Tuesday, July 7th, 2020

Finances terms




When buying a home or a new development site it is imperative to include into your mortgage repayment figures the cost of the any monthly maintenance expenditure. This sounds like common sense doesn’t it, but the amount of times purchasers of new home and apartments find themselves in trouble and having to over stretch their budget is alarming. With the ever increasing shift to Common Interest Style Development in this country, it is no wonder that we have seen an increase in failed mortgages as purchasers haven’t done a few basic checks and put aside the initial emotion and excitement of moving into their new home or apartment.

Finance Tips

Know the Market, Know your Finance

Do your own research into the area and the market you are thinking of buying into. Don’t just see one agent. Real Estate agents are groomed and slick, they’ll be your best friend and have always pleasant things to say. It’s a good idea to listen but NEVER take one opinion only. Stand alone and be sure when you decide to purchase that you know what you are paying is good value, and that your investment is sound. Shop around through the agents, see what each says, see what each has listed. Do your Internet and news paper research on recent sales and have a visit and evaluate the properties, which you are interested to buy

Commonly used Real Estate Finance terms:

Actual cash value:

The price property will bring in a fair market, after fair and reasonable efforts have been made to find the purchaser who will give the highest price.

Cost approach:

A method in which the value of a property is derived by estimating the replacement cost of the improvements, deducting the estimated depreciation, and adding the value of the land, as estimated by use of the market data approach.

Creative financing:

Any financing arrangement other than a traditional mortgage from a third-party lending institution.

Debt service:

The payments consisting of amortization and interest on a loan.


A loss from upper limit of value caused by deterioration and/or obsolescence.

Discount rate:

An interest rate commensurate with perceived risk; used to convert future payments or receipts to present value.

EMI is the Equated Monthly Installment payable till the loan is paid back in full. It consists of a portion of the interest as well as the principal


The net value of a property, obtained by subtracting from its total value all liens and other charges against it. The term is frequently applied to the value of the owner’s (as opposed to the lender’s) interest in property in excess of all claims and liens.

Income approach:

An appraisal technique in which the anticipated net income is processed to indicate the capital amount of the investment that produces it.


The use of borrowed funds to complete an investment transaction.

Market value:

Market value connotes what a property is actually worth and for what market price it might sell.


What is a lease?

Lease is a contract between the Lessor and Lessee.

What is a lessor?

The person or party who owns the property and wants to let it out on lease.

What is a lessee?

The person or party who wants to take the property for rent for a specified period of time.

What are the conditions for a valid lease?

  • The lease agreement which contains all the terms and conditions of the lease should be understood and accepted by both the lessor and the lessee before affixing their signatures to it.
  • Agreement to lease for a period of over 1 year should be registered under the Rent Control Act with proper stamp duty paid.
  • The lessor should promise to let out the property owned by him to the lessee for a fixed period of time in return of agreed rental value.

How can lease agreement be created?

Lease agreement of an immovable property can be created by the following method:

Registered instrument in cases where the lease is from year to year or exceeding one year rent or reserving yearly rent. In such cases the instrument must be executed by both the lessor and the lessee and be registered with the concerned registrar.

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