Real Estate Refinancing: Clarify Here 5 Questions!
Home refinancing is an interesting option for those who need a secure and cheap line of credit. Its model of fiduciary sale of the property as collateral brings security in the negotiation, allowing the practice of lower interest and longer terms for its settlement.
Although they are similar – because they use a collateral property, they have extended repayment terms and low interest rates compared to other loans – real estate refinancing should not be confused with ordinary property financing. After all, each modality has its utility according to the purpose of the borrower.
Check out the main differences between these modalities and find out which one is best for you.
Refinancing and Real Estate Financing Differences
Home financing and refinancing are two forms of credit in which a home is the guarantee of repayment by the borrower.
However, in the first, the credit is specific for the purchase of a real estate property, which is the guarantee for its payment.
Thus, the value of the credit is relative to that of the property to be purchased. In addition, it is passed on directly to the seller through a contract between the parties and the lending institution.
In refinancing, the borrower places a property that is already his property as collateral for the loan. The credit amount is based on the value of this property and is directly deposited in your bank account and can be used for any purpose. The market practice for this type of credit is to be released between 50 and 60% of the appraised value of the property offered as collateral.
Interested in refinancing your property? So read on and ask other questions about this modality!
Top 5 Real Estate Refinancing Questions
1. Is refinancing cheaper than a personal loan?
As it has a property sold as collateral, refinancing has cheaper interest rates than other types of credit, such as personal loan (or CDC), overdraft or revolving credit card.
In addition, the amount of credit available is almost always higher, given that the property is linked, as well as the term for repayment of debt.
2. What is the deadline for debt repayment?
The values may be higher and the risk is low, financial institutions offer interesting repayment terms for a home refinance.
The debt can be paid up to 15 years, facilitating the repayment of monthly installments.
3. What can credit be used for?
Since refinancing transfers credit directly to the borrower’s account and a property already settled by it is pledged as collateral, there are no requirements as to its purpose.
Thus, it can be used as working capital in a company, to pay off debt with more expensive credit terms, to pay for retirement, purchase of goods, or any other desired purpose.
4. Is it possible to prepay the installments?
In real estate refinancing it is possible to anticipate installments, repaying them in reverse order. This decreases the total financing term and consequently the interest charged, allowing greater savings and increasing the cost benefit of this type of credit.
5. What happens to the property given as collateral?
In practice, when the borrower is on time with the payment of their installments, nothing happens. He can continue to enjoy the property in the same way. The only change is that in the registration of the property, a restriction of chat mortgage will be added, being automatically released upon discharge.
This procedure is performed directly in a real estate registry and only prevents the negotiation of the property without the consent of the creditor institution.
As we have seen, real estate refinancing is a form of credit that offers a number of advantages to those who need money at low interest and without a specific destination, being a great option to pay more expensive debt or getting cheap working capital for your business. . . . . .