Property Flashcards
Property investments
Savings invested in bricks and mortar
Investors take out loans to acquire property / borrowing secure by legal mortgage (charge on property)
Lasts normally 25 years
Fixed or variable rates
Types of mortgages
(IDREPNB) - DREP NBI
Interest only - borrower pays int now and makes separate arrangement to repay capital layers
Deferred interest - portion of early years int is added later years (start low and rises)
Repayment - fixed equal payments made over life of mortgage
Endowment - interest paid to lender and proceeds from endowment policy sufficient to repay capital
Pension - interest paid to lender and part of pension repays capital
Non status - for self employed and low loan amounts
Buy to let - rental income covers outgoings and amount put aside for repairs and modernisation
Open ended property risks
Periods where both commercial and residential fall in value and difficult to sell
Difficult to withdraw investment made in open ended fund property if manger unable to find buyers because of market conditions and fund has insufficient cash to repay investors
Doesn’t apply for closed ended funds in property
