Bank financing: how does it work?
Buying a property is certainly one of the biggest dreams of Brazilians, but few people are able to make this purchase in a single payment.
So, people opt for bank financing, that is, the bank pays the property for you, and you pay this amount to the bank little by little, through installments.
Of course, it is not enough to just pay the value of the property to the bank. An interest rate will be charged.
What happens is a kind of loan, in which the bank lends you the money to buy the property and, over time, you pay it back. And, like any loan, the longer you take to pay it off, the more interest you will be charged.
The most common bank financings are made by the Housing Finance System (SFH) and the Real Estate Finance System (SFI).
What is SFH?
The SFH was created in 1964, with the aim of helping people with lower incomes to buy their property.
The Minha Casa, Minha Vida program is an extension of the SFH (we did an article explaining better how this program works, click here to learn more).
Even if you are not eligible for the Minha Casa, Minha Vida program, you may be eligible for the SFH. See below for requirements.
- The property value cannot exceed R$1.5 million.
- The property must be registered at the Real Estate Registry Office.
- The property must be residential.
- The property must be located where the beneficiary has lived or worked for at least one year.
- The financing must represent, at most, 80% of the property’s value.
- The property cannot have been the object of another financing using the Employment Compensation Fund (FGTS) in the last three years.
- The monthly amount of the installment cannot be greater than 30% of the contractor’s gross income.
What are the advantages of SFH?
Historically, an SFH loan had lower interest rates than an SFI loan, but recently Caixa has evened the interest on both loans.
Still, the SFH has advantages, such as:
- The financing term is longer, reaching up to 35 years.
- There is the possibility of refinancing up to 50% of the initial term.
One of the biggest advantages is that you can use the FGTS to purchase the property, with some additional requirements:
- Do not have any other SFH financing.
- Do not own any other residential property, even if it is under construction.
- Have a formal contract, under the FGTS regime, for at least three full years.
If you meet these requirements, you will be entitled to access your FGTS fund and use it to purchase the property.
But, after this initial withdrawal, your FGTS fund will receive a monthly amount from your salary, right?
In addition to the initial withdrawal, you have the right, from the beginning of the financing, to make a withdrawal from your FGTS fund every two years, to help pay for the property, until the financing ends.
What is SFI?
The SFI encompasses all financing that does not fit into the SFH: luxury properties, commercial properties, properties acquired by legal entities, among others.
There is no limit to the value of the property and up to 90% of it can be financed.
In SFI financing, there is no limit to the income you can commit with the installments, that is, you can choose to pay larger installments to pay off the loan faster and, consequently, pay less interest.
Can I finance two properties at the same time?
Among the doubts that arise when the subject is the bank financing of real estate, the possibility of obtaining second financing is one of the most recurrent.
After all, can owning some financing influence the possibility of financing another property? Is it possible to finance two properties simultaneously? The answer is: currently, yes. But attention to detail!
Caixa Econômica Federal prohibited the financing of two properties by the same client in March 2015. In 2016, the decision was interrupted and the possibility of financing two properties simultaneously started to receive authorization and also more resources.
Currently, with this change, the bank started to finance up to 70% of the property’s value. If the property is used, the financing is up to 80% of the contract value.
However, it is important to remember that, regardless of the type of financing, it is still necessary to carry out a customer analysis to determine whether the credit will be approved or not.
Therefore, if the customer already has an outstanding bank loan, the bank will check the customer’s income to ensure that he really will have enough credit to manage both loans. After all, it is not allowed to have more than 30% of the committed income, that is, tied to loans.
Also remembering that, even if the client has released income, the permission for a new loan will depend on the financing line already chosen, as well as the desired financing line.
Tips for getting a good deal when closing a bank loan
Now you know which are the two main forms of bank financing that exist and which you fall into, but there is much more to financing than that.
Banks are free to negotiate interest rates with the customer. It is important that you simulate financing at different banks to see which offers the best deal.
Usually, that bank you have a good relationship with will be more likely to offer you a good deal, but this is not a rule, so compare your competition.
It’s worth spending time looking for the best bank financing, after all, it’s a commitment that will stay with you for years, maybe even decades.
In addition to the interest rate, there are other additional expenses that accompany financing, which vary from bank to bank. It is very important that you ask and finds out about everything that will be charged to you, so you don’t have unpleasant surprises ahead.
When taking out a loan, it is mandatory to also take out insurance, which will give you security in the event of an accident that disables you for work, death or any other unforeseen event that makes the property you are financing uninhabitable.