Why Viva?
Viva’s Platform and the Importance of Cross-Border Mortgages
By Jon Snow
Here at Viva we talk a lot about how our decentralized mortgage platform will dramatically change the lending landscape. A big part of that change will stem from our technology’s ability to allow home buyers to obtain the financing for their house across national borders. We talk about it in our White Paper, on our website, and in our promotional videos. But why is it so important, exactly? What does it mean in terms of dollars and cents?
Many countries have enjoyed historically low mortgage rates in the post-2008 environment of cheap money courtesy of the easing (making money available at lower interest rates) policies of central banks around the world. Even against the current backdrop of a now rising rate environment, mortgage rates remain pretty low relative to historical standards.
Not all nations got invitations to the low mortgage rate party, however. For a variety of reasons, there are many countries whose mortgage rates exceed 10% and even some that are up around 20%.
As you can see, the 25 countries with the highest mortgage rates are all at about 10% or higher. Of course, some of these countries might scare off potential lenders — instability in Ukraine, for instance, might be cause for concern. However, in all these countries, there are potential borrowers with assets, excellent credit, and good, long-standing jobs. They are nevertheless confined to the very unattractive lending options in their home country. Enter Viva.
To demonstrate the power of what seems like a small change in interest rates, let’s use the 25th country on the list, Costa Rica, as an example. Let’s say a doctor who has practiced medicine for 10 years in Costa Rica has maintained an excellent credit rating and has significant money in savings and/or investments. Let’s also say that this solid mortgage candidate gets a better rate than the national average and is able to get a home loan from a Costa Rican bank at 9% for a 30 year fixed-rate, $300,000 mortgage. Here’s how that loan would work:
- Doctor’s Monthly Payments: $2,413.87; 30 Year Total Interest Paid: $568,992.43
In another scenario, this same doctor instead works with a Viva Hub agent in Costa Rica who confirms his/her income, assets, employment history, the appraisal of the house in question, and other relevant information as is currently used in the mortgage process. This information is then uploaded to the Viva platform where it can be viewed by potential lenders around the world. The borrower hopes to get a mortgage of 7.5% using Viva.
Seeing this doctor’s extremely strong loan application, big and small investors alike welcome the opportunity to earn 7.5% on their money in an investment backed by a piece of property with a financially sound borrower and the mortgage gets funded. Now the loan looks like this:
- Doctor’s Monthly Payments: $2,097.64; 30 Year Total Interest Paid: $455,151.67
That is an enormous difference. The doctor pays more than $300 less per month and saves almost $114,000 in interest over the course of the mortgage. The doctor is happy to save money and the lenders are happy to make money. Everyone wins. Except the financial institutions. That $114,000 doesn’t get piled into their coffers — it remains with the doctor and in his/her community.
Now imagine a situation where an Argentinian family uses Viva to obtain a 13% mortgage instead of one at 20+%. The savings would dwarf our Costa Rican example.
Why Viva? That’s why. Join us: www.vivanetwork.org
