Interesting conversation on buying homes in Colombia

kernow62 says on Apr 15, 2005, 03:45:

Your girlfriend is very wise.

I don't know about now, but mortgages in Colombia were generally much shorter in duration than in the US. When my Colombian wife and I purchased our home we took out a 30 year mortgage (in the US), she didn't like it one bit, she couldn't believe people could take out a 30 year mortgage. We paid it off in short order, thanks to her constant prodding. Same with credit cards, unless they are 0% for a year or two we pay them off monthly whenever possible.

I would be interested to know the interest rate in Colombia on mortgages too.

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Dan says on Apr 15, 2005, 04:31:

My wife thinks that 30yr loan is crazy too. I did see on one of the colombian bank websites info about mortgages and they calculate things a bit different. They have a UVR (couldn't find what it stood for) that right now is 149.2287. The interest rate is also 11%, 12.5%, 13%, or 13.92% according to Conavi website.

With my house here in the US, I can recalculate my payments and including the extra amount I pay monthy and know the date my house is paid for with my computer. As far as Colombia with the UVR, I have NO idea how the heck they calculate that stuff.

Also, Conavi has a simulator so you can do some planning. I tried it out once to see how it looked and it's a lot different from what you see in the US. Also the payments fluctuate. They can start high then work low, start low work high, or somewhere in the middle and it raises a little but goes back down... confuses me. Good luck trying to figure it out.

God Bless America!

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santiBOG says on Apr 15, 2005, 05:16:

UVR The Unidad de Valor Real is an index that reflects the currency's buying power. It's based exclusively on the cost-of-living numbers published by Dane.

The previous system was UPAC (Unidad de Poder Adquisitivo Constante) which, acccording to some, was nothing short of a ripoff for consumers. The new UVR system, however, has been called Unidad para Volver a Robar.

As far as home loans go, in addition to the UVR-based loans banks actually do offer the possibility of having a fixed monthly payment (adjusted annually).

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Mr. Hollywood says on Apr 15, 2005, 06:54:

It's very different All loans in Colombia are adjustable rate, for one, and the banks do a very good job of making the repayment keep pace with inflation. Thus, there's none of the advantage of paying back a loan over time with money that keeps getting cheaper.

So on the consumer level, the idea of "leveraging" a home purchase and subsequent appreciation just doesn't work so well in Colombia.

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bhill says on Apr 15, 2005, 08:52:

30 year loans
... she couldn't believe people could take out a 30 year mortgage

I wonder what she would make of the multi-generational loans in Japan.
I know a woman who's family has been paying for decades already, yet
the current fair market value of the house is less than the next 40
years of loan payments (forget about what's already been paid for X
decades).

-Brian

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Bill1243 says on Apr 15, 2005, 15:07:

and It sounds like the interest rates on home loans are high there...and they must be adjustable types, where interest rate changes dictate the going rate.

We here in the U.S. have a very different system than other countries. The banks and other lenders make the loans, but then they are packaged into a security, and then sold off to the financial markets. In other words, the interest rate risk is transferred away from the lenders. This has created a very vibrant market in home building and home ownership here in the states. In countries that don't have this kind of system, you find lesser amounts of home ownership...in fact, in Europe, for instance, it is rare to even see any new houses even being built!

Back to the point, it must be this high and fluctuating interest rate that is what is making her so adament about not wanting to take out a loan on the home purchase. She actually sold her home for 30 million pesos...and then went right out and bought another one with the same money....paying exactly the same price for the new home--in cash!

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Lionheart says on Apr 15, 2005, 19:01:

seems to be a cultural difference I have spoken to people in several Latin American countries, most insist on paying cash for their house, or only do short term loans. I didn't go into details, but I think the money is actually passed around within the families for the purchases. So some rich uncle is the family mortgage bank ... is this possible? I know it happens in Spain and Southern France as well.

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poco says on Apr 15, 2005, 21:06:

Homes are No. 1 No. 1 Reason – Security

High possibility of NO pension, NO money, NO husband and for the last 30 years a decreasing birth rate resulting in little or NO family help. Not a pretty picture.

Colombians are familiar with inflation, devaluation, bank failures, etc. The peso is invested in house, moto, rental property etc. Hard assets. Loans are usually short term and used to purchase income producing assets.

Accidental death insurance might be available?

"When you men get home and face an anti-war protester, look him in the eyes and shake his hand. Then, wink at his girlfriend, because she knows she's dating a pussy." Quote - General Tommy Franks

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Gator says on Apr 15, 2005, 21:09:

Cash is King... when dealing with Colombian real estate. Not much over about five years on a repayment and interest reates are high-compared to the USA. Best bet is try and get the loan in the USA and pay in cash in Colombia. Beter have a good banker because Colombian real estate is not a big asset for a US Bank.

"Credidi pretio parvo emere et magno vendere tibi in animo fuisse!" .

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viewpoint says on Apr 16, 2005, 07:56:

Bill1243 Yes your girlfriend is correct and that's why she already owns her own home that is paid for. But that shouldn't surprise anyone as she is Colombian which is a lesson in survival itself. She went without many things probably missed plenty of meals to save the money for that house.

When you need to borrow money to buy a home or a car you really never own it until (and unless) you pay for it in full. One health or employment problem and someone else will own that home or car. Your girlfriend probably has seen and experienced many adversities in her life which molded her into the person she is today. It's not just because she in a woman but rather the fact that she is Colombian and things don't come easy here.

Interest rates here are a component of interest and inflation totaling almost 16%. In economic terms it's cheaper to rent a home or apartment in Colombia that own one if you are financing it within Colombia through a bank. It's really very simple because you can lend money at 16% but if you purchase real estate and rent it the income produced is only 7-8% return on your investment.

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miamimike says on Apr 16, 2005, 08:44:

How about those 5-7 year car loans... If people are flipping out on 30 year home loans(I would flip out also as I pay cash for everything unless its for accumulating frequent flier miles on my M/C)WOnder what they think about those Crazy 5-7year Auto Loans commonplace in the US ? In 3 years, a borrower can be Upside-Down already(owing more on the loan then the car is worth)--now thats CRAZY.

My Avatar-- Sarah Palin Says " "You know the difference between a pit bull and a hockey mom?? Lipstick!" Now on a Short Verbal Tether by the Honorable John McCain

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juanalejo says on Apr 16, 2005, 13:44:

Loans In Colombia you can get mortgages up to 30 years but most people do not find them comfortable to live with, me included, I rather get a cheaper place for less time that owe my whole life for a home. Most people do go for 15 years. You can get a credit in either UVR or pesos, you can get a higher mothly bill which guarantees you a fix rate through the whole of your credit or a cheaper that is adjusted via the UVR to inflation. This is done to make mortgages more accesible. 5 year car loans do exist and are common, although most people I know rather go for a 3 year loan.

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Dan says on Apr 16, 2005, 15:00:

I'm not too crazy about paying for anything for too much time. I got a car once with a five year loan and paid it off in 2.5 yrs. then, for the past few years I had no bills until I bought my house, and just all the projects seem to make me put even more money into it.

I'd like to get a house from Colomba that can be paid off quicker.

God Bless America!

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