With each passing day more different types of credit appear in Brazil. Home equity is one of those new ways of making loans. The modality has been conquering many fans, because in addition to being available to individuals, it can also be used by legal entities.
In practice, in home equity, the applicant offers as collateral for the loan a property, which can be a commercial or residential property. The opportunity is available for those who need to raise funds for various purposes, since in this modality there are no requirements regarding the use of money.
Do you want to understand how home equity works and what to consider when choosing the right credit company? Continue your reading!
What is home equity?
Home equity is nothing more than a secured home loan. In this case, the person asks for a loan corresponding to up to 60% of the value of the asset, according to Resolution No. 4,271 / 2013. This property is a guarantee of payment, without the person having to sell or leave it. Payments are monthly and best of all, the installments can fit in anyone’s pocket.
This modality is already widely used abroad and is now being offered in Brazil. The requested amounts can be used for several purposes, such as:
- pay debts to organize financially;
- opening your own business;
- buying a home ;
- raise capital to negotiate.
The evaluation of the property is carried out by professionals sent by financial or banking institutions. In this way, everything will happen in a documented and totally safe way for both parties, which is extremely important.
What is the relationship between home equity and mortgage?
The traditional mortgage and home equity are two types of loan that have the lenders’ properties as the main guarantee. But make no mistake, the two modalities are not exactly the same. Its main difference is related to ownership.
In home equity, the property is transferred immediately to the name of the bank or creditor institution. In case of default, the property remains with the creditor without the need for judicial intervention. In the mortgage, the asset remains in the name of the owner and, if there is no payment, legal action is required for the property to be transferred.
Because of this factor, which seems more risky for home or apartment owners, home equity provides advantages that the mortgage cannot provide. It is important to analyze all the factors involved, in addition to the options that the market provides and choose the one that has the most benefits.
What are the advantages of home equity?
In general, we can say that loans and personal loans that have lower interest rates are good alternatives. Therefore, home equity falls into such a category. See below what are the advantages of this modality!
Since the property is the guarantee of payment, home equity has interest rates much lower than those practiced in other types of loans in the market. These rates can vary from 1 to 2% per month, which makes the modality more attractive to customers. But remember that all of this is only possible if the property is free and clear of other obligations.
Extended payment term
Another benefit that stands out is the payment time of the total amount. Home equity loans have longer payment terms than other popular types in our country. The minimum contracting period is 36 months, which is equivalent to 3 years, and the maximum varies according to the policies of the responsible company, which can reach 240 times, that is, 20 years.
The term offered in loans with collateral for property is much longer than that which entrepreneurs receive from banks. This characteristic mainly attracts entrepreneurs in need of more working capital.
Higher credit amount
In addition, home equity is one of the best alternatives for people interested in acquiring loans above R $ 50 thousand. The amount of credit provided is calculated according to the value of the property, which undergoes an inspection to verify its value in the market. The evaluation is done by a third party company and, for this reason, the security and fidelity in the numbers is reliable.
After evaluating the house or apartment, if the loan is granted, all expenses related to the credit are diluted between installments. These expenses that will cause a small increase in the installments are relative:
- notary costs;
- the evaluation of the property;
- credit opening.
The increase in the amount to be charged is so small that it is almost imperceptible. So don’t worry about those small expenses that are part of the business, but they don’t compare to the interest charged on other types of loans.
Availability for those who are negative
Another strong point of this type of credit is the fact that negative people can also purchase the service. CPF restrictions are perceived, but they do not prevent the person from acquiring the desired values. In fact, they can be used to settle debts acquired over time and which for some reason remain unpaid.
All of this is possible because the borrower offers as collateral his property already paid, providing security for the institution that is lending the money. For this reason, the financial institution believes that default will not occur and the amounts are more easily released to the owners of the properties.
Even if the credit is released, it is important to avoid taking on other debts in order to be able to repay the loan installments without delay. This prevents the property from being taken over by the financial institution, which does not want to take out the real estate from creditors, only wants to receive the amounts lent until the maturity date of each installment.
Finally, home equity is a great opportunity for those who wish to obtain resources to invest in businesses, without having difficulties in paying the installments. It is worth remembering that for this it is important to do a good financial planning, which will enable more financial comfort and ease in negotiations.
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