How Property Finance Works
February 20, 2019
Having your own home is the dream of many people. But the price is not so low, so the financial market offers alternatives for you to get your home. One such way is financing.
Financing is one of the most commonly used ways to purchase real estate. An agreement between the buyer, the seller and the bank. To clarify all your doubts of how the financing of a property works, stay tuned to the following topics.
What is financing?
The financing involves three parties, the buyer, the seller and the bank. When buying a new property, or not, the client can choose to finance. The three parties make a contract, the bank buys the seller’s property and the client, interested in the property, pays the bank the amount divided into installments. Financing is an option for those who do not have all the money to make the purchase.
Tip: If possible, add a good amount to give financing, so that the installments will be of lower value and paid in a shorter period.
What happens if the customer does not pay the bank?
If the installments are late and the debt is not removed, the property can be recovered by the bank, that is, the client will lose the property. This one, will be auctioned and the amount used to cover the expenses that the bank had.
Types of financing
As part of the Housing Financial System (SFH), only families with a certain maximum income can participate.
Interest rates are lower and the value of the property varies periodically.
Financing with the construction company
This type of financing has the advantage of being more flexible in terms of values and deadlines.
However, if the developer negotiates the property with the bank and goes bankrupt, the buyer has the risk of losing the property.
There is no restriction on the income of the buyer and it is possible to finance properties that are not in the guidelines of the SFH, however, the interest reaches 12% in this case.
How to Choose a Funding
Several banks offer various financing proposals. Which makes it necessary to research to find the most advantageous for you. When researching and analyzing the available financing, do not take into account only the value of the installments and the interest charged. What should be taken into account is the CET (Total Effective Cost) that consists of the total amount spent by you at the end of the financing.
Check out where to fund your property
In CET is included all the tariffs, taxes, insurance, taxes and interest that will be charged. When comparing the CET of two loans it is possible that one that has a higher interest rate and is more advantageous than another with lower interest rates, due to the tariffs and taxes behind the value. So, do not forget to always ask the CET of the proposal analyzed.
What are the steps of funding?
After choosing a property and the bank with the best financing offer is the time to check in with the documents. What is requested by the banks are usually the RG, CPF, proof of income and, if applicable, marriage certificate. In addition, the bank performs a credit analysis.
Then, with the credit released, the bank will evaluate with the engineers and architects the value of the venture. To make sure the price is compatible. After this evaluation, if all is correct, the three parties close the contract and the bank pays the seller. Now, the client must pay the installments agreed with the bank, the property can already be used immediately. After the period established, with the installments paid, a document proving the discharge is issued.
With all the clarity, the moment is to research the market and find the most advantageous financing.