Requirements for a Mortgage Loan: Interests, Advantages and MORE

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If you are planning to buy your own home to strengthen your wealth and that of your family, here we will inform you about the Requirements for a Mortgage Credit.

You will also find valuable data about the interest rates for this type of credit, the types of mortgage credit that exist in Chile and thus be able to decide the one that best suits your needs.

Requirements for a Chile Mortgage Credit

If you want to buy a home to ensure your future and that of your family. We will detail the Requirements for a Mortgage Credit, with which you must comply to acquire it and that are required by financial entities.

These credits are long-term (between 15 and 30 years), there is even a specific type up to 40 years. Here are the requirements for this credit:

You must have Chilean nationality, if you are a foreigner you must have permanent residence in the territory and a age older than 18 years. However, there are financial entities that request to be over 21 years old.

It is necessary that you have at least one year of work seniority as an independent worker, and with verifiable income. If you are an employee, you must have at least 6 months of seniority with the same employer.

The commercial background is another of the Requirements for a Mortgage Credit. On which the entity will make a full inspection, and must have a good record. Which means that they must not be negative, or have debts or remain in Dicom.

Your salary and income will also be verified by the bank. Specifically salary, withdrawals, and rents. If you have tickets that vary, an average of the income per month is calculated, and thus the balance you have with a fixed monthly income is known (the fee should not be greater than 25% -30% of the liquid entries, and can reach up to a 50% in other entities).

Other documentation such as property certificates, marital status, etc. are also requested. When calculating a credit, it is suggested run a simulation in three different institutions to assess the appropriate option and the amount of the final fee.

Who cannot request it?

People who cannot request it are those who do not comply with the Requirements for a Mortgage Credit, which were detailed in the previous point.

Likewise, people who do not have the ability to pay to assume this responsibility, since it is a long-term credit. For this reason it is important to carry out an analysis on personal finances.

Scotiabank Mortgage Credit

Scotiabank’s mortgage loan has some characteristics, which we mention below:

  • They can finance up to 90% of the property with or without help.
  • It has an agreement with more than 350 real estate companies, and reductions in costs for operations.
  • When the credit is pre-approved, the certification can be obtained and delivered where necessary.
  • Calculate the credit according to the needs of the applicant, to acquire the help that is required.

Rates and interests of a Mortgage Loan in Chile

This point is very important when applying for a mortgage loan, since the interest rate is the extra percentage that is paid on the amount of money that was requested. The ideal rate for this credit can be fixed as long as the economic moment is variable.

For a mortgage loan, the interest rate has a margin set by Chilean laws, governed by the Superintendency of Banks and Financial Institutions (SBIF) and by the Superintendency of Securities and Insurance. Which is called «Maximum Conventional Rate» and is established as a monthly percentage for all financial entities.

This type of credit is the most extensive on the market. Due to the importance of obtaining a property, it is the largest amount of money that an institution can grant to a natural person.

Therefore, it is the longest financing by the amount of installments, with a duration between 15 and 20 years.

It is the percentage that you will pay on the credit balance for a large part of your life, so it is necessary to make sure you can pay it.

For mortgage credit there are three types of interest rate in Chile. We mention them below:

Fixed rate

The percentage of the credit to be paid will be the same throughout the time, even if economic variations occur. The rates are higher, and at the same time offer less risk since the monthly fee does not vary.

The Variable Rate

In this rate the percentage of the fee is check every six months or every year. Thus causing it to go up or down, everything will depend on how the economy is. When credit is requested, it is considered a referential indicator.

At the time of verification, a new percentage is established on the value of the referential indicator instantly. For this reason, the rate is lower than the fixed one and represents a greater risk. This is suggested if the person has the potential to increase their income.

Mixed Rate

This rate is the combination between fixed and variable. The bank establishes a fixed rate for a specific time (between 5 and 7 years). At the end of this period, it establishes a variable rate previously agreed by the bank and the applicant.

In Chile there are differences between interest rates. For this reason, it is essential to understand this point when requesting a mortgage loan, so that they can be used in the best way without spending more.

It is recommended that you collate and simulate opportunities that the market offers, and you can choose correctly. With this tool you can study the benefits offered by each entity and review the interest rates they offer for mortgage loans.

Advantages of a Mortgage Credit

Mortgage loans offer some advantages, which we will detail below:

  • When applying for a mortgage loan, you have the opportunity to enjoy a home of your own in a short term.
  • With this acquisition you will not pay a rent every month. Instead you will make the monthly payments for your own home.
  • Provides convenience in payments, you can choose the most convenient way to amortize according to your needs.
  • Through the insurance suggested by financial institutions, assets are protected from eventualities such as: earthquakes, robberies, fires, etc.
  • Housing grants can be used based on your income.
  • This type of credit provides tax advantages, such as a reduction in the value of the taxes that have to be paid.
  • The interest rate on this credit is lower than that of other credits.

What is it?

The mortgage credit is a loan that is granted for the acquisition, manufacture or amplification of a house. It can be used for buying a used or new home, as well as premises for shops, offices and other structures.

The duration of these credits is from 5 to 30 years, and the stipulated interest rate can be fixed, variable or mixed. In addition to this, some expenses are estimated and thus know what is the mortgage credit that suits the client.

Among the characteristics of the mortgage loan, is the fact that if for some reason you do not make all the agreed payments, the property remains as collateral for the bank. For this reason, it is essential that you study your ability to pay before requesting the loan.

This credit can be used for two purposes. One is to buy a home and can only be accessed by natural persons. And the other that is for general purposes where it can also be requested by legal persons (companies).

Now, since you know what a mortgage loan is, we will explain the types that exist:

Letters of Credit

This tool is issued by the bank, and can be trade on the Stock Market by the bank, be obtained by the financial entity or by another person, in order to receive the financing. At this time it is not very common to get this type of credit.

The Endorsable Mutual Mortgage

Here the credit is subsidized by the financial institution. It can be transferred through an endorsement by the bank, and thus the client can pay his debt to the financial institution to which the loan was endorsed. This credit is granted by some banks and the mutual companies.

The Non-Endorsable Mortgage Mutual

The entity subsidizes this credit with own resources, but cannot endorse. This is the most frequent instrument with respect to what a mortgage loan means. This credit is divided into others, which are:

  1. The Fixed Rate Mortgage Mutual: All the installments in this credit are fixed, the rate remains the same. However, it does not mean that the amount to be paid cannot change. The fees are agreed in UF (Development Units), therefore if it goes down or goes up the amount will vary, but the rate will change.
  2. Variable Rate Mortgage Mutual: The rate changes annually, and the Bank Active Rate (TAB) is considered. This instrument is the less used for its risk. It is advisable to carry out an analysis on the change in rates in recent years, and thus be able to estimate how the variation will be later.
  3. The Mixed Rate Mortgage Mutual: It starts with a fixed rate first, and then it becomes variable. During the first years the fixed rate is advantageous, but later it could complicate the payment. It is important to carry out a due study on the personal conditions of the client, and then choose this option, knowing that in a difficult moment you have the ability to pay the debt.
  4. The Mutual Mortgage Peso: It offers a fixed rate in pesos. It is convenient for the applicant if inflation is high. That is, if the weight loses its validity, the fee you must pay is lower.

With the information we provide you, you can now start gathering the Requirements for a Mortgage Credit. And prepare yourself to take a big step such as acquiring your own home.

If you want to obtain more information about it, you can enter here. We wish you luck with this process, and that you receive a positive response soon.

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