$avings & Re rement
by W. D. Walker
Mortgages & Trusts: Can You Trust Them? Many of us have found it very difficult to find somewhere safe to place our hard earned cash that will contribute income towards the lifestyle we would like to enjoy. For the past few years we have been faced with yields of 1 or 2% in US dollar investments with financial ins tu ons, including the bond market. It takes a lot of money to get a decent income at that rate of return! The stock market has been scary- seemingly solid companies have stock values plung, while a virtually worthless one that has caught the emo on of the market soars, only to take a dive shortly a erwards. The old way of analysing a company for its value doesn’t seem to help in these days of manipulated markets. The one thing that has always showed gains, in spite of temporary dips from me to me, is well placed real estate. Most great fortunes have a signigicant real estate factor, and many re rements are possible because of the gain in the value of the family home. It takes a lot of money and steady nerves to speculate in real estate, but real estate can be used to guarnatee a source of income greater than any other safe, reliable investment. In Costa Rica the yield on real estate based loans is far higher than in developed countries, and the safety factor is increased as the real estate market has not fully recovered, ensuring loan guantees will appreciate. If the guarantee is good, there are few foreclosures, but it can happen. The possible downside is, therefore, becoming the owner of a Costa Rican property at far less than its market value. The property can then be sold at a profit, or kept for the use of those who funded the loan. This is not to say that real estate based loans are without risk. Casa Canada has been in the business of administering loans for clients for 22 years, and during that period have been saved from expensive mistakes by advisors, or made mistakes and learned the lesson the hard way. One of the basic items is in the wording of the mortgage or trust agreement. It took years to perfect the documents used today, and to elimiate the loopholes. Another vital step is the valua on of the property. Appraisers in Costa Rica are not like those in developed countries, they have less informa on on which to base
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their values, and o en the valua on goes to the highest bidder. The lender wants it low, the borrow wants it high. Casa Canada stopped using appraisers a er unfortuate experiences with over valued proper es, and now has its own experts. It is also important to avoid loans in areas with difficult access, off the beaten track, or in a run down neighbourhood where the value will not increase,. The most secure loans involve the borrowers personal house or the building housing a personal business. With mortgages funded through Casa Canada the lender does not have any inves ga on, legal or set up costs. These are paid by the borrower. Casa Canada does not lend more than 50% of the quick sale value of proper es with buildings or a house, nor more than 25% for lots or raw land. Loans are made only in first posi on, second degree loans are not acceptable. Casa Canada management people visit the property offered as security for each loan, as does a real estate expert. A report on the property owner and guarantor is requested from the two major credit bureaus in Costa Rica, and income and employment are confirmed. Title to the property is thoroughly searched, something very important in Costa Rica. Although Casa Canada interest rates are higher than those charged by banks, the advantage to the borrower is quick service. A bank loan can take a year or more to be approved, while Casa Canada will do all the necessary studies in a couple of weeks. Loans made through Casa Canada can be repaid at any me without no ce or bonus, making them a rac ve to people needing money to purchase a home or business and not wan ng to wait for the long bank approval process. When the bank loan eventually does come through, they can pay off the Casa Canada loan. The collec on department of Casa Canada will contact borrowers the day a er their payment is due, should it not be made on me, then will follow up un l the payments are brought up to date. In this ways loans don’t get so far behind that the borrow cannot pay the arrears. For all services Casa Canada charges the client(s) funding the mortgage 2% per year interest, which is paid each me a mortgage payment is received. The lender’s return is the rate of the mortgage less the 2% fee. In this way, should a mortgage not perform for a few months, there is no fee charged for administra on un l payments are received. To spread the risk of interrupted El Residente