Land loans vary greatly depending on property type. The most common type of loans that are given out are mortgage loans. There are several types of mortgage loans depending on the personal preferences of the buyer. These loans are all collateralized by the property itself.
- Conventional Mortgage- A conventional mortgage offers a fixed rate. They typically come in 10, 15 or 30 year loans. Most people put around 10% down. This is the most common type of home loan.
- Adjustable Rate Mortgage- Adjustable rate mortgages carry an interest rate that changes to keep pace with current market rates. These loans are great for those planning to stay in their home for only a short amount of time, otherwise it is better to go ahead and lock in the fixed-rate the conventional mortgage loan provides.
- Balloon Mortgage- This type of loan has a fixed rate for a certain time period, usually around 7 years, and is followed by a balloon payment which requires the entire balance to be paid off at that time. People choose this loan usually when they plan on selling the home
There is always the question- where is the capital for these loans coming from? The answer to that is there are various sources. Real estate assets are typically very expensive when compared to other readily available investment instruments, and only rarely will the buyer pay the whole balance when acquiring the property.
Real estate investment organizations have large capital reserves, and allow 100% equity in the property they purchase. REITs were created by congress in order to give all investors the opportunity to invest in large-scale and diversified portfolios in the same way they would invest in other types of assets.
They are getting more attention in the marketplace because they are a good bond alternative. This article by the New York Times writes "'You've got a lot of people who need income, REITs are in good financial shape, and they have a lot of opportunities to pick up buildings on the cheap." the rest of the article goes into detail about the percentages of REITs commonly held by investors and their success rates.
It can be found here http://query.nytimes.com/gst/fullpage.html?res=9804E5DB103CF93BA35754C0A9649D8B63&ref=realestateinvestmenttrusts
There is much uncertainty in the realm of real estate and what the end result will be. It is important to pay close attention to trends in the marketplace since there is almost always a time of regression and recovery.
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