To many, the dream of owning a home seems like an impossible thing. Much of this perception is in the cost of a property: it is high and far beyond what the average Brazilian can afford.
In this context, there is no alternative but to look for the scenarios available in the market. The loan to buy property is one of them. However, although it seems like a very interesting proposal, there are some points to consider in this modality. In this post, we will explain to you what they are. Check-out!
What are the disadvantages of loan to buy property?
This type of loan or financing works as follows: the consumer makes an agreement with the institution to repay part of the value of the property and in return and undertakes to pay this amount in installments, with interest, for a certain period. If on the one hand the interested person obtains the property immediately, on the other hand he is subject to some conditions imposed by this modality. How:
This is one of the main problems with financing. Interest rates are often quite high and are a relevant factor in the total loan amount. Moreover, in the beginning the buyer may pay more interest than the value of the property. Since most of the first installments consist of the cost of interest.
The monthly payments still count on the amount of CET (Total Effective Cost), which are all financing expenses and that make a difference in installments.
Risk of losing the property
When closing the contract with the financial institution, one of the risks for those unable to pay all installments is losing the property. When financing a property directly on the plant with a construction company, before obtaining the keys, it is possible to go back in the purchase. This is known as cancellation.
However, in case of financing with banks this is not possible. Being allowed in cases of default for more than 3 months, the institution will take home back.
In this process happens the following behaviors:
- Notification: After the time limit is exceeded, the bank sends a notification to the debtor. It can be sent either by letter or by a notary officer.
- Property is auctioned: after the subpoena, the consumer has up to 15 days to repay the arrears. If not, the property can be auctioned in 30 days.
If the auction value is higher than the debt, the consumer gets the difference back. However, if the amount is less than or equal to the debt, it is settled, but both the property and the money already paid on the installments is lost.
To make sure that the buyer will be able to repay the loan, there are a number of prerequisites that the institutions determine. For example, the applicant must be 18 years old or older to make a loan. In the event that you are over 60 and intend to make a 20-year loan, some institutions may deny credit. For them, the maximum age until the end of the contract must be 80 years. Another requirement is to have to prove that you can commit to the benefit and that it will not influence more than 30% of your income.
There is also the input value, which is required. It may vary, as some institutions ask for 20% and others 10% on the property price. The rule is that the more you can afford, the lower the amount of interest and installments. In addition, the characteristics of the property influence the release of credit. Homes made of timber, prefabricated houses, vacation homes, farms or farms may be denied funding. This also extends to properties with some cool problem.
The person concerned should not only worry about the interest and CET rates embedded in the installments, but also about the other expenses surrounding the financing. In doing so, he must also bear the legal appraisal and analysis of the property. They can cost from $ 960 to $ 3,900.
The SFH (Housing Finance System) is another monthly fee, permitted by law, charged on this type of loan. It costs around $ 25.00 and can reach $ 9,000 if the funding lasts 30 years. There is still the ITBI (Real Estate Transfer Tax), a rate charged on the value of the property and which depends on the municipality. Usually it equals 2%. This cost exists in any type of property purchase. Permanent Death and Disability (MIP) and Physical Property Damage (DFI) insurance is also required to provide financing.
The value of these insurances is calculated monthly and increases with the age of the owner and the price of the property.
This is a tricky issue, because when you are contracting for a long-term real estate loan, such as a 20-year, it is not just the installments and extra costs that you have to worry about. You need to be aware of any unforeseen issues that may arise and prevent the contract from being fulfilled. And this is due to unforeseen events such as unemployment, other debts and even the deterioration of the property, which will generate additional costs.
In addition, the property does not belong to the owner until it has paid all installments. Until then, the property is alienated to the bank. It is therefore important that the person interested in making this type of loan see if it is worth it. For despite the immediate purchase of the house, there are still interest, maintenance costs, the possibility of loss due to default and among other issues that should weigh in on this choice.
What is the best alternative besides financing?
With all these requirements, financing becomes a very complicated option. In this context, the consortium turns out to be the best alternative to get a property. Unlike the loan, it has no interest rates and other effective costs, only a management fee, which is often much lower. Also, in the consortium there is no entry fee.
Your buyer’s financial situation is analyzed when you get the letter of credit in a draw or bid. We hope this article has helped you understand why it is not worth repaying a loan to buy property. Interested in the possibilities offered by the consortium but have doubts about the operation? So learn more about the consortium market and stay on top!