Death Pledge...
Sounds ominous, right?
Whilst it may seem a bit grim, it is actually the etymology of the word ‘mortgage’
From the old French ‘morgage’
Derived from ‘mort’ - dead, and ‘gage’ - pledge
It’s original context is slightly contested - there are two schools of thought;
The term ‘dead pledge’ signifies that the pledge is considered ‘dead’ once the debt is fully repaid or the
borrower defaults
The other, which i think seems more realistic given that it was first coined in the middle ages
Death pledge is used as it is doubtful that the borrower will ever pay the debt in time, thus dying is the
pledge
Which, given life expectancy at the time, I am more inclined to believe
Some other interesting word etymologies?
Decide - from the Latin ‘de’ (off) and ‘caedere’ (cut) - therefore, to decide is to literally cut off your other
options
Pundit - or Pandit in Sanskrit, means “knowledge owner” or “learned man” often in a religious context.
Now, used for people talking about football on TV
Mortgages, then, is the subject of today's note
More specifically, the nuances involved in getting a mortgage
Why?
This week if have met with / helped the following with mortgages
A German lady in Qatar
A British teacher in Algeria
A South African couple in China
A British economist in Kenya
A quantity surveyor in Saudi Arabia
What is the common thread here?
Mortgages
What is not common to them all?
Their situation, the property they are buying, the broker they using, the earnings, their family situation,
their locations, their experience, their goals, their lenders, their mortgage rates, their mortgage fees, the
level of documentation they can provide, the time it has taken, their expectations, and so on….
From a top level perspective, mortgages are exceptionally straight forward, use a lender to secure
finance to purchase a property and then increase your returns with this ‘leverage’
But, when you get into the details, I can not think of many other processes where so many variables come
into play
Each lender has their own nuances, different countries need different documents, different types of
property are better suited to different lenders, different religions need certain mortgages
This, I think, highlights the key to getting a mortgage
Work with a broker that understands the idiosyncrasies of expat mortgages
One that will look at your situation, and then pair you with a lender that will like your situation
And, if at first, you get knocked back, do not get dis-heartened
Keep trying, try another lender, try another broker
There is always someone willing to lend
Regardless of your situation
A client of mine was knocked back on their initial two lender
They were, understandably, down
My comments?
Let’s try again - if it was that easy to build wealth with property, everyone would be doing it
We tried again, we secured the mortgage, all systems go
So, although it can seem daunting and confusing at times, stick with it
The first mortgage is always the most confusing/frustrating
After that? It’s no longer your first rodeo and it becomes easier
Like most things in life
“The harder you practice, the luckier you get”
Luckily, nowadays, a 25 year mortgage is no longer a ‘death pledge’, but it is a great way to purchase a
income producing, appreciating asset, with only 30% of the asset (properties) value as a ‘down payment’
Oh, and what does this ‘leverage’ do to your returns?
Example - your £200k property appreciates at 20% in 5 years? A £40k gain.
If you use a death pledge and only put 30% of the £200k at £60k down?
That is a 67% return on your initial 30%/£60k
Think a friend would like this? Send it their way
Have a great weekend ahead,
Callum