Construction loan: is it worth it?
The construction loan is an alternative for those who dream of building their own home or renovating.
The dream of buying your own property is something very cultural in Brazil. According to the Datafolha Institute, owning a home is a dream for 87% of the population. And for 95% of people, home is their favorite place.
What is a construction loan?
A construction loan is like a personal loan or a credit card.
You pay the agreed amount per month and so you pay off your debt with the bank! But, attention to an important detail: in this type of credit, you can use the proposed amount only for expenses related to the work.
That is, with the loan, you can buy construction materials, hire professionals, rent equipment and everything needed to renovate or build your property.
However, before taking out the construction loan, it is important to have good financial planning to guarantee payment of the installments and fulfill your dream without problems!
The rules related to the loan are always informed at the time of the contract. Read carefully to avoid problems!
How to get a loan for renovation or construction
As with other modalities, in order to obtain a loan for renovation or construction, it will be necessary to go through several stages of analysis, in which the financial institution will understand whether it is worth granting the credit.
Step 1 — Credit Analysis:
Here, the bank consults your financial profile to understand if you have a “clean name”, how much you earn per month, if you will be able to pay the amount due, what your payment habits are, your Score, etc.
To apply for construction financing, the ideal is to have a clean name. Some banks even accept to lend money to those who have pending CPF, but the rates are usually much higher.
In addition, it is also important to prove your income so that the bank can carry out the analysis. For this, you will need to provide a series of documents such as:
• Identity document (RG or CPF);
• Proof of income;
• Proof of address;
The proof of residency that can be used varies by institution. In general, the following are accepted:
- water bills;
- electricity bills;
- Cell phone bills;
- Fixed telephone bills;
- Lease agreement, provided that it has been notarized;
- Recent income tax return;
- IPTU collection card;
- Pay TV account;
- internet account;
- Piped gas bills;
- Credit card bill;
- Property deed;
- IPVA collection booklet;
- Paycheck, provided it has been issued by a public body;
- Statements that have been sent by the INSS or SRF;
- Extract from the Guarantee Fund sent by Caixa Econômica Federal;
- Vehicle Licensing Registration;
- Document proving the real estate financing.
Step 2 – Financial proposal:
After having all your information in hand, the bank will contact you to release a new credit option for you. In this step, you will be informed of the interest rates and the maximum amount you can have as credit.
Always evaluate which installment term fits your financial situation. It is important to make sure that the amount of the monthly installment fits into your budget, so as not to burst the bills and end up in the red.
Step 3 – Signing the contract:
At the last stage, you need to sign the loan agreement. Carefully read the terms of the contract, especially how and what the credit can be used for. After subscribing, the credit amount is deposited directly into your account.
What is the best construction loan option?
The best construction loan is the one that offers the amount you need to carry out your work with the most affordable interest for your pocket. Therefore, in order to decide which is the best offer, it is necessary to compare proposals from different institutions.
Check out the main institutions that offer the construction loan modality:
There are several home improvement and construction loan options on the market. Remember to always compare rates, terms and rules.
It is always worth running simulations for a personal loan as well. Depending on the term you need, the financial institution may offer a better option in this modality.
Make a good analysis of your personal financial planning before taking out a loan. Borrowing money can be a good solution to advance a dream, as long as you have the necessary budget to honor that commitment!
Be careful not to take out loans that compromise your income too much. Ideally, the portion should not exceed 20% of your salary. See how much you can compromise in your case!
After all, in addition to the construction installment, you will still spend on: rent, transport, market, basic bills, credit card installments, leisure, school and so on. Planning is the key for everything to happen in the best way.