good value, unlikely to drop much further and you should take it, if all your requirements are satisfied.

Canadian Real Estate

Number of House Sales is Falling Fast, Prices Not So Much

First Published Date : February 19, 2009 ADawnJournal.com

The Canadian Real Estate Association has released its latest figures, and with them comes the news that house sales are falling in number as the housing market continues to feel the pressure of the global credit crisis. The headline of the latest figures is that sales have fallen by 41 per cent in the 12 month period from January 2008 to January 2009. With sellers reluctant to put their houses on a market that is filled with fairly anxious customers, the level of sales will naturally fall. What is positive, though, is that the prices on house sales are staying relatively constant by comparison.

While things south of the border continue to lurch while we wait for the results of President Obama’s stimulus package, Canada is showing many other countries that house prices do not need to fall anywhere near as fast nor as far as they have been elsewhere. One of the most remarkable pieces of news is that house prices have actually stabilized in recent months, with no fall since November. The good news overall is that the meltdown which has happened in the US seems unlikely to be repeated in Canada.

The Teranet-National Bank house price index – a highly technical database which uses enhanced data to compare year on year house prices – has shown an actual small rise (+0.6%) in prices between November 2007 and the same month in 2008. The same comparison for the USA has shown an eighteen percentage point fall – and a 25% fall overall since 2006. And although it is true that the figures seem to depend hugely upon the people providing them, the most reliable, respected indices are showing positive signs for the Canadian housing market.

There is certainly no disputing that numbers are falling still – houses are not being sold in such large numbers as they were before – but there are signs that the problems are being addressed. When sales fell off in 2008 this happened in Vancouver, Calgary and Toronto – where house prices are relatively high. Consequently, people in those cities are less likely to put their houses on the market in 2009, until things improve at least. Sales in Montreal, Winnipeg and Ottawa, comparatively, have remained more constant – unsurprisingly, as these are higher-priced cities.

As a rule, higher-priced houses are not being sold quite as often as before, with consumer confidence inevitably falling as a consequence of the fears over jobs – Canada, seen by many worldwide as an example of how to run an economy cautiously but positively, recently announced record job losses in one of the biggest signs yet of how global this crisis is. In the lower price cities, prices are beginning to rise while they fall in the higher priced cities. But overall the big news from the latest figures is to be summed up in one sentence: not the best news, but a lot better than some others are getting.

Why Buy International Real Estate Abroad

Options for buying a retirement home abroad

For a long time in the past when people went abroad all they had in mind was simply going out to spoil themselves vacationing from the familiar environment and all they brought back was a few mementos and probably a camera full of pictures they clicked away. However things are turning different today, what with the prospects of acquiring property abroad and settling there, especially after one has retired. Many folks who faced an uncertain future due to the cost of property at home are discovering they can actually acquire high end properties such as condos and villas abroad at what would sound like a good bargain at home.

Many people are now in the acquisition frenzy because of the many stories they have heard from others who have successfully bought real estate abroad. The current economic crisis has not made things better, what the depreciating value of most people’s lifetime savings. The cash people thought would go along way in taking them through retirement is slipping through their fingers. Whereas it would cost you hundreds of thousand of dollars to try and invest locally, things are looking very positive abroad and it is now a race against time as most savers try and get a piece of the cake.

To give you an idea of how sweet things are, consider that for example, a resident of Florida who wants to escape to someplace out of the country but not to far from home would consider settling in Mexico. Whereas they would require a minimum of $100,000 in Florida itself or $150,000 to buy a small apartment in New York city, going down to Mexico they would most likely acquire a beautiful condo with a beachfront for as little as $50,000 which means they will still have enough change to help them settle down for many days to come. Apart from the low prices they will have escaped to a quite and secure place to enjoy their sunset years.

For the person who is a little adventurous another unique location to consider would be Nicaragua which is nestled quietly at the heart of Central America. This is a country that has left behind a long dark history of civil wars and is now a fast developing third world country but with all the trappings of the first world. For a long time people consider Costa Rica to be the only place you could settle in the region but now they are knowing better. You will enjoy getting a nice villa with its own large compound, fro those who love space for anything between $50,000 and $100,000 on the very higher side. The cost of living is nothing to compare with many places in the Americas.

But if your idea of a real escape is far away in Europe you may want to consider the emerging property market of Eastern Europe. For prices that you will consider a real throw away when you compare with the rest of Western Europe you will grab for yourself a first class condo or even a serene waterfront villa. As the rest of the continent struggles to grab the little remaining space, here you will acquire large swathes of beach property for as little as $40,000 and that is just the beginning of the good news.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the realestateexpedition.com website (however, I will still hold the domain). I will gradually move all articles from this site to Ahmed Dawn Dot Com. This article originally published on the above website on Dec 5, 2009.

Why Different People Qualify For Different Mortgage Lending Rates?

Special Mortgage Rates, Special Terms and Conditions

First Published: September 28, 2009 ADawnJournal.com

In an ideal world, everyone would have an absolutely equal share of money, opportunity and health, and what they would have would be adequate to live on comfortably. However, the world is not ideal, and through one reason or another some people find themselves having to be satisfied with what they have. In order to equalise things somewhat, there has to be a range of different options which can be applied in situations that require them. What this means in practice is that individuals will be treated differently according to their situation – with the proviso that it must be sustainable. This is why we see different people qualifying for different rates in terms of mortgage lending.

To take a hypothetical situation, an individual – let’s call him Mr. X – may have been living happily for many years in a comfortable job which entitled him to a carefree life, with a credit card bill which he paid in full every month allowing him to avoid interest fees. Suddenly, one day, a company moved into his area doing the same thing that his company was doing, but for a considerable amount less, and business migrated to the newer company. Mr. X found himself earning less commission, and was unable to keep up payments on his credit card, forcing him into a situation where his credit record was less positive than it would have been three years prior. Three years ago he qualified for an excellent mortgage interest rate. Now, he has to accept a higher rate.

This is clearly far from an ideal situation. Through no real fault of his own, Mr. X finds himself in a negative position. Is his bank wrong to approach things this way? From a business point of view, the answer is “no”. His situation created a position whereby he was considered to be more of a credit risk. Banks need to judge risk based on the facts that they have available to them, and quantifiable data. Although Mr X was generally a good payer, he has found himself in the same position as other people who may have been less responsible with credit payments. If the bank were to make an exception for him, though, they would have to do it in other situations and their margin would be reduced.

The price we pay for having a system of credit and borrowing in our economy is that it will sometimes “unfairly” penalise people who have conducted their accounts generally rather well. This system may be imperfect, but as we mentioned at the start of the article, this is not an ideal world. In order to make the best of your situation, particularly if you are one of the many people whose credit record has suffered from circumstances beyond your control, it becomes all the more necessary to look at ways of getting the best deal. This entails shopping around, saving for a deposit and in some cases waiting for your continued efforts to make payments to your credit accounts to be reflected in your credit score. And in the meantime, realize that positive behaviour is, eventually, rewarded.

Why Go Into Real Estate?

Why Should You Consider Getting Into Real Estate?

The world of real estate is one that is filled with challenges, and is never as straightforward as one would like it to be – as some think it may be from the outside, indeed. There is certainly no reason to suggest, though, that one should give up on the idea just because of the difficulties, it is these difficulties that make real estate what it is – an arena in which the strong survive and are rewarded handsomely for so doing. What is the story? Why should you consider getting into real estate?

1. The money. Let’s not pull any punches, very few people who get involved in the business of real estate go into it without money as their primary motivation. The most recognized way in which people make money from real estate is to buy a property when it is cheap, and potentially not very nice to live in, then spend some money bringing it into shape so that it can be sold on at a profit. The equation is fairly straightforward. You start with a modest outlay on a modest property. You want to maximize what you can bring in for it while not spending too much. Clever property developers will know how to improve a property while getting the best value.

2. Working for yourself. Sometimes there will be a lot of money in a job where you are answerable to other people. Sure, you enjoy the money, but when you are continually having to devote your time and skills to serving the need and request of someone else it can be tiring and unrewarding (except on the financial front, of course). Being your own boss means that you get to make the decisions and as well as being able to benefit financially you will also have the chance to make your personal philosophy into something concrete. This is something that is enriching in more than just the obvious way.

3. Standing in the community. This is something that tends to go hand in hand with financial success, of course. The two things are different, though. You can become a respected member of the community without a lot of money, and you can certainly make a lot of money without becoming a respected member of the community. But working in the real estate business can offer you the chance to really make ties that will stand you in good stead. Good property options will make a community far more profitable, and by contributing to that you may find that you are sought out by people with sway.

4. The journey is a blast. Often when someone buys a house, they do it up, sell it on and go back to work with a tidy profit in their bank account. This isn’t wrong. But if you realize  a knack for developing properties, you can continue reinvesting and keep making more money. When you are successful in real estate, it often means the big dream coming true – being able to retire early in order to enjoy your spoils at leisure.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the realestateexpedition.com website (however, I will still hold the domain). I will gradually move all articles from this site to Ahmed Dawn Dot Com. This article originally published on the above website on May 1, 2009.