Mortgages in Emerging and Established Markets

When relying on financial assistance when investing in real estate in overseas markets, understanding the differing practices between established and emerging markets can assist with obtaining the ideal loan for the type of market being entered into.Emerging markets tend to be countries with a local economy developing at a rapid pace. Coming in line with their established market counterparts, property prices offer unbeatable bargains with rapidly increasing capital growth potential. The security of an established market coupled with a steady and affluent domestic sector enable slower growth and higher prices, yet with increased long term benefits.Mortgage financing is not always available in many emerging markets, yet the low entry levels and property prices in these countries can often assist with avoiding the necessity of obtaining loans. The initial boom of the real estate market in Dubai provides a good example of an emerging market where financing assistance was not available.Many buyers keen to enter the market were forced to pay for their properties entirely in cash, or seek alternative financing options. The most popular alternative financing options for buyers of non-mortgageable property in emerging markets was by re-financing a current property, releasing capital and arranging personal loans in home countries.Other emerging markets such as Albania offer surprisingly modern financing options. While this is quite rare, the presence of various international banks already present in the market, assisted with the fast development of a mortgage market to international standards. Ideal financing options combined with low priced real estate, created an ideal market for pure investment purposes.Other markets such as Brazil, provided a transitional sector where foreign buyers were not able to access local financing, yet nationals of the country could. In these circumstances foreign buyers are able to gauge what the forthcoming mortgage market is likely to offer once it is open to international clients. Sadly the mortgage market in Brazil requires many modern reforms to become a realistic and viable option for any buyer, national or foreign.Due to the limited options and competition between providers in emerging markets, mortgage and loan financing can vary greatly between providers. Buyers requiring financing in emerging markets are advised to conduct their own research to search for deals to best suit their finances and preferences.The exceptional growth of an emerging market will normally place high demands for reasonable and regulated financing options, prompting international banks to open in the market. Property prices tend to rise considerably when additional assistance such as financing becomes readily available in markets of high demand.Real estate in established markets enable buyers a large choice of options, with many of the most commonly requested varieties including fixed rates, variable rates, interest only and more recently, the multi currency mortgages. Pre-qualification is advisable to ensure that buyers understand the full extent of their lending potential, avoiding looking at the wrong property budget or missing out on a dream home. A benefit of obtaining financing in an established market is the extensive variety of choices from national and international banks, credit societies and private lenders.The full range of financing options provides buyers with the largest range of choices. Flexibility is also an advantage and a higher loan-to-value rate is often achieved in comparison to financing in emerging markets, along with extended loan maturity options and lower interest rates.Although the markets such as the USA, Canada and the UK, amongst many others are established, the sector is liable to change along with the local economy, interest rates and changes in the lending criteria. Established markets tend to provide security with their lending services, although different markets have varied controls on the strictness of their lending criteria.The difference between the US and the Canadian real estate markets and the way they were affected by the recent economic downturn, can be attributed to the variations in each country’s mortgage lending markets. The strictness of Canadian financial lending enabled the country to stay afloat, while the US market crumbled. Ensuring against excessive lending has proven to assist greatly with the stability of the real estate sector in each region.Often an established market mortgage will allow perceived rental income on the property while in emerging markets owners will not be able to account this type of future income, only what the client is actually receiving at the time of application. Banks operating in established markets often become competitive, offering better deals. This can include benefits such as loan terms to be negotiated for clients in established markets, while they are usually rather strict in emerging market locations.Benefits abound in both emerging and established markets, yet when relying on financial assistance for purchasing, often many emerging markets limit the numbers of potential investors. Despite the rock bottom property prices, if financial assistance cannot be obtained, many buyers remain priced out of some of the fastest growth opportunity markets. Obtaining advice from a professional company familiar with the location of interest can assist greatly with understanding and avoiding any immediate or future problems.

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