Tarun Jaswani asked:


Annual percentage rate (APR) is the simplified counterpart to the effective interest rate the borrower will pay on a loan. In many countries and jurisdictions, lenders (such as banks) are required to disclose the “cost” of borrowing in some standardized way as a form of consumer protection.

APR is intended to make it easier to compare lenders and loan options. The APR is likely to differ from the “note rate” or “headline rate” advertised by the lender, due to the addition of other fees that may need to be included in the APR. However the APR can be found simply by asking the lender, or reading the section about APR in your contract.

Lenders are required to disclose the APR before the loan (or credit application) is finalized (but note that the definition of APR is not the same in these two countries – see below). Credit card companies can advertise monthly interest rates, but they are required to clearly state the annual percentage rate before an agreement is signed.

APR is a term used with regard to deposit accounts as well. However, when dealing with deposit accounts, annual percentage yield (APY) or annual equivalent rate (AER) is the number to be quoted to consumers for comparison purposes.

This also explains why a 15 year mortgage and a 30 year mortgage with the same APR would have different monthly payments and a different total amount of interest paid. There are many more periods over which to spread the principal, which makes the payment smaller, but there are just as many periods over which to charge interest at the same rate, which makes the total amount of interest paid much greater. For example, $100,000 mortgaged (without fees, since they add into the calculation in a different way) over 15 years costs a total of $193,429.80 (interest is 93.430% of principal), but over 30 years, costs a total of $315,925.20 (interest is 215.925% of principal).

In addition the APR takes costs into account. Suppose for instance that $100,000 is borrowed with $1000 one-time fees paid in advance. If, in the second case, equal monthly payments are made of $946.01 against 9.569% compounded monthly then it takes 240 months to pay the loan back. If the $1000 one-time fees are taken into account then the yearly interest rate paid is effectively equal to 10.31%.

The APR concept can also be applied to savings accounts: imagine a savings account with 1% costs at each withdrawal and again 9.569% interest compounded monthly. Suppose that the complete amount including the interest is withdrawn after exactly one year. Then, taking this 1% fee into account, the savings effectively earned 8.9% interest that year.

Some classes of fees are deliberately not included in the calculation of APR. Because these fees are not included, some consumer advocates claim that the APR does not represent the total cost of borrowing. Excluded fees may include:

Routine one-time fees which are paid to someone other than the lender (such as a real estate attorney’s fee)

Penalties such as late fees or service reinstatement fees without regard for the size of the penalty or the likelihood that it will be imposed.

Lenders argue that the real estate attorney’s fee, for example, is a pass-through cost, not a cost of the lending. In effect, they are arguing that the attorney’s fee is a separate transaction and not a part of the loan. Consumer advocates argue that this would be true if the customer is free to select which attorney is used. If the lender insists on using a specific attorney however, then the cost should be looked at as a component of the total cost of doing business with that lender.

This area is made more complicated by the practice of contingency fees for example, when the lender receives money from the attorney and other agents to be the one used by the lender. Because of this, U.S. regulators require all lenders to produce an affiliated business disclosure form which shows the amounts paid between the lender and the appraisal firms, attorneys, etc.



TOBY

Michael Shawn asked:


There are hundres of thousands of people who are going to benefit from the current housing depression that has hit this country over the past year.  Although homeowners are struggling seemingly everywhere and the news has been going on forever about the drop in home prices. This downfall has openned an uprecidented home buying opportunity!!

If you are one of the fortunate few that is entering the market in this low period. Not, only are you standing to gain from the tax credits and low mortage rates that are still in effect. But, in a few years, once the news has passed and home sales begin to recover and the cycle starts to reverse..home prices will at some point rise.

I personally predict that banks are going to be continuing to raise interest rates and this will prevent home prices from making any quick rise. But, if you have put your time in and purchased a home at a reasonable price., you should gain equity and in such markets as Las Vegas and California you may see these markets make a semi-recovery.

Plan on several years in your investment and purchase a home that you can afford is the first step towards building a strong capital future position that will bear fruit. This is not a time to be sitting around waiting. The current tax credits won’t last long and interest rates are not going to be here forever at these prices.

Please keep in mind that buying a home is not instant equity. Equity is built over time and banks will only value your home in the first 3 years for pretty much what you paid for it. So, when making a home purchase keep that time horizon in mind. It’s important to realize that this is an asset that will apreciate over time. I recommend that people buy homes they will enjoy and not only will you gain the pride of home ownership, you will most likely gain in equity that will put your family in a better financial postition once the recovery is well under way.

I believe we are starting to see that recovery, and the word is going to get out once people see that interest rates are going to rise and home prices will also rise with them, just at a slower more historically correct rate rather than the ultra frenzied rate of 2006!



VICENTE

Duncan Paul Mitchell asked:


From holiday homes in Spain, vacation rental properties in Florida, beachside villas in Barbados, Antigua and Tobago, luxurious villas in Mallorca, Ibiza and Menorca, beautiful apartments in Tenerife and Lanzarote, idyllic country cottages in England, Scotland, Ireland or Wales, rural holiday homes in France, Italy and Portugal, Cyprus or Turkey, not forgetting the picture perfect ski chalets in the French Alps, Italian Dolomites or Austrian Tyrol- people from all over the world have taken advantage of the increased economic prosperity over the last few decades to invest their hard earned savings in some form of bricks and mortar.

In addition to buying your holiday home for its likley future capital appreciation, I suspect that you are also very keen to generate income from your investment by means of letting our the property for a few weeks or even months each year.

But with so many properties out there to choose from, it is important that you consider and plan a careful strategy in order to market and promote your property in the most cost effective way, to ensure that your efforts ultimately yield more rental income, than you are spending in marketing, advertising and other related costs.

So here are some tips and ideas which I think you will find useful in ensuring that your property achieves and even surpasses your expectations in terms of generating rental income.

1.Know Your Break Even Point!

How much income do you need your property to generate each year to cover any mortgage, maintenance costs and local authority charges and taxes- not forgetting of course, the monies you may have to spend on advertising and promoting your investment property? How much does it really cost you to maintain your property each year. You need to include any mortage costs, maintenance costs, local authority or muncipal taxes and levies etc. Once you have calculated this figure you will then be able to calculate how much each week you need to charge our your holiday property for in order to at least break even and cover your costs. Knowing this may also allow you to be more flexible when it comes to setting the weekly rental price of your property. This is especially useful in a competitive market or during times when, quite simply, there are fewer people looking to rent holiday homes.

2. Set An Advertising Budget (And stick to it!)

Clearly it would be disappointing to find that despite your best efforts, you have actually spent so much money in promotional and advertising costs, that it has wiped out any potential profit from your total rental income. In the world of business, many companies would tend to set a marketing budget of anywhere between 5% & 10% of their total annual turnover. This would seem to make sense, and if you see your investment or holiday rental property as a business- which I suggest you should-then you can use this 5-10% figure as good guideline in helping you to set a sensible advertising budget.

3 Know Which Methods Are Working (Keep Records)

A marketing director of a well-known company was once alleged to have said that he believed about 50% of his marketing budget produced profitable returns. The problem was, he didn’t know which 50%! This may sound funny, but alas, it is an easy trap to fall into and its cause is largely down to not keeping records or tracking exactly where each new business enquiry comes from.

This problem is so widespread amongst all businesses that it goes to explain somewhat, why many companies have now started to ask their potential and actual customers that most valuable of $64,000 questions- “Where did you learn about us?”, or “Where did you find us?”.

Some sage business guru once said “Turnover is vanity, but profit is sanity!”. In other words your campaigns must be cost effective and generate more in ultimate rental income than the cost of the promotional activity itself. Some campaigns may well bring in rental enquiries and even some actual bookings but at what cost?

4. Understanding Your Cost Per Enquiry.

If you are going to be able to understand which of your advertising campaigns are more successful and produce the best results, it is vital that you have a mechanism for recording the results of your various marketing and promotional activities. This will allow to ditch those methods which have a very low return on your investment, conversely it will also allow you to focus more on those methods and areas where the majority of your enquiries and bookings are coming from.

5.Use The Pareto Principle (The 80/20 Rule!)

In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. In the late 1940s, Dr.Joseph M.Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto’s Principle. While it may be misnamed, Pareto’s Principle or Pareto’s Law as it is sometimes called, can be a very effective tool to help you manage effectively.

Despite all of your various efforts at promoting your property, you will probably be amazed to calculate that most of your booking enquiries will come from one or two sources- this is what we mean by the 80/20 rule. Providing you are not like our unnamed hapless marketing manager referred to in point 3, then you should be able to use this valuable information to really focus on those activities which achieve the most profitable results.

Summary

So there you have it! Some tips and examples as to how you can leverage the rental income producing ability of your holiday home, whether it be a villa, townhouse, cottage, ski chalet or apartment.

In future articles I will be covering the issues of where best to advertise your property and how to ensure you are promoting your property in the most advantageous and effective way.



JAKE

Sonia asked:


                Home buyer’s costs or closing costs are the expenses in relation to yourith your purchase of a home. Both the buyer and the seller pay the closing costs’ depending on what is written in the contract of sales and what both agreed on. Some of these costs are paid upon closing the deal and others as your transaction progresses.

                Home buyer’s costs are explained below.  Some closing costs may or may not be applicable depending on the custom of the area where you make your home purchase.

1.  Tax Fees. A property will not be transferred to your name unless you pay the tax fee. Exact cost depends on the location of the property. Most commonly, the tax is one percent on the first two-hundred thousand of the value of the property and two percent in excess of the two-hundred thousand value.

2.  Goods/Service Tax. When you purchase a newly constructed house, you will pay the Goods and Service Tax, or the GST. The price depends on the area and the rates applied.

3. Property Tax. If the current owner of the home you are negotiating to buy has already paid the property tax for the year, you have to reimburse them as your share of the year’s taxes.

4. Appraisal Fee. This is a fee required by the lending institution home before they approve your loan.

5. Survey Fee. Your mortgage lender will require you to submit a land survey form. The survey form serves to establish the boundaries of the property. If the current owner does not have one, you will have to contact a surveyor and pay him or her for surveyor’s fees.

6. Mortgage Application Fee. Most mortgage lender require you to pay an applicationa fee once you apply for a mortage loan. The fee varies, depending on the mortgage lenders rate.

7.  Mortgage Default Insurance.  This insurance is required on mortgages that exceeds the seventy-five percent of the appraised property value. This serves to ensure that the lender will not lose money in the event that you cannot pay your mortgage and your property value is not sufficient to pay the mortgage.

8. Fire Insurance. Your mortgage lender will insist that you purchase an insurance policy. This is a guarantee to them that in case of fire, they will receive whatever balance you have on your loan before you receive any insurance proceeds.

9. Legal Fees.  When transferring the property to your name, this will be recorded in the Land Title Office. You may hire the services of a lawyer of a notary public to act for you on this matter.

10. Other Fees.  Your home buyers’ costs may include the moving expenses like hiring a professional moving company or do the moving yourself.  Expect additional expenses on repairs, purchase of new appliances, curtains or carpets.  

It is best to consult the exact fees in the area you plan to buy a new home. Be sure you have this home buyer’s costs covered in your budget as you start hunting for a home.

 

 

 

 

 

 

 

 

 



LELAND

Jenny Smith asked:


Spring is traditionally a popular time to put property on the market and, after a long winter, the housing market may be showing signs of recovery. Interest rates have shifted and mortage approvals are showing a slight increase. To boost your chances of selling your home, one of the key things to consider is those first impressions and the small stuff that can really make a difference to getting and sealing an offer – crucial stuff during the current recession.

While numerous television programmes have left some buyers feeling that all properties should be immaculate, neutral showhomes, this is unrealistic for most people who have to live in their houses and don’t have lots of spare cash (or desire) to restyle it before then moving out!

However, you can help buyers to see through your lifestyle and project their own on your home. So what makes a real impact?

Don’t put people off before they’ve even stepped foot in your house.A tidy, clean looking exterior, neat front gardens or paths, nice plants and flowers, nice paintwork around the front door – all of these things immediately make your house look more welcoming.

Well lit homes always seem light, airy and welcoming – simple things like cleaning the windows and the right lighting (no bare bulbs!) can make a real difference.

Homeliness also rates highly as it’s very hard to sell a house that looks unloved. If it looks as if you don’t care about, why should anyone else? Lighting the fire, clearing away clutter and touching up painted interiors can help with this.

A clean and tidy house is attractive. A smelly, uncared for one isn’t. Household odours can really put people off. Think fresh bread rather than fried breakfast! Similarly pet odours or fur can be hard to get rid of and not everyone loves Fido. These details are easy to get right but, believe it or not, can lose you a sale if you get it wrong.

According to some recent surveys, poor building work or DIY is a big turn-off for up to 90% of potential buyers and nearly the same amount would think twice about putting an offer in on a house with a garden that lacked privacy. Where you are restricted on what you can do in this capacity, just bear it in mind and make the best of what you have.

The kitchen comes up as one of the most important rooms, closely followed by the bathroom. No real surprises as these are the rooms that often have or require the most investment and work and therefore reflect the effort you have put in and perhaps means the new owners won’t have to. You don’t have to redo either of them completely, but again, making the best of them through use of light, cleanliness, lack of clutter and tidy paintwork and details (handles, finishes, blinds and flooring) can make the difference between having your house in the running for an offer or having them running out of the door.



PERCY