How Home Secured Loan Works

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There are various forms of lending on the market, but not always all offer good repayment terms and low interest rates. This is why often secured home loan can be the best option.

This type of credit offers very low interest rates and longer repayment terms. So if you have a good you can use it to get more advantageous loans. The basic requirement is that you have a property in your name that will serve as collateral. Many people fail to realize dreams for lack of money, but this can be changed.

This loan is also called chattel mortgage, home refinancing or home equity.

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In this credit system you offer your property as collateral, usually well above the loan amount. This guarantee allows financial institutions to extend long-term credit and very low interest rates.

Why are home loan interest rates lower?

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Institutions are able to reduce interest rates when their property is collateral especially due to low defaults.

By having lower risks of not getting the money back, she can provide better conditions for her customers.

Can you live, rent or sell the property?

During the term you finance you can fully enjoy the property, because the property will continue in your name, only with clause of fiduciary to the financial agent.

You can continue living, renting or even selling as long as you pay the debt or the new buyer transfers the financing to you and keeps paying.

Can you lose the property?

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Yes. If you do not pay the installments, this could happen. However, this process is time consuming and complicated, so this is the bank’s last option. It will tend anyway so that you can pay off the debt.

If you do not pay it can go to auction and the sale will be used to repay the debt. If the sale value is greater than the outstanding balance of the contract, the balance is returned to the borrower. The sale only provides to replace the losses and the bank cannot make profits. In addition, the good still does not earn interest and may be that the bank may not even get rid of it. This is not to say that you should relax and not pay the installments as there is still a risk of losing the property.

Advantages of Securing a Home Loan

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This modality is very suitable for those people who need a high loan amount and is gaining a lot of prominence in the middle of credit.

The credit line is free, so you can use the money for anything you want without having to justify the destination of the amount. The time to finish paying is very long. You can even have several years to pay off debts. The biggest advantage is that you can have low interest, installments that fit your pocket and plenty of time to repay the debt without compromising the budget.

How to make a home equity loan

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Like any other loan you will need to go through some steps to approve your credit. They may take longer than the conventional loan. In addition, the real estate and owner certificates must all be correct for the notary to finalize the sale. To make a secured home loan you will need to apply for it and bring the necessary documentation. Then just wait for approval and sign the contract.

Some of the required documents are:

  • ID and CPF or CNH (of the couple);
  • If single, Birth Certificate;
  • If married, Marriage Certificate;
  • Proof of Residence updated
  • Property Registration
  • IPTU Cover
  • Negative Declaration of Condo Debts.
  • Proof of income

What is the difference between chattel mortgage and mortgage? 

The difference between one and the other is in the contract made between the institution and the client. Mortgage also requires an asset to secure debt but the process is far more bureaucratic. There are so many legal barriers that make the mortgage operation unfeasible, time consuming and expensive to the financed.

These are the main reasons that institutions always choose to make collateral loans only with chattel mortgage

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With the mortgage, the property remains in its name, making it difficult for the financial institution to return the property. The other option the owner transfers the property to the institution until the end of the contract.

Alienating the property the owner continues with the property in his name and the creditor institution with indirect ownership, which will facilitate in cases where you have to resume ownership for non-payment of installments. The secured home loan may be the best solution for you. So go to a financial institution and analyze this possibility. See also the article Understand how real estate refinancing works.

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