Real Estate is Royal Estate, Mortgage is Debt Pledge, Finance a Penalty

Yes Real Estate means Royal Estate, Mortgage  means debt pledge and Finance means penalty. We often use words without understanding why they are called so. This post is about etymology of Real Estate, Mortgage and Finance.

Let’s start with definition of real estate.  As per About.com, Real estate is a broad term than refers to:

  • Residential new homes and existing (resale) homes,
  • Commercial shopping centers and offices,
  • Industrial and manufacturing buildings and property,
  • Vacant land and farms.

Also Known As: Housing, land, commercial, property. Everyone who owns a home owns real estate.

Real  is it not Real or Tangible?

I used to think that real in real estate meant something real or tangible as in reality shows or real numbers in maths. But the other day reading about football match between Real Madrid and Barcelona, I was struck by the word Real in Real Madrid. I mean all football clubs or teams have to be real right!. On googling found that Real means Royal in Spanish. Most of the Spanish clubs prefixed their name with Real ex:  Real Madrid, Real Sociedad, Real Betis, Real Club Deportivo de La Coruña and Real Unión. Real Madrid club is the world’s richest football club (€438.6m) in terms of revenue and the second most valuable worth over €1.4mld in 2011. These clubs enjoyed the patronage of Spansh royal family. If you look at the emblems of these clubs you will notice the royal crown.
Football teams logo with crown

Football teams logo with crown

Royal Patronage

The tradition began in 1902 when clubs suggested a football tournament to honour the coronation of King Alfonso XIII. The tournament was named Campeonato de España – Copa de Su Majestad el Rey de Fútbol (Championship of Spain – His Majesty the King’s Football Cup) or Copa Del Rey meaning the King’s Cup. King Alfonso XIII subsequently became the patron of many Spanish football clubs, granting them permission to use “Real” in their names. On 29 June 1920, Madrid Football Club received a communiqué from the Primary Superintendent of his Majesty the King Alfonso XIII which granted Madrid the title of Real as per RealMadrid.com.It was found that earliest meaning of ‘real’ in English included “Of, relating to, or characteristic of a monarch, royalty, or (by extension) the nobility, esp. with regard to power, wealth, or dignity; (also) befitting a monarch”.  Etymology of real can also be traced to French in which real means royale, from Latin regalis, royal, regal, from combining form reg-king, + suffix -alis

Real a currency

Real is was a unit of currency in Spain for several centuries after the mid-14th century, but changed in value relative to other units introduced. In 1864, the real was replaced by a new Spanish escudo, then by the peseta in 1868, when a real came to mean a quarter of a peseta.
The real is the present-day currency of Brazil. Its sign is R$ and its ISO code is BRL. It is subdivided into 100 centavos. In Portuguese the word real means both “royal” and “real” .
Real currency

Real Estate

Coming to real estate. In the feudal system, King was the owner of all the land and everyone who occupied land paid him directly or indirectly. Indirectly through lords who in turn paid the king. King was paid in cash, goods or services. Remember movie Lagaan starring Aamir Khan.  Property Tax paid to government can be seen as relic of that system. As per Robert Kiyosaki, author of Rich Dad and Poor Dad, in his book Cash Flow Quadrant says, Today usage of real estate continues because no matter how much you pay for it, it never really belongs to you. It still belongs to the royals. As per Wikipedia The oldest document using a term recognizable as ‘real estate’ in historical records is dated 1605.

Mortgage

Mortgage or Home Loan, is a  loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower(mortgagor) gives the lender (mortgagee) a legal claim ( lien) on the property as security(collateral) for the loan. If you don’t pay the debt, the lender has the right to take back the property and sell it to cover the debt.As per etymology(Ref:Wiki) mortgage comes from French mort gage (“dead pledge”) apparently meaning that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure , or Latin mortuum vadium.
Mortgage burden

Home Loan or Mortgage burden

In our earlier post,It’s not what you earn that makes your financial position! , we had talked about one Mr M.D from Subramoney.com:Risk strategy not Investment Strategy .

He bought a house in Navi Mumbai for about Rs. 80 Lakhs, – of this about Rs. 55 lakhs was funded by a loan from the State Bank of India. Over the last 4 years he had paid a lot of interest, but the principal outstanding was still Rs. 52 lakhs. He just lost his job. What is at stake- Household expenses (including children’s school fees) -Rs. 100,000, EMI    Rs. 52,000 .  

For example if one takes a home loan a large amount is paid in interest, (sometimes more than the loan), as shown in the picture below. For a loan of 50 lakh rupees taken at 11% for 20 years one needs to pay around 74 lakh of interest only(73,86,160 Rs to be exact).  Then does it make sense to buy a home on loan? Is your home really an asset?

Home Loan

Home Loan: Interest Payment

 

Finance

As per Wiki , Finance has come From  English finaunce, or from  French finance, from finer (“to pay ransom”) or English fine  “to pay a penalty” , from fin  “end”, from Latin fīnis. Original English in around 1400 finance meant “ending”. Sense of “ending/satisfying a debt” came from French influence: in sense of “ransom” mid 15th century, in sense of “taxation” late 15th century. In sense of “manage money” first recorded 1770.
Did you find the article useful? Do you agree or disagree with the definitions or etymology of the words.

Disclaimer : This is an information based website, meant for providing assistance to it's readers. We do not hold any responsibility for mis-information or mis-communication.