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Mortgage credits: Everything you need to know before going into debt to buy your house - La Nacion
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Créditos hipotecarios. Banco por banco, cuánto prestan, desde que sueldo podés calificar y pros y contras de sacar uno
Créditos hipotecarios. Banco por banco, cuánto prestan, desde que sueldo podés calificar y pros y contras de sacar uno
www.lanacion.com.ar
May 17, 2024
Mortgage credits
Everything you need to know before going into debt to buy your house
By Carla Quiroga
As more banks join the offer of mortgage loans, the questions from interested parties multiply. The dream of owning your own home seems to be closer and that excites many Argentines who, even with an average income, cannot buy their home. However, before going into debt, it is key to understand various variables, especially in an economic context like the one Argentina is going through. On the other hand, the conditions of the different entities differ in the modalities and contracts, so it is essential to analyze the rates, amounts and deadlines in each case. From what monthly income can I qualify to request a loan? What does it depend on if the quotas do not skyrocket? Is it better to wait or is it the right time to request financing? LA NACION created an interactive guide with all the answers to your questions.
1) Which banks offer loans and in what amounts?
So far there are 12 banks that have announced mortgage loans: Nación, BBVA, Ciudad, Galicia, Hipotecario, Macro, ICBC, Supervielle, Santander and the provincial Córdoba, Neuquén and Corrientes.
The amounts are up to $250 million , although there are cases without a limit such as the Galicia, BBVA, Macro, Supervielle and Santander lines. In general, they finance between 75 and 80% of the value of a property, although there is only one entity that lends 100%: the bank of Córdoba (Bancor), with a limit of $90 million. Macro finances 75% of properties up to $350,000,000, 60% of those over $350,000,000 and 90% if the person taking the loan is under 30 years old with parents who guarantee the loan and acquires their first home. In the case of the Nación, it is clarified that it is up to 75%, as long as the value of the property does not exceed 120 million pesos.
2) What are the payment terms and fees?
Financing terms range between 5 and 30 years and annual rates vary between 3.5 and 9.5%. On a month-to-month basis, fees are adjusted for inflation.
Regarding the amounts, it depends on each entity, but the key is that the fee committed by the policyholder represents between 20 and 30% of monthly income. There is a case in which this percentage can be extended to 35% if the person is a client of the entity (Banco de Neuquén).
3) From what monthly income can I qualify?
The first key point is that it is net income. Although there are banks that detail that those who earn from $850,000 per month can qualify, this income enables an amount that is not enough to buy a property. The economist specialized in the sector Federico González Rouco makes a real analysis and details that to access $50 million - to buy a studio apartment - in a UVA line with a rate of 4.5%, the fee would be $250,000 and the policyholder must collect $1 million per month.
There are cases in which the income of the couple or family group can be added and others that also allow non-cohabitants, such as Banco Nación.
4) Do I have to collect my salary from the bank that grants the credit?
Not necessarily, it depends on each entity. But, in general, taking out credit at the bank where the salary is collected allows access to better conditions: in some cases from the requirement of lower monthly income required to lower rates. We must not forget that these lines are an opportunity for entities to retain customers in the long term.
5) How much advance on the value of the property do you have to have to access financing?
Most lines finance between 70 and 80% of the value of the property to be acquired. Taking into account that, according to the Zonaprop index, a 40-square-meter studio apartment located in the city of Buenos Aires has a published price of $98,109 for sale, the buyer must have at least US$20,000 in advance. This example applies to loans that finance 80% of the value of the property.
6) Can my parents be credit guarantors?
There is only one option: the Macro bank has a special line for those under 30 years of age that allows 90% financing if the parents are guarantors, which would reduce the advance payment requirement to US$10,000 in the case of purchasing a studio apartment published in the US. $98,109.
7) What if I have to borrow? Does the origin have to be justified?
The bank requires attendance at the signing of the deed with the advance payment, but will not investigate the origin of the funds unless they have been previously deposited in the bank account. In this case, the usual controls are carried out to prevent money laundering. The applicant can borrow it from a family member and even take out a loan. “Depending on the amount of the operation, the notary who intervenes in the operation could require a certification of the origin of the funds,” clarifies tax official Sebastián Domínguez.
In the event that, for example, it is a donation from the parents, a document with a certain date is necessary. It must be taken into account that if it is undeclared money or the AFIP detects that the fees are not related to the person's blank income, it could increase the applicant's taxes.
8) What happens if I am a monotributista?
In general, only those who are registered in the highest categories of the monotax qualify (who bill around $12 million per year). Additionally, some banks may require a certain seniority in that category.
“A monotributista with a turnover of less than 1 million pesos per month will not be able to access the launched lines. He has to be an employee in a dependency relationship, who is also a monotributist or a couple of monotributists who add other income,” explains Domínguez.
9) Am I required to move into the property I purchase?
Depends. The most aggressive lines of credit require that it be a family home, unique and permanently occupied. But there are also others that enable the purchase of a second home. That is, anyone who already has another property in their name can buy. In any case, in the interpretation of what is considered sole ownership, some gray areas arise that the acceptance committee of each bank will evaluate to analyze on a case-by-case basis. For example: Is the owner who shares ownership in a small percentage of an inherited property? Is the owner of a property of which another person has usufruct?
10) Are there loans with an anti-inflation limit?
Banco Nación implemented a system that works as a “cap” on the monthly installments of its lines of credit to prevent abrupt jumps in inflation: from the seventh month, the borrower who receives his or her assets through Banco Nación and purchases a single home and permanent occupation can pay a premium of 1.5% annually to access the possibility of the bank calculating two installments - one adjusted for inflation and the other for salaries - and choose which one you want to pay.
The difference owed will be carried over to the end of the loan and, once the payment schedule is finalized, the balance will be rescheduled, which can be paid with a personal loan or a mortgage extension. This possibility would end up raising the rate from 4.5% to 6% annually. “This means, in a 30-year loan, almost 20% extra payment. In other words, to define whether it is worth it or not, we must take into account that it has a high cost,” explains Federico González Rouco.
11) What is the most accessible credit?
The line with the lowest rate is from Banco Ciudad and is 3.5%, but can only be accessed by those who buy a family home, single and permanently occupied, which must be located in the microcenter, that is, within the perimeter contemplated by the Sustainable Urban Development Fund (Fodus) program, which includes San Juan, Entre Ríos, Callao, Santa Fe, Leandro N. Alem and Paseo Colón avenues. Two specific examples: a 26 square meter unit located at 800 Viamonte that is offered for US$37,500 and another in Suipacha and Corrientes of 21 square meters for US$42,000. With these values, whoever has US$9,375 in savings for the first case or US$10,500 for the second (25% of the value of the property), and a monthly salary of just over $1 million, can access a line of $20 million by committing a monthly fee of almost $116,300.
The line finances up to 75% (maximum $250 million) for 10, 15 and 20 years, and the fee must not represent more than 25% of the salary. For example, in relation to the amount of the monthly fee: every $10 million that is Apply for 20 years to acquire a home in the downtown area, the initial monthly payment is $58,149
12) If the credit is in pesos, how are the dollars obtained at the time of writing?
This is one of the main problems to solve. The bank grants pesos and the buyer needs to buy the MEP dollar - they cannot purchase official ones through the stocks - to pay for the property. This process requires 24 hours of parking, which would imply that on the day of the deed, the seller of the property will not be able to immediately access the dollars. Today, with this process, no one would agree to sign a sale without the dollars in hand, which is why the market expects some solution.
"One way out could be for the Government to enable the purchase of the official dollar with the PAIS tax so that it is closer to the value of the MEP, another is to eliminate parking and a third option could be for the bank to sell the dollars at the time, charging a percentage due to the risk involved in absorbing the parking,” González Rouco proposes.
13) What does it depend on if the monthly payments do not skyrocket?
As they are UVA credits, what will determine the monthly increase in installments will be the evolution of inflation. In any case, the impact on the purchasing power of the person who took it will be conditional on the update of their salary. In numbers, although the distance is shortening, salaries continue to lag behind inflation. In March they had a general increase of 10.3%, which placed them just below the 11% shown by the consumer price index (CPI). In the quarterly evolution they were also close, with an increase of 45%, versus 51.6%, respectively, but in the interannual measurement the gap is wide (208% versus 287.9%). These figures arise from the Salary Index published by the National Institute of Statistics and Censuses (Indec).
Looking ahead, the drop in inflation starting in April opens the possibility for real wages to stop falling and begin a recovery process, although from very low levels. The evolution of inflation is fundamental because it determines the increase in the quota, but another variable to observe is the fluctuations experienced by citizens' real salaries, which since December have fallen by 25% compared to inflation. “The key is for salaries to grow more than inflation,” emphasizes González Rouco, and recognizes that today salaries are at a historic low, which is why, if the economy grows, they should be recomposed.
14) What determines whether one loan is “cheaper” than another?
As they are UVA lines, the fee is made up of the nominal annual rate plus the monthly adjustment for inflation. This means that at “lower rate, cheaper credit”.
15) Are the rates of the loans launched high or low for the macroeconomic context of Argentina?
To analyze the interest rates proposed by the banks, it is important to compare with countries that offer credits to indexed units of value, such as Chile, Uruguay and Colombia, which have an average rate of 4.75% and 7.5%, something not so distant from what is currently being offered in Argentina with more unstable macroeconomic conditions.
In any case, they can be considered high, when considering the purchasing power of citizens. “For this reason, I believe that this wave of credits is not going to be a boom in the short term, since for the situation to be different, salaries have to improve,” says González Rouco. Along the same lines, Iván Kerr, who was Secretary of Housing of the Nation and president of ProCreAr, analyzes: “We are still a little up, but it is logical. “Chile lends at a fixed 3% annual rate, for 30 years, but it has not had inflation of more than 10 points annually for 50 years.”
16) If the bank where I took out the loan launches another line with a lower rate, can my rate be lowered?
No. A loan is a contract and the bank cannot change the rate of a current loan, but the client can request a refinancing of the loan. That is, the entity cancels the loan and exchanges it for another with better conditions with a lower rate, which ends up benefiting the borrower because they owe the same capital with a lower financial cost.
17) Is it better to wait? Could lines with lower rates emerge?
Specialists consider that an average of 6% annually is a “logical” value for the country's current economic context.
18) What are the advantages and disadvantages of taking a UVA credit?
The UVA credit, when adjusted month by month for inflation, allows the initial payment to not be as high (as is the case with fixed rate loans). In addition, it is not necessary to have a high average income to apply for it. This measure, with specific variations in its contexts, was taken by several countries, such as Mexico, Colombia and Chile more than 60 years ago, when they were also going through moments of inflation. That is, for a country like Argentina, with a year-on-year inflation of almost 290%, without an indexed unit, there would be no credit.
However, there is criticism from broad sectors because, when adjusted for inflation, it can make the situation very difficult for the debtor, who is faced with having to pay very high installments that do not increase at the same rate as their salary.
19) What were the interest rates like when UVA credits were launched in 2016?
The current loan rates are similar to those during the mortgage loan boom of 2016 and 2018, but the difference from that time is that the average salary in dollars was much higher. Kerr elaborates that the fall in UVA mortgage loans in 2019 was not due to the model or interest rates, but due to inflation. The former official points out that the families that took the UVA credit in those years were not owners and could have been. “Inflation was out of control and they had to make an effort that hurt them. In any case, in dollars, they maintained their value and with the devaluation they liquefied the capital they owe to the bank,” he analyzes.
20) Why are there no fixed rate loans in Argentina?
A country with an interannual inflation of almost 290% prevents launching a line without an indexed unit of value that adjusts for inflation. “A fixed rate loan should be above 100%, which implies paying a very high fee, which few can access,” summarizes Kerr.
21) How would a devaluation impact the quota?
The impact that a rise in the exchange rate -pass through- has on prices could become a problem because it generates inflation. As a consequence, the payments will rise, but the debt will represent a lower percentage of the value of the home, comments González Rouco. For his part, Carlos Spina, partner of Argencons, the developer who created the Quartier brand, believes that we should not focus so much on the dollar, but rather on the relationship with salaries.
22) If the exchange rate remains flat and inflation continues to decline, will the debt in dollars increase?
Yes, but the interpretation of businessmen in the sector is that in this scenario salaries will have greater purchasing power, that is, people will have a growth in their income and, in addition, properties that are at historically low sales values will increase.
23) Should I continue renting or take out a loan?
It depends on each case. A concrete example: to buy a property for US$125,000 - which could be a two-bedroom -, the monthly payment of a loan for US$100,000 (around $100,000,000), with a rate of 4.25%, is $505,000, while the average rent for a two-room in Capital is around 430,322 pesos per month, according to data from Zonaprop, although there are publications of three rooms and 70 square meters, for example, in Caballito, which are rented at the same value as the fee ($505,000 ). The analysis is very relative: perhaps a person prefers to give up meters or location and buy a property in a less developed neighborhood through a loan with a monthly payment that represents the same value that they paid to rent a unit in a consolidated area.
The most optimistic specialists assure that for those who dream of being an owner this is an ideal time because salaries are at historic lows and should be restored, in addition the square meter is still low.
In this context, González Rouco makes a differentiation: a 50-year-old person who is already at the peak of his career is not the same as a young professional with potential growth and chances of improving his income. In this case, the credit installment will represent an increasingly smaller percentage of his salary because his income will rise above inflation, which is the indicator by which the UVA credit is updated. However, the choice between buying and renting also depends on other factors such as job stability, whether the person has the necessary initial amount and the long-term projection (20 or 30 years) of what they want to purchase as a home.
What must be taken into account is that new rental contracts usually close adjustments for inflation every three months and also do not have the impact of the annual rate. While banks adjust for inflation every month.
24) Is it a good time to buy a property?
Yes, because the properties are still at low prices compared to those of 2018, the height of the UVA credit boom. In any case, since the middle of last year, the real estate market began a process of rising sales values that could be accelerated by the reactivation that credit will generate in demand. Today the publication prices of properties located in the city of Buenos Aires is US$2,219/m², 0.8% more than the previous month, registering its largest monthly increase since April 2018, according to the latest Zonaprop survey. The same report details that in the first four months of the year, it accumulated an increase of 1.9%, and since July 2023, when the trend change occurred, the publication values accumulated an increase of 3.1%. In addition, the volume of apartments for sale discounted stopped decreasing in the last six months and remains stable at 18% in the first quarter of 2024.
“The drop in the volume of discounted ads is one of the factors that explain the increase in the price registered since July 2023,” analyzes Leandro Molina, director of Zonaprop. Looking to the future and regardless of the credit effect, Martín Boquete, director of Toribio Achával, estimates an increase of 10% until the end of the year and up to 25% by the middle of next year. “It will be key for inflation to be stabilized and to be able to operate in dollars,” he concludes.
25) What property can I buy taking into account the maximum amounts granted by banks?
Although there are banks that do not have a limit, if the maximum amount granted by some entities is considered -up to $250 million-, the applicant could buy up to a four-room apartment that today is published from US$200,000 in the neighborhoods of the Federal Capital. It is important to clarify that, in all advertised loans, the borrower must have 20 or 30 percent of the value of the unit they will purchase. Therefore, if requesting $250 million, he may acquire a unit for up to US$300,000, but must have at least $50 million in advance.
On the other hand, and taking into account the publication values that Zonaprop takes as a reference, a 40 square meter studio apartment located in the city of Buenos Aires has a publication price of US$ 98,109 dollars for sale, while one of two rooms and 50 square meters is worth $117,474 and one with three rooms and 70 square meters is $161,697. Outside the Federal Capital, the options become more accessible. A two-room apartment of 50 square meters in the northern area is published at $108,752 while a three-bedroom apartment of 70 square meters is at $161,203. In the southern zone, the average price of a two-room apartment of 50 square meters is $79,026, while a three-room apartment of 70 square meters has an average value of $116,171.
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