COLLATERAL: This is a form of security afforded to the lender by the borrower, by pledging property as a guarantee for the repayment of money. Ideally, the value of the property so pledged should not be less than the amount borrowed, and the property, must be possessable and capable of being liquidated for cash by the lender. TERMS: This refers to the rate of interest at which money is lent and the period over which it must be repaid. These may be fixed or varied during the loan period. Variable interest rates may nevertheless be "fixed" by relating them uniquely to another interest rate which may itself vary, such as the "base" rate set by the Central Bank. The period may also vary, for example, in order to keep the monthly payment amount small or constant. CONDITIONS: This refers to all other requirements set by the lender and might relate, for example, to such things as down payments, possession of legal title, secure employment and nationality. DOWNPAYMENT: This refers to the money that has to be paid as the first installment of a series of payments in a repayment scheme. , The down payment is seen as an additional security for the lender/seller, as proof of the buyer's/borrower's financial capacity and as proof of intention to go ahead with the transaction. Most housing-finance schemes do not lend for the whole amount of the property to be acquired, the difference being met by the borrower in the form of a down payment which is usually larger than the subsequent payments (often between 10 and 20 per cent of the total cost).
Method A chart should be drawn up with five columns, based on the one used in the Example to this Task. Columns should be labeled: Source; Terms; Conditions; Typical Loan Amount; and Capacity, respectively. The Terms column may be further subdivided into three columns headed Interest; Period; Collateral and Down payment, as in the example to this Task. A list of all the main sources of financing house-building activities, whether formal or informal, should be made in the first column, under "Source." By "main" is meant those sources that are used by a large proportion of households or make a large impact on the total financing picture. Against each source should be indicated the typical terms (column 2) and conditions (column 3) that apply. In column 4, the typical amount lent by the source should be indicated, either as a percentage of total value or as monetary figure or both. In the last column, an assessment of the capacity of this source should be given, either as number of loans, share of total requirement or total amount of money it could provide annually.
Information Unless a survey has been done recently, it will be necessary to undertake a survey that catalogues how households in the target group finance their house-building (see Notes: FINDING OUT HOW HOUSEHOLDS FINANCE CONSTRUCTION). Where it is not possible to carry out a survey (even of the modest size indicated in the Notes), personal experience will have to be relied upon, supplemented by casual interviews with colleagues, neighbours etc.
Rule-of-Thumb There are no "rules-of-thumb", but see Notes: WAYS OF FINANCING HOUSE-BUILDING.
Example See Example on next page which summarizes the information produced for Task 2.1 in the first cycle. The secondcycle survey results are shown in the example following the Notes: FINDING OUT HOW HOUSEHOLDS FINANCE CONSTRUCTION.
Notes FINDING OUT HOW HOUSEHOLDS FINANCE CONSTRUCTION Unless a survey has recently been done, it will be necessary to undertake one that catalogues how households in the target group finance their house-building. Such a survey should seek to identify all the main ways of financing housebuilding activities, whether formal or informal. Where time and resources permit, the survey should interview households that are building or have recently finished building houses. It is not necessary that the survey cover a (statistically) significant percentage of such households but, rather, that enough are contacted to ensure that the whole range of categories of households (Task 1.2) is covered: the number of households surveyed may be as few as 50 (as long as there are at least five households from each sub-group of your target group). It should be possible to undertake such a survey if about eight work-days are available, plus another day or two to analyse the results.
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