One of the most ingrained desires in our society is that of homeownership and for many this is a life goal. However, acquiring a property is a high investment and involves many types of business. To do this, understanding your reality and needs is the key to defining the ideal way to purchase your home or apartment. For some, real estate financing may be the best option, while others opt for the real estate consortium.
To make the right choice, you need to understand what the two models are about. Thus, choosing the one that best fits your reality becomes much easier.
Consortium or financing: understand the difference
When it comes to forms of payment in the real estate sector, the most advantageous alternative is to always pay in cash. However, this can be a distant reality for most people. Thus, opting for a financing or consortium may be the way out to acquire your own home. To decide between the two modalities, it is important to understand what each one is about.
The real estate consortium
The consortium is usually the best option for those who are not in a hurry to move and seek to acquire the first property. In this model it is possible to split up to 100% of the property value, without the need for an entry. The great disadvantage of these ventures is precisely in the time it takes to deliver the letter of credit, which can take years.
Basically, a consortium is a group of people who come together to purchase a specific asset, which in this case, is a property. By stimulating a group movement, he brings together people interested in the business and thus manage to accumulate favorable conditions for the enterprise. Therefore, all those integrated into the business contribute monthly to a fund for the purchase of that common good. These payments cover the delivery of the residence to the consortium members until all are covered.
The letter of credit can be contemplated in two different ways. The first of them concerns the draw in yes, while the other concerns fixed, free and embedded bids. The contest requires only that the installments are up to date, as well as administrative fees, in addition to a reserve fund and credit life insurance. In addition, it is subject to annual adjustments by the INCC (National Construction Cost Index). This can greatly increase the final amount paid.
Real estate financing
In contrast, bank financing is often the most popular option on the market. In them, a financial institution makes available, after an analysis, the necessary credit for the acquisition of the property. These institutions establish their own rules, terms, rates and interest and it is up to the simulations of terms and values to define which has the most advantages for the buyer.
Thus, we can see that the best form of payment varies according to the profile of each buyer. When weighing the advantages and disadvantages, not only take into account your current financial situation, but also your long-term plans and objectives for some years to come.
Real estate consortium: how it works
Every consortium is promoted by an administrator. Thus, searching for the company’s history is the first step to minimize business risks. The Brazilian Association of Consortia (ABAC) has a list of all the companies that carry out these operations. If the institution is not present, it is recommended to look for a safer one.
In addition, the entire consortium system is prescribed by law 11,795 and supervised by Banco Central l. So, look for the history of the entity and previous consortia promoted by it to ensure its safety.
The next step in choosing the administrator is the drafting of the business contract. The ideal is to read the clauses carefully and if possible to count on legal assistance for that moment. It is in these clauses that the consortium member will know the amounts to be paid, in addition to their rights and duties.
The monthly payment of the installments usually includes the following dividends:
- Common fund: money intended for the purchase of the property;
- Administrative fee: amount paid to the administrator to carry out the consortium;
- Insurance: Usually, this type of business involves life insurance to protect the sale installments in the event of the death of any participant;
- Reserve fund: this amount is not charged by all institutions, but acts as a guarantee during the consortium and is returned at the end of the period.
In addition, it is allowed to pay additional installments. Buyers who choose to do so aim to anticipate the investment.
To say that a letter of credit has been contemplated, means that the consortium member will have access to the property. This contemplation can be given in two ways: through a draw or bid. Ideally, at these times, representatives of the consortium members are present to ensure the suitability of the contest. Usually, the draw is made once a month and includes a lucky draw and a person who made a bid.
There are three types of bids:
- Free bid : any amount can be offered, as long as it is between a minimum fee and the total cost of the remaining monthly fees;
- Fixed bid: the consortium operator sets a fixed quota for the bid, increasing the chances of a tie. In this case, contemplation goes out to whoever has the quota number closest to the number drawn;
- Built-in bid : it is a way to use a part of the letter of credit (total value of the asset) as a bid for your contemplation;
Financing or consortium: advantages and disadvantages
As we said earlier, one of the main challenges for those who choose to acquire a property through a consortium concerns the variation in the total amount paid. INCC’s annual readjustment has varied in recent years around 7%. However, this value is not accurate and can fluctuate considerably.
In return for this disadvantage, the consortium allows strategies that make it more advantageous in some cases. That’s because, some people enter the business and end up giving it up. Thus, in some cases, they choose to sell their stake for a much lower price than what has already been paid. For those who have reservations, this can be a great opportunity to buy a consortium already underway and thus be contemplated faster.
Another similar situation concerns when the person already contemplated is unable to solve the bureaucratic procedures. This allows you to buy a letter already included in discounts, assuming only the payment of the rest of the consortium.
In general, this payment model is ideal for those who plan to buy their own home, but are in no hurry to move, and have not chosen the property or residence location. In addition, there are other costs. You must remember that while your letter of credit is not covered you will need a place to live. This implies costs for a rental that needs to match your budget.
The great attraction of financing has to do with the speed for change. This method allows the right to enjoy the property immediately, even if the installments have not yet been fully paid. In addition, opting for financing means stagnating its price regardless of the property’s appreciation. This means that, no matter how much the property appreciates, the only values that affect its total price are the interest on the financing and the readjustment by the TR.
In many cases, when the person finishes paying for the property, he or she may end up having an asset that is worth much more than what was paid. This is because, some factors can influence, and a lot, in the valuation of the enterprise. However, depending on the amount of interest embedded in your installments, this valuation may not be sufficient.
The Guarantee Fund for Time of Service (FGTS) is a right paid by the employer to workers. All those under the CLT regime receive it and it can be used in a consortium or real estate financing. For both cases the rules are the same and workers must meet the following requirements:
- Have at least 3 years of formal contract;
- Do not own the property in the city in which the purchase will be made;
- Have not financed any property through the Housing Finance System (SFH)
For consortia, the guarantee fund can be used to bid. However, there are other options. It also allows you to complete the amount of the letter of credit to buy a more expensive property, in addition to repaying a portion or paying off all the consortium debt.
What is the ideal option?
Choosing between a consortium or real estate financing depends on the profile of the buyer. Both options have advantages and disadvantages that must be taken into account. The ideal is to establish a list of pros and cons, in addition to one with your current needs. This will make the vision of the two ventures clearer.
In addition, you can count on the help of financial experts to make the best decision. Another way is to conduct a credit analysis to determine whether financing, for example, is a viable option. Regardless of whether you choose a used or new property, a credit analysis will not only help you to define the best form of payment, but also your budget.
Regardless of the payment method chosen, to make your investment as safe as possible, you must rely on the support of portals such as Casa Mineira Imóveis. With years of experience, renowned partners and a great reputation in the Belo Horizonte real estate market, we offer on our portal several properties for all buyer profiles.