Get to know the 5 main types of real estate credit
Some words are constantly used in everyday life. Therefore, it is natural for people to stop to think about its meaning. An example of this, is the term “real estate credit “.
You certainly know that it refers to capital for the purchase of real estate, but do you know how this access is given and what types of credit are available in the market?
There are several credit options, each offering different advantages and can be recommended for one purchase, but not recommended for another.
If you want to understand more about this topic, read the article until the end!
Types of credit: what is real estate credit?
Real estate credit is a product offered by financial institutions in order to facilitate the purchase of real estate. After all, investing in real estate requires a lot of capital and most people don’t have that much money to buy a house or apartment in cash.
In many cases, the purchase in cash is not even so advantageous, because money that could be available or invested, generating income, becomes a property. To get that money back, the investor needs to sell the property. Therefore, we say that the property is an investment with low liquidity, as it does not turn into capital quickly.
This is one of the reasons why people choose to invest capital and buy a property through financing. In this way, they continue to have access to the money and do not delay the purchase of their house or apartment.
The real estate market plays a very important role in the economy of any country. It generates millions of jobs and meets the social needs of housing and the interests of investors. For this reason, the government usually makes decisions that encourage access to real estate financing, by reducing interest rates, for example.
In order to have access to a real estate financing with advantageous conditions, it is important that the investor has resources saved to make a good cash inflow in the purchase. Thus, the value of the financing falls and the risk of the bank suffering from bad debt as well.
The more the financial institution perceives the buyer as a good payer, the better the terms of the financing it can obtain. So, avoid getting into debt to reduce the risks of having your name negative. That’s because banks usually score people according to their payer profile. This assessment is called a “credit score”.
Now that you understand what bank financing is and what it does for the economy, it’s time to learn about the types of credit available.
1. Types of credit: Financial Housing System (SFH)
SFH is the most popular real estate financing system in Brazil. It is regulated by Law 4.230 of August 21, 1964. The funds for financing are the result of investments in Brazilian Savings, in addition to the resources of the Guarantee Fund for Time of Service (FGTS).
This system imposes a maximum value for the property that can be financed. Currently, this amount is R $ 950 thousand for properties located in the states of São Paulo, Rio de Janeiro, Minas Gerais and the Federal District. In the other states, the maximum ceiling is equivalent to R $ 800 thousand. As of 2019, the maximum value for properties financed by SFH will be R $ 1.5 million – regardless of the state.
In this system, there is a maximum amount for the interest rate that can be charged. Nowadays it is 12% per year. It is possible to finance up to 80% of the property through this system. In addition, it is important to remember that the contractor must live or work in the same city in which the property is located, cannot have a second contract through SFH and neither can another property in the same city or metropolitan region. The property must also be residential. In SFH it is possible to use the FGTS balance to enter the financing.
2. Real Estate Financial System (SFI)
The SFI does not impose a limit on the value of the property to be financed or on the interest rate charged on this type of credit. The resources for this financing are the result of customers’ investments in the banking institution.
In SFI, the client only becomes the owner of the property after paying off the debt, as the property is under fiduciary sale. It is possible to finance commercial properties in this modality. In SFI it is not possible to use FGTS resources to reduce debt.
3. SAC table
This is not a system of rules governing financing, but a type of debt repayment. In the Constant Amortization System (SAC), interest is charged on the outstanding balance, therefore, as the customer pays the financing, the value of the installments decreases. It is the most used system.
4. Price table
In this amortization system, the customer will have financing with fixed installments. However, it is important to clarify that the composition of the value of these installments will be different during the financing. The first installments prioritize amortization, while the last installments bear most of the interest.
5. Increasing Amortization System (Sacre)
This is a little-used option. In this type of amortization, the first installments have a lower value and, as the payment is made, monthly fees become more expensive, having their cost reduced again at the end of the financing. A calculation is made every 12 months based on the amounts paid. It is based on these payments that the value of the next 12 installments will be defined. This recalculation will obey this time interval.
As we saw in this article, there are many factors to be analyzed when it comes to types of credit available on the market. The client will need to prepare in advance to be able to choose a property that meets one of the financing options (SFH and SFI), planning to choose the best way to repay his debt.
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