LOANS AND CREDITS FOR HOUSES HOW THEY WORK
Home loans and credits are, perhaps, the most important type of financing of all that exist. These loans are offered through online financial institutions and through traditional banks. Many people resort to these credits to complete the purchase of their home or to make some type of repair in their home.
However, there are many doubts about home loans. If you are interested in knowing more about them you are reading the full article. You will know what they are, how they work and what benefits they have for the people who ask for them.
An easy definition for home loans is the following: it is a financial product that allows you to have the necessary amount to buy or rehabilitate a home or other property.
In order to grant housing loans, financial institutions require a guarantee before granting credit as such. In the case of home loans , the owner of the loan (the client) guarantees (real estate) the property he has just bought, which will be transferred to the financial institution in the event of a default. In addition to this mortgage guarantee, the client offers, as in a personal loan, a personal guarantee.
Giving the newly acquired asset as a guarantee gives greater security to the operation, which means less risk for the financial institution. Therefore, and because of the high amounts requested to buy a house through home loans , the repayment terms are much longer and the interest rates are lower than those of personal loans. Both aspects are a fundamental characteristic of home loans .
A loan of this type must be associated with an operating book or checking account in the name of the beneficiary.
Because of its long duration and the amount offered, the hiring of home loans is one of the most important financial operations for a family or individual.
Home loans also have interests
It is worth remembering that interest rates are the price that entities charge for making the loan of money. There are several types of interest and here we will tell you what they are:
- Fixed interest rate: The interest rate and therefore the monthly installment to be paid remain fixed throughout the life of the loan. The advantage of this modality is that the client will know in advance how much he will have to pay each month, without worrying about the type ups and downs. As an inconvenience, a higher rate is usually established at the time of contracting than for variable rate mortgages.
- Variable interest rate: The variable interest rate is reviewed annually, semiannually and on other occasions quarterly. This is adjusted to market conditions at that time, according to some benchmark.
Financial institutions grant loans for housing
For a maximum amount and equivalent to 80% of the value of the home. They do so as long as the fee to be paid does not exceed the debt limit of 30-35% of the monthly net income.
But there are also other factors that are important in determining the beneficiary’s ability to pay. Therefore, firms can make a feasibility study for clients and will require a series of documents such as: identity document, last income statement, copy of the employment contract, a housing appraisal report, last VAT declaration, among others.
Housing loans are available – through various financial entities – for all those people or families seeking financing to buy a home or make reforms in which they already have.
Before making the request for housing loans , the client must have all the collections in hand to avoid rejection of the loan. In addition, you must be sure that you can repay the borrowed money over time.
With all these tips, anyone can apply for housing loans without any problem. So you’re ready to do it.