Over the years, Brazil emerged in new forms of credit, for both corporations and individuals for. One of these modalities is the home equity.
O home equity It is still not as popular in Brazil as elsewhere, but its use is growing. This mode allows the payment is made in an elastic term andwith reasonable interest.
What is home equity?
Home equity is a form of credit with collateral property. With him, the loan lender receives, the debtor, a property as a guarantee for the operation, becoming his owner until they pay the debt.
Like this, You give yourself a process of liens withProperty guarantee. The borrower transfers the property to the lender's name until all debt installments are paid off, According which is contractually established.
How does home equity?
The home equity emerged in Brazil in the mid 2000, when it was better known in other countries. Normally, the home equity characteristics are as follows:
- Interest is low, constituting, generally, less than 2% monthly;
- You can make payment with 24 up until 80 plots.
- Us United States, some lenders allow the first part to be repaid after 3 years, which is risky in the sense that the debtor may end up borrowing.
But whoever asks for the loan can use the money any way you want. Some possibilities of use are:
- Business investment;
- Get working capital;
- Build or renovate;
- pay off debts;
- Travel.
How is the process of lending by home equity?
To get this loan, you must have a settled property on your behalf, since it is based on property collateral.
Normally, step by step in a process credit home equity is:
- The donor receives a property of an individual as collateral;
- The funding releases for that person the amount requested, current account, no need for a specific purpose;
- The property remains in the name of the funding until the last loan installment is paid. So, the property back to the name of the former owner.
Risks and rules of home equity
To be secured by a physical asset, the risk of such credit is less. But then, existing default, the borrower can get to lose your property as part of the debt enforcement proceedings.
As the funding, as rules of the home equity They vary according to the minimum value of the property, as well as minimum and maximum loan. The debtor's income commitment to pay each monthly payment can also vary, staying, generally, between 25 a 30%.
Therefore, for the given property as collateral is not lost, it is necessary for the borrower to maintain a good financial planning to pay the installments of your debt.
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What is the relationship between equity and home mortgage?
equity and home mortgage are traditional types of loans with property as collateral, but they are not exactly the same thing. However, it is considered that the home equity is a form of mortgage.
A difference between equity and home mortgage traditional is the way the contract is fulfilled:
- Home equity: the lender owns the property by liens as the entire debt is not paid;
- Mortgage: the property or the property remains the property of the lender. This represents problems in court, in order to achieve financial receive the amount released in case of default.
Therefore, it can be said that the home equity It is a stronger form of collateral than mortgage, since its implementation in the event of default do not have to go through a bureaucratic process. After all, this results in a lower interest charge.