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Know what are the risks and rules of Home Equity!

Fast credit, competitive rates and total freedom of use are some of the factors that make Home Equity the ideal solution for those who need to “put their house in order” and reorganize their finances. Although there are several advantages, you need to be aware of the risks and rules of Home Equity to avoid debt and not compromise your assets.

With this in mind, we have prepared this post that explains in detail how this modality works, what are the main benefits and how to protect yourself from the risks involved in the process. Read on and plan your investment wisely!

After all, what is Home Equity?

This is a type of credit with real estate guarantee. This means that when asking for a loan, your property comes in as a guarantee that you will honor the debt. It is not necessary to prove the purpose of the funds and it is enough to have a property duly paid in your name to make the transaction.

As Home Equity involves a certain level of risk, it is essential to apply with a specialized company. Thus, you will have a financial consultancy in all stages of the procedure. In addition to guiding the operation step by step, the consultants are also responsible for finding the best conditions for your pocket. So, you can trust!

What are the main advantages of Home Equity?

Before detailing the risks and rules of Home Equity, let’s look at the immediate benefits of the transaction.

Freedom to use credit

The use of Home Equity resources depends exclusively on your need, that is, you do not need to prove the destination of the money. The credit can be applied to pay off previous debts, invest in a second property, open your own business, pay for your children’s college, take that dream trip or even to catch your breath in times of crisis – among other possibilities.

Differentiated interest rates

Interest rates on Home Equity are among the lowest in the market, especially when compared to interest on traditional loans. It is no coincidence that personal credit is one of the main factors responsible for default rates in Brazil.

To give you an idea, while on other credit products, interest can reach up to 15% per month, some types of Home Equity have a rate of 0.94%. Not to mention that the credit value also tends to be considerably higher – remembering that the maximum limit in most cases is 60% of the property’s valuation.

Long-term discharge

Another indisputable advantage of Home Equity is the payment term, which can be paid in up to 120 months, the equivalent of ten years. This is almost a property financing term! Such period may vary according to the financial institution, but, without a doubt, the client will have much more time to settle the debt than in conventional modalities, which usually have an average term of five years.

In many cases, benefits are decreasing, which is also a benefit. Thus, in addition to the fact that the installments are smaller than in other loan products, they still decrease gradually each month. In this way, you will be able to ease your pocket well ahead of what you imagine, and you can even plan for future investments.

Real estate professional explaining home equity advantages to client

What are the rules of the sport?

As we have seen, in Home Equity you offer your property as a guarantee for obtaining credit. However, this does not mean losing possession of the good. The property can normally be used by users, however, it will be sold to the bank during the contractual period of the loan. As soon as the debt is paid off, the owner will have full ownership again.

As it is a fast and easy credit modality, without bureaucracy, Home Equity has no complicated rules. To make the request, it is enough that the property is in the name of the applicant and free from legal disputes. The required documents may vary depending on the bank branch. But, generally, the following items are mandatory:

  • ID and CPF of the applicant;
  • proof of income;
  • proof of address;
  • property documentation.

The steps are also simple, which allows more agility in the transaction so that you can get your plans off the ground as soon as possible. There are four basic steps:

  • request for proposal: the requester sends his proposal to the company through the service channels;
  • credit analysis: within 24 hours after sending the proposal, the applicant receives the analysis response, made under personalized conditions;
  • analysis of the documentation: the applicant submits his personal documents and the property in question to be evaluated;
  • credit release: the contract is issued and, once registered with a notary, the credit is released in the applicant’s account.

What are the risks involved?

Like all credit alternatives, Home Equity also presents a certain degree of risk. In this case, if the customer does not pay the debt, his property may end up going to auction. However, we can say that the level of risk is minimal if the applicant has carried out good financial planning and is well advised to file the order.

Programming well is essential because it allows you to know for sure how much of your income you can commit to the installments, in order to pay them off, without stress. Therefore, before applying for the credit, make a careful planning and define your budget very well. Then, look for the right company to guide the process.

The choice of the institution also makes all the difference in the results. Being properly assisted from the first contact until obtaining the credit generates more transparency and security in the transaction. That way, you can be sure that everything is going on legally and according to your purchase profile. As a result, the risk level is practically zero.

So, now that you know the rules and risks of Home Equity, stay focused on your planning and take the first step: go in search of a trustworthy company to mediate the transaction and ensure that you make the best use of it this investment!