Capitalization effects of creative mortgage financing
department or school: Business, Sauder School of
department or school: Real Estate Division
data provider: DSpace
degree campus: UBCV
creator: Graham, Barbara Elizabeth Anne
issued: 2010-05-03T23:45:59Z
issued: 1985
related degree: Master of Science in Business - MScB
degree grantor: University of British Columbia
description: This thesis studies the impact of creative financing on single family house prices, focussing on instruments such as Agreements-for-Sale, assumed mortgages and vendor-financed loans. Benefits from financing at below-market interest rates are expected to be capitalized into higher sale prices of houses, however, the literature is not clear on the appropriate adjustment. If the purchase price of houses increased by an amount equal to the present value of the payment savings, there would be no direct benefit for purchasers and they would effectively be using a financing scheme similar to a graduated payment mortgage. A Canadian sample of housing transactions has been used, specifically in the Lower Mainland area of British Columbia between 1980 and 1982. The sample was selected to include home sales at different price levels and during different periods of market activity. In this way, the capitalization effect of creative financing instruments could be tested at different house price levels and market conditions, as well as for alternative types of creative funds. Creative financing arrangements can be classified as institutional or non-institutional depending on the loan origination source, and it was hypothesized that assumption loans (institutional origination) would be properly capitalized in the price while vendor-financed loans (non-institutional origination) would be overcapitalized in house prices. The reason for the dual pricing response hinges on the discount rate used to calculate the benefit of below-market financing; it should be higher for vendor-financed loans due to the higher costs in loan origination and servicing for the seller as compared to a financial intermediary. The results indicated that assumption loans were properly capitalized in the price of single family homes as the coefficient of the creative financing variable assumed a value of approximately 1. The vendor-financed sample revealed that the benefit for below-market financing was overca…
aggregated CHO: https://circle.library.ubc.ca/rest/handle/2429/24397
note: CAPITALIZATION E F F E C T S O F C R E A T I V E M O R T G A G E FINANCING By B.E. A N N E G R A H A M B.Comm., The University of British Columbia, 1980 A THESIS SUBMITTED IN PART IAL F U L F I L L M E N T O F T H E REQUIREMENTS FOR T H E D E G R E E O F M A S T E R O F SCIENCE in Business Administration in T H E F A C U L T Y O F G R A D U A T E STUDIES Commerce and Business Administration We accept this thesis as conforming to the required starud^f d T H E UNIVERSITY O F BRITISH COLUMBIA November 1985 Q B.E. Anne Graham, 1985 In presenting t h i s thesis i n p a r t i a l f u l f i l m e n t of the requirements for an advanced degree at the University of B r i t i s h Columbia, I agree that the Library s h a l l make i t f r e e l y available for reference and study. I further agree that permission for extensive copying of t h i s thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. I t i s understood that copying or publication of t h i s thesis for f i n a n c i a l gain s h a l l not be allowed without my written permission. Department of URBAN LAND ECONOMICS The University of B r i t i s h Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date OCTOBER 1, 1985 DF-fi r^/R-n ii A B S T R A C T This thesis studies the impact of creative financing on single family house prices, focussing on instruments such as Agreements-for-Sale, assumed mortgages and vendor-financed loans. Benefits from financing at below-market interest rates are expected to be capitalized into higher sale prices of houses, however, the literature is not clear on the appropriate adjustment. If the purchase price of houses increased by an amount equal to the present value of the payment savings, there would be no direct benefit for purchasers and they would effectively be using a financing scheme similar to a graduated payment mortgage. A Canadian sample of housing transactions has been used, specifically in the Lower Mainland area of British…
has type: Thesis/Dissertation
is shown at: 10.14288/1.0095930
language: eng
degree discipline: Business Administration - Urban Land Economics
provider: Vancouver : University of British Columbia Library
publisher: University of British Columbia
rights: For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.
scholar level: Graduate
type: Text
identifier URI: http://hdl.handle.net/2429/24397