Discover the types of real estate financing and find the best one for you

Conquering your own home is, without a doubt, a great dream of every Brazilian. However, many cannot do it due to the lack of money to pay for the property’s value. To accomplish this goal, do you know the types of real estate financing?

If you’ve identified yourself with this situation, don’t worry. We have the ideal solution for you to get out of rent and finally buy a property: make a mortgage.

The market offers different types of real estate financing and, when coupled with an effective payment planning, it is possible to acquire a home without having to wait to accumulate the full amount of the property.

This process still leaves many people confused about which criteria influence credit approval or not. Curious to know what types of mortgages exist?

Follow the article we have prepared for you to understand everything about real estate financing and find what best fits your needs based on the interest rates of the banks!

What is real estate financing and how does it work?

The real estate financing, also known as housing finance, is nothing more than borrow a sum of money from a financial institution to invest in buying a property.

The long-term credit line loan is made through a contract agreed between the buyer and the lender, defining the clauses according to the type of real estate financing chosen.

The process takes place as follows: the buyer pays a down payment, borrows the remaining amount and divides it into installments to be paid with interest and charges in up to 35 years.

Generally, banks suggest a down payment of 10% of the total value of the property. However, if the buyer wants to pay more, the financing amount decreases.

Some factors are taken into account to define the amount borrowed. Check out:

  • The Type Of Property;
  • Reference Rate;
  • Bank Fees;
  • Financing Time; And
  • MIP (Death Or Permanent Disability) And DFI (Physical Damage To Property) Insurance.

Banks have different financing programs. Just analyze the options available in your city and choose the one that best fits your financial conditions.

Use a real estate financing simulator before looking for a financial institution to know a little about the loan values ​​and conditions.

[E-BOOK: What do you need to know before buying your dream home? ]

Amortization rates

In the financial area, the term “amortization” means to write off a debt in installments. However, when large amounts are worked out over a long period of time, many fees end up being included.

Observing the equation below, it is read that the amortization is equal to the installment minus the interest. It is valid for all amortization systems, modifying only the way to arrive at the values ​​of each item in the equation.

AMORTIZATION = INSTALLMENT – INTEREST

Check out the three types of amortization system available in the country:

1# Constant Amortization System – SAC 

As the name implies, amortization is maintained throughout the entire process, being the first point to be calculated and defined. The monetary value is calculated based on the interest rate applied to the outstanding balance amount.

The portion, in the Constant Amortization System table, is the result of the sum of amortization and interest.

2# French Amortization System – Price

The Price system is the least used in Brazil. In it, the installments are fixed, the interest, decreasing and the amortizations, increasing. In the beginning, the benefits are low, but they increase after application of the reference rate (TR).

Due to the high rates of inflation, this system was reformulated, starting to adopt indexes that readjust the installments based on the increase in prices.

Here, the installments are made up of an installment of amortization and interest, and vary throughout the financing period.

3# Increasing Amortization System – Sacre

The Increasing Amortization System is actually a combination of the two previous systems. Its benefits increase over time, but only up to a point. From there, they start to decline.

Much like the Price System, the readjustment of Sacre installments is associated with reference rates and, over time, amortization grows and interest falls.

The advantage offered by Sacre is that, as the installments fall during the financing period, the risk of default decreases in parallel.

Would you like to learn how to finance an apartment? Check out our article!

 

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What are the types of real estate financing?

The two main ways to finance a property in Brazil are:

  • Housing Finance System (SFH); And
  • Real Estate Financing System (SFI).

Let’s get to know the characteristics of each one.

Housing Finance System (SFH)

The Housing Finance System is a type of real estate financing that was developed by the federal government and is guaranteed by resources from the Government Severance Indemnity Fund (FGTS) and the Brazilian System of Savings and Loans (SBPE).

A real estate financing made by the SFH must have the following characteristics:

  • Maximum Appraisal Value Of The Property Must Be:
    • R$950 Thousand For Minas Gerais, Rio De Janeiro, São Paulo And The Federal District;
    • R$ 800 Thousand for the Other States.
  • The Installment Cannot Commit More Than 30% Of The Contractor’s Monthly Income;
  • The Debt Repayment Term Is Up To 35 Years (420 Months);
  • Can Only Be Performed By An Individual;
  • The Resource Base Comes From The Savings Account And The Severance Pay Fund (FGTS);
  • The Interest Rate Can Be A Maximum Of 12% Per Annum. In 2018, The Minimum Rate Dropped From 10.25% To 9% Per Year;
  • The Percentage Of The Maximum Value For Real Estate Financing Is:
    • 70% For Used Properties;
    • 80% for New Units.

This type of real estate financing also offers 50% discount on registration and deed of the first property.

Real Estate Financing System (SFI)

Also created by the federal government, the Real Estate Financing System aims to meet the needs of the Housing Finance System – it serves values ​​valued at more than R$ 800 thousand and R$ 950,000, depending on the region.

Due to the greater risk, interest rates on financing end up being higher and fluctuating.

An SFI financing must have the following attributes:

  • The Appraised Value Of The Property Must:
    • Exceed R$ 950,000 For Minas Gerais, Rio De Janeiro And The Federal District;
    • Exceed R$ 800 Thousand for Other States.
  • There Is No Committed Income Limit;
  • The Debt Repayment Term Is Up To 35 Years (420 Months);
  • The Value Of Financing Grant Varies Between 80% And 90% Of The Property’s Value;
  • Can Only Be Performed By An Individual;
  • Variable Interest Rate (In 2018, The Minimum Rate Dropped From 11.25% To 10% Pa)

How to choose the ideal type of real estate financing

After knowing the types of mortgages and the amortization rates, it’s time to choose the best offer for your financial situation.

Check out some tips for hiring the best type of mortgage:

1# Use the same criteria for all simulations

When getting to know the types of real estate financing, use the same criteria for all options, for example:

  • Property Value;
  • Financing Amount;
  • Fees; And
  • Term of The Operation.

Remember to note whether the financing of ITBI (Tax on Transmission of Real Estate) and Registration expenses will be included in the simulations.

2# know the hiring prerequisites

When you go to the bank, try to find out what you can do to get better payment terms, such as porting your salary to this bank in order to have special rates.

3# compare your property’s appraisal value

In all real estate financing, there is an appraisal of the property, and it is based on this that the maximum possible value for the release of credit is defined.

With these numbers in hand, compare the amount that banks will charge for this assessment.

4# MIP and DFI Insurance

All real estate financing operations have two housing insurances:

  • Death And Permanent Disability (MIB); And
  • Physical Damage to Property (DFI).

In many cases, the better payment terms offered by banks can be linked to expensive insurance.

So compare the price of insurance from one bank to another.

5# compare the value of the installments

In this step, compare the value of the first simulation installment of each bank plus the ancillary expenses. This way, you will see the total and real value of your mortgage.

 

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