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Credit: the right of borrowers

You want to buy real estate by borrowing? Whatever the nature of the credit you subscribe, the French legislation in force grants you rights protecting you. Know the right of the borrowers.

The protection of the borrower

The Scrivener Law

In effect since July 13, 1979, the Scrivener Act provides the borrower with protection against loan abuse. It applies to all loans financing the purchase of real estate for residential use or for professional purposes, the acquisition of building land, the carrying out of renovation or construction work of which the amount exceeds to € 21,350 or for the purchase of shares in a real estate company.

Credit offer: a 10-day cooling off

The right of borrowers to issue a loan offer:

When you receive an offer of credit issued by a lending organization, to be sent by registered mail with acknowledgment of receipt and include 3 copies, you have 10 days to think about it to review it and make your decision. As this reflection period is mandatory, you can not send a reply by mail until its end. The credit offer remains valid for one month from the date you receive it. You therefore have 20 additional days, once the cooling off period has expired, to study and compare the offer, and give your answer.

Conditions precedent for a real estate purchase

During any acquisition of a property, the buyer benefits from conditions precedent of sale. These can be applied to obtain a loan to finance the acquisition. It should be noted that in the absence of obtaining within the fixed deadlines, the purchaser can recover his deposit of guarantee because he is no longer bound by the promise of sale (or reservation contract). Conditions precedent to sale also apply if the building permit is refused. There is then nullity and non-existence of the demand for credit. In the case where the purchaser contracts several credits, those whose amount is greater than 10% of the total loan must be concluded under the condition precedent of other credits.

The pre-loan offer

Any prior credit offer must specify the elements allowing the borrower to make a decision. These are:

• Identity of the lender, the borrower (and sureties)
• Nature of credit
• value of the loan
• Terms of the loan (schedule, interest, release of funds …)
• TEG (Total Effective Rate) and total cost of the loan
• Insurance and guarantees requested (loan insurance, mortgage …)
• Conditions of credit transfer
• Amount of loan cancellation fees
• Time for reflection

How to get out of Debts Further editorial at nasfonline.org

The hostile economic context in which we live is characterized by inflation and unemployment. Yes, getting out of debt now is a bit more complicated. The indicators of people and companies in default have been increasing . The difficult task of doing a financial planning in the future and the fact that there are no entities that offer loans at a fixed rate, forces people to take on more debts than they can afford.

This is how people have increased their payment commitments, having more expenses than income, which for various reasons they have contracted. Now, when it comes to the point that the money that has been earned is already due, then in most of the times the wrong decisions are made. This forces us to resort to the different options that may exist, but choosing the one that, instead of minimizing the debts, increases them. Getting out of debt does not happen in a day, but it is definitely possible.

Actions to consider to get out of debt

There are several methods that can be implemented to get out of debt , either by paying the lesser amount up to the higher one. Or on the contrary, starting with the payment of the one with the highest interest rate. Regardless of this, the first thing to do is define the parameters to be met. It is necessary to design the strategies to follow and initiate the steps that will allow the elimination of debts. These debts truncate the financial stability of people. To do this, firm and smart decisions must be made in the short, medium and long term.

A design in the strategies to implement allows identifying every detail to get out of debt. Among these are loans and credits acquired, as well as fixed expenses. Likewise, a list must be made with fixed income, in the short and medium term. The main reason is that they allow to define exactly the assets and liabilities of a person.

Once this information has been obtained, it is important to prioritize the debts, considering who is owed, how much, the terms in which you can pay and the interest rates to pay, being able to use as a first strategy to reduce expenses, eliminate unnecessary or increase income.

Paying the Debts

When the first debt has been paid, it must be removed from the list. This does not mean that new payment commitments can be acquired since, instead of leaving debts , they would be increasing. In these cases, what must be done is to pay the next one on the list, being able to do it in a shorter term. This would minimize the risks of a negative credit history.

We can not leave aside the entrepreneurs who understand that financing is key in every company to develop. Keep that development constant and grow over time. However, in the absence of money they are forced to incur debts. If these debts accumulate, they create a significant financial problem that can lead to bankruptcy. That is why it is also necessary to be prepared to face this type of situation and get out of debt on time.

Negative Effects in the Credit History

The main reason is to avoid negative effects on the credit history of a person or company. It is important to indicate some recommendations that must be considered to get out of debt . In this sense, debts must be controlled by creating a monthly budget. This constantly monitoring the basic expenses so as not to incur the unnecessary ones.

When you have several outstanding debts, it is recommended as a first option to prioritize the payment of debts with high interest. This helps us avoid default, especially when it corresponds to vehicle or mortgage loans. This is because of their high quotas, which can generate a problem in the short and long term. This may cause legal action to be taken against you.

In conclusion, poorly contracted debt can destabilize the personal, family and even business economy. And this is the importance of encouraging financial education for people, workers and families. A simple design for the development of a revenue recording system, planning of expenses, construction of balances and possibilities of saving, investment, indebtedness or expense, will not only help to get out of debt , but also will allow to avoid errors that entail a over-indebtedness

The most common loans

In bank loans there is a creditor and a debtor. The creditor gives the debtor a certain amount of money for a certain amount of time. The condition for the loan to be made is that when the debtor has to repay the loan. In the initial contract of the loan, it is agreed to return the money at a rate of interest.

Mortgage loans begin when the loan is made to the interested party. There must be a guarantee of by means, which is a housing in the largest of cases. It is the duty of the debtor to comply with the initial conditions of the loan. If the debt is not settled, the debtor’s house will become the property of the creditor. The loan can not be more than 80% of the value of the home; in this way it guarantees its usefulness.

Other types of loans

Student loans, student loans, are becoming increasingly popular in the United Kingdom. Banks promote their loans, boosting education and making them attractive to student families. The loan of studies tries to improve the offer of the scholarships, since in the long term and with a good volume the bank ends up gaining very significant utilities. Interest on this type of loan is relatively low compared to other types of loans.

The loans to the consumer are short-term and in smaller amount of money lent. The government can finance durable consumer products such as a television, a car or a motorcycle. All kinds of durable products in general, extra or unforeseen expenses. You can purchase services, as well as goods.

The business loan is quite opportune to start a business. The project is justified before the financial institution and the company is founded. When a company wants to expand, or start a project, it is also very profitable. When there is not enough liquidity flow and the company requires some extra expense, it is also requested. Before the current crisis and the proliferation of Small and Medium Enterprises, business loans increased their demand.

The loan and its benefits

Signing of a loan contract

There are several options for this type of loans, in turn fight the economic crisis of your country if it exists. Crowfunding is a collective financing for projects of very high magnitude. There are an infinity of projects that involve impressive capital. Sometimes a single financing is not enough for a transnational company to have enough liquidity to grow. This option, called crowdfunding, can also be used for political campaigns.

The credits now are sub-classified loans in different ways. Traditional credit, commercial credit, consumer credit and mortgage credit. On the other hand we have the consolidated credit, pledge credit, personal credit, fast credit, syndicated credit, educational credit, automotive credit, mini credit, micro credit and business credit.

For all the credits mentioned above the only thing that will vary are the parameters of all. These sub-classifications are mainly: the amount of the amount borrowed, the form and the periods in which the payments will be made. The interest rate, which depends on the need of the person who needs the loan. The more you lend me the more you charge me. All this is agreed at the time of signing the contract.

Advantages and disadvantages

The advantage of loans, for example, is that in Real Estate, most assets increase over time. It is totally profitable to request a loan for the acquisition of a home. Or even the same land, to later build a house. With the passage of time this house is increasing its value, a good business. This is an example of a profitable business.

The disadvantage of loans is the debtor’s lack of commitment towards the creditor. Today the economy is much more volatile than it was before, and people have to uncover a hole to cover another.
A loan is a money that we have to pay back, and you have to be smart when it comes to applying for it. There is no consistency in spending money that you do not really have. There has to be a considerable economic balance before even thinking about applying for a loan. There are professionals dedicated exclusively to that, to lend money to people who did not know how to take care of their economy from the beginning.

The Banks are dedicated to saving our money and charging us only a little for this task. They also dedicate themselves to lend us money that later we will not be able to pay, if we are not smart.

What is real estate refinancing?

Still little known in Brazil, the concept of real estate refinancing and the way of doing so generate many doubts. Other forms of credit, such as loans and amounts available on overdrafts and credit cards, end up being the most sought after.

Refinancing a property is an excellent alternative for people who need a good amount of money, to carry out major projects. Credits: Klaus Aires

However, getting extra cash from these forms generates more interest and pays off less compared to any type of refinancing.

This type of transaction consists of obtaining credit, with the property being given as guarantee in case of non payment of the parcels. The modality is similar to the mortgage, in which the property is not owned by the creditor, although he has the power to auction it if the commitment is not removed. The difference is that in refinancing, the house or apartment becomes the property of the financial institution.

In the United States, this is a very common way of getting credit.

This type of refinancing has arisen for clients who need a larger amount of money to undertake major projects such as remodeling a home or studying abroad. In addition, it is a great alternative compared to other loans where the risk of default is high.

From now on, learn how to refinance real estate and all related details.

How does refinancing work?

Also called fiduciary alienation, real estate refinancing requires a contract, which must be approved and signed for the transaction to take place.

Knowing how to refinance real estate before completing the business is critical to finding the best opportunities.

The document must include the amount that needs to be paid, the description of the installments and all related fees. In addition, it is also necessary to include a description of the property used in refinancing.

These standards are in accordance with the Securities and Debt Register.

The installments are debited directly from your checking account.

Here are some details, separated by topics, that explain better how to do real estate refinancing.

Necessary documents

If you prefer to know how the transaction will be, you can simulate the values. So you can better plan the payment of the installments. In this case, you do not need to bring any documentation.

However, if you really want to close the deal, separating the items is one way to make the process faster and less bureaucratic.

The items to be refinanced for any property are:

• CPF;
• RG;
• Proof of address;
• Proof of income;
• Proof of marital status (birth certificate, marriage, divorce or death certificate);
• Copy of the declaration of the income tax and also of your receipt of delivery;
• Property registration

Remembering that all documents must be recent and / or updated.

Terms of the proceedings

In the refinancing of property promoted by financial institutions, the installments may extend for up to 240 months (20 years). For this reason, this is an interesting alternative for people who need a good amount of money and have no other alternative in this regard.

The loan repayment period is usually long and allows for planning. Credits: Joel Photos

An even more rewarding aspect is in relation to new lending possibilities. If you initially do not get the full amount you would need, you may have access to new credits in the first five years of your business.

Total Refinancing Costs and Rates

According to the bank, interest rates may vary. Therefore, before choosing an institution, you must look for several, do simulations and calculations, in order to choose the most attractive option.

Generally, the typical interest rates of a loan like this are charged. In addition, IOF (Tax on Financial Transactions) and insurance such as Property Damage (DFI) and Death or Disability (MIP) are also included. There is still the IGP-M, which is charged annually.

Compared to other forms of loan, the amounts are well reduced. You can find rates of just over 1% a month – a very attractive ratio to credit card (approximately 12%) and overdraft (10%). These fees are also charged monthly.

Even other forms of credit have higher percentages: Personal loans range from 4% to 7% per month (according to the institution that offers them) and the store credit practices 5%.

As you might realize, a property refinance has at least 4 times smaller numbers.

What types of real estate can be refinanced?

Many types of real estate can be refinanced, both commercial and residential. Houses and apartments, in general, in urban area, can be part of the business.

Rural estates are also usually approved, as are land in general, regardless of the size of the city and the environment (urban or otherwise). The presence of a construction is not an indispensable condition for the transaction to be fulfilled.

However, to be able to refinance the property, it must be worth at least 30 thousand reais. This amount, inclusive, is assessed by the financial institution before any loan consolidation.

It is important to note that the money to be assigned to the owner of the property is not its full value. The minimum value for this type of transaction is 20 thousand reais and the limit is 50% of the value of the good. The amount to be released, however, is due to some factors, such as the customer’s payment capacity (which is analyzed previously) and the level of contact with the financial institution that transfers the loan.

Likewise, the apartment, house or land must be removed and all documents in order.

Another important aspect is in relation to the survey of the property. Prior to refinancing approval, all of its characteristics are evaluated, mainly in relation to its physical and structural states.

For the negotiation to take place, the property must be in the name of the applicant. If this is not the case, other forms of credit are available, such as personal loan.

Throughout this text, you have seen how to do real estate refinancing and all topics related to its implementation, such as the necessary documentation, inspection, deadlines and amount to be released. He also knew the best times for which this type of credit is advantageous.

To learn about other forms of loan and their utilities, read the content already published on the website. Through it, you have precious information to make the best decision when it comes to credit.

TIN is the acronym of Nominal Interest Rate and is a percentage established as payment for borrowed money.

In addition to the TIN, there is the APR, which is the Annual Equivalent Rate and indicates the effective cost of a product.

Simply explained, TIN is the percentage of interest that banks use for the loans they give us.

Also, you should know that just knowing the TIN does not have the total cost of the loan.

As for the times to pay the TIN, we have:

• Daily.
• Weekly.
• Monthly.
• Quarterly.
• Biannual.
• Annual.

Although the most common is to make these payments on a monthly basis, it is a decision you make with the bank.

It is important that you know that the amount in your payments varies according to the time you have to pay them.

The more time they give you to pay, the greater the total amount of interest.

Does TIN apply to everything you buy on credit?

Although it is related to all your purchases, it does not influence each cost, because it is the percentage that remains for the bank.

In other words, that Nominal Interest Rate is applied to the total loan, not to each item that you are going to buy with it.

Let’s go with an example in numbers:

If you ask for a loan of 200,000 pesos to pay in a year and the annual TIN is of 8.5% it means that you will pay 17,000 pesos of interest.

In the same way, you must choose wisely how long you will pay the interest, we explain why:

for a loan of 10,000 pesos with an annual TIN of 6% you will end up paying 600 pesos of interest.

However, if the interest rate is daily, you would end up paying 219,000, yes, it seems crazy! but that’s why we tell you that you should analyze it well.

In simple words: it is not the same to pay 6% in 12 installments than to pay 6% in 365 installments.

All this, in turn, has caused most banks to establish a one-year payment period.

Do all banks have the same percentage?

This variable is another thing to take into account.

The Nominal Interest Rate may vary depending on the bank, therefore, we recommend that you quote from different companies.

Sometimes, your credit history can influence this percentage. how? Here we explain it to you:

1. If the bank sees that you have outstanding debts or delays, it is likely that they will place a high interest rate on you.
2. In the same way, they may not allow you so many installments to pay, but they want you to pay in a short time.
3. If your record is good, you will have more freedom to pay, since the bank will trust you.

How many types of interest rates are there?

Interest rates have different applications depending on the system that applies them.

For example, in the banking context we work with different interest rates:

• Active interest rate, which is the percentage that banks charge for different types of credit services.
• Passive interest rate, where the percentage is paid by a banking institution to whom he deposits some money.

What determines interest rates?

This is a variant where each country is autonomous, however in the case of Mexico the main determinants are:

• The production
• Unemployment
• The money
• Inflation

Let’s talk about the Mexican reality

Interest rates in Mexico are currently the highest in Latin America, and this makes it increasingly expensive and more difficult to apply to a bank loan.

This, in turn, limits consumption and decreases productive investment.

In December 2016, the Bank of Mexico increased the base of the benchmark interest rates by 25 points. What also affects the banks.

Therefore, as the cost increases for banks or financial institutions, it also increases for users.

Which markets are most affected by this increase? the automotive, the housing and the high-value technological products.

All these aspects affect both the country and the community, because there are fewer purchases, the supply increases and demand decreases and the less income the financial institutions receive, the less loans they can make.

In conclusion, it is important to be aware of all the changes in economic and financial matters, because many times although we believe that they will not affect us, they do influence even directly in our lives.