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Mortgage loans: Fees, risks, requirements and what can be purchased with the loans announced this week - La Nacion Propiedades
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Créditos hipotecarios: cuotas, riesgos, cuánto hay que ganar por mes y qué se puede comprar con los préstamos anunciados esta semana
Créditos hipotecarios: las respuestas a 26 preguntas clave: desde cuánto hay que ganar por mes para calificar hasta cuáles son los riesgos de tomar una deuda en UVAs
www.lanacion.com.ar
April 27, 2024
“People are coming to the dance,” say the real estate brokers. The announcements of the launch of mortgage loans from Banco Hipotecario, Ciudad and Supervielle took the market by surprise . “This news is a very good sign that no one wants to be left out of the market and that the banks are betting heavily on the normalization of the economy,” analyzes Federico González Rouco, an economist who closely follows the sector who recently launched the book: El dream of one's own house . The specialist adds: “ the addition of a private bank means that entities will begin to fight over the rate, which will generate lower fees for those who want to buy an apartment.” “If it is possible to maintain low and stable inflation and the property market can operate in dollars , the real estate sector will accompany the growth of the economy,” reflects Martín Boquete, director of Toribio Achával.
The news was expected by an industry that since the beginning of the year has shown signs of a rebound effect with more operations and rising prices. In fact, in February, 53.6 percent more operations were carried out in the city of Buenos Aires than in the same month last year and 18.3 percent compared to the previous month, according to data from the Buenos Aires College of Notaries.
From the Mortgage Office they recognize that in just three days, the inquiries exploded : they already have more than 18,000 interested people registered, and more than 30,000 visits to the entity's website. “ The ads came through the window and are very good news ,” emphasizes Jose Rozados, founder of Reporte Inmobiliario, within the framework of Data Day, the event organized by the platform this week in Puerto Madero. Along the same lines, the president of the Chamber of Urban Developers (CEDU), Damián Tabakman, agrees with the surprise effect: “we thought they would be launched only when inflation dropped.”
“Without a doubt, the week's announcements were a kick-start for other banks to accelerate the process , so as not to lose customer market share,” Rozados acknowledged. Entities usually use mortgage credit as an anchor to have long-term captive clients, and it is a way to insure them for 10, 15 or 20 years, and also to attract new ones. "That a private bank has joined is a good sign," agrees Carlos Spina, partner of Argencons, the developer that created the Quartier brand, but clarifies that these lines will target used and brand new units that can be registered . “As it is not possible to buy well units, they will not generate reactivation in the construction sector, which is key to the growth of the economy ,” he analyzes and insists on the need to generate the tool of real right of mortgage of future property so that it can also be can buy well units.
The news becomes more relevant if you take into account that the lack of credit to buy a property is , historically, one of the Achilles heels of the Argentine economy . The deed data reflects that in February only 106 were signed with a mortgage (3.1% of the total) in the city of Buenos Aires. “ February was the month with the least mortgage credit in 22 years ,” details González Rouco, who works at Empiria, Hernán Lacunza's economic consulting firm, and gives numbers that reflect the delay: in Chile it represents 27%, 28% of GDP; in the United States, 75%, 80% while in Argentina, at the best moment which was in 2001, it represented only 5 percent and today it is only 0.2 percent. This comparison perhaps explains the data that Rouco shares in his book: “ 40% of young people between 25 and 30 years old live with their parents or grandparents .”
1) Which banks announced mortgage loans this week?
Banco Hipotecario was a pioneer and on Tuesday announced lines at UVA with a rate of 8.5%, which drops to 4.4% during the first year for clients who collect their salaries at the entity. The City did it a day later on Wednesday , also at UVAs but only for clients who credit their salary in the bank. Those who are not can migrate their income and access. On the other hand, Supervielle became the first completely private bank to announce that it will ride the wave of mortgage loans . These lines will be intended for clients and non-clients of the entity who are looking for their permanent or non-permanent home or are thinking about expanding or renovating. From Banco Provincia they recognize that they are going to follow what “the market is indicating” , but for now they are looking at the panorama with caution. And they refer to the fact that the UVA system brought many inconveniences among clients because their fee was raised, which is why they implemented a benefit that consisted of subsidizing debtors of UVA mortgage loans when the percentage of the fee exceeded 35% of their income. The same measure had been taken by Banco Nación. In summary, so far only three banks have jumped on the bandwagon but rumors are multiplying that other entities will also do so.2) Since when can they be taken?
El Hipotecario will officially launch it during May , while Banco Ciudad will begin serving interested parties on Monday, April 29 through the website and in all the entity's branches. On the other hand, from May 4, Supervielle will allow those who wish to simulate the payment of a loan to do so online through the website, in addition to knowing the requirements and conditions to request it, and leaving their data.3) What can the money be used for with the new lines?
The advertised loans are to buy (a first or second home that can be mortgaged), build, expand, recycle or finish a house . In the case of the City, they must be properties located in AMBA or in the provinces of Córdoba, Mendoza, Tucumán and Salta. This entity also has a line for the acquisition of a single, permanent family home in the downtown area.4) How much money can be requested?
In both cases ( City and Mortgage) up to $250 million , which would be around US$250,000. In the case of the Mortgage, the loan can cover up to 80% of the home. That is, whoever requests it must have the remaining 20%. The City finances up to 75% of the value of the unit to be acquired, which is why the buyer must have a 25% advance payment.5) How much are the fees?
In the Mortgage line the rate is 8.5% but drops to 4.25% during the first year for clients who collect their salary at the bank. While the general line of the City has an interest rate of 5.5% and 3.5% for the purchase of properties in the downtown area. In both cases, the capital is adjustable by UVAs.6) Are these rates high or low?
There are two ways to analyze it. If you compare them with the profitability of a rental that today is around 4.5% annually, talking about rates between 5.5% and 8.5% “may be high . ” Likewise, considering the rate of return on a rental can be a dubious indicator because it is a “distorted” market.7) What are the payment terms for the lines launched?
The maximum payment term in the case of the Mortgage is 30 years (360 months). While in the City they are for 10, 15 and up to 20 years .8) How much do you have to earn per month to qualify?
In both cases, the fee should not exceed 25% of the income of the applicant and/or their family group . González Rouco gives a concrete example: to buy a property worth US$125,000, you need income of approximately $3.2 million. We are talking about four average salaries . In the case of Banco Ciudad, if the person, family or group of borrowers have an income of $1,930,000, they can access, as an example, a loan of $70 million over 20 years, with an initial payment of $482,000. If the amount is less, $10 million over 20 years, the initial monthly payment is $68,943.32. On the other hand, these loans have the possibility of requesting an extension of the term if the amount of the installment to be paid exceeds 10% of the value of the installment resulting from having applied to that loan a capital adjustment by the Variation Coefficient of Salaries (CVS) since its disbursement. In these cases, the original term of the loan may be extended by up to 25%.9) What value can the installments be?
The analysis is case by case. But for example, in a line of US$50,000 (not the value of the home), with a 25-year term, the installments are $400,000 and blank income of $1.6 million is required from the debtor household . In the case of a couple (debtor household), the income can be added and the loan can be requested together. In the case of the City, as clarified in the previous answer, for a loan of $70 million over 20 years, the initial payment will be $482,000. If the amount is less, $10 million over 20 years, the initial monthly payment is $68,943.32 .10) How much does the fee change during the first year for those who are not Mortgage Clients?
An example of a fee for clients and non-clients would be like this: every $1,000,000 for 30 years , those who are clients and credit their salary there will pay a fee of $5,050 with a preferential rate of 4.25% during the first year; Those who are not clients of the bank will pay a fee of $7,820 in that same period with a rate of 8.5%.11) The credits released are under the French system: how does it work?
It is a system of constant installments in which the policyholder pays the same amount every month, which allows for some predictability, but at the beginning more interest is paid than capital. The latter is paid off in the final section of the mortgage . “It usually raises a lot of doubt but the reality is that adjusted for inflation, the policyholder always owes less. That is, each month the debt in UVAs is less than the previous one,” explains González Rouco. “ What happens is that inflation adjusts the remaining balance ,” adds Spina and clarifies that this allowed some of the borrowers between 2017 and 2018 to cancel it because the UVA adjusted less than the dollar and they ended up paying US$70,000 for a property that They had bought it for US$100,000.
12) What will be the impact of the credits on property prices?
As a credit boom is not expected , brokers affirm that there will not be a price increase in the short and medium term. “For the price market to adjust there must be volume and it doesn't seem to me that there is yet a context of confidence for that to happen,” responds Spina, who clarifies that for the process to advance, inflation and, also, rates should go down.In other words, in a scenario in which the macro eats away at purchasing power, the immediate effects on sales values become complicated. In any case, the “green shoots” of credit could benefit used units more than 20 years old with typologies far from what post-pandemic buyers are looking for . “If everything goes well we will see a realignment of prices but only next year,” explains González Rouco. Likewise, it must be taken into account that regardless of the credit effect, the real estate market has been experiencing a cycle change with rising prices for months. The average sale value in CABA increased 0.4% in March and stands at US$2,202/m² . In the first three months of the year, it accumulates an increase of 1.1% while in the year-on-year comparison it rises 1.3%, the largest increase since May 2019, according to the Index carried out every month by Zonaprop. Furthermore, in March, 71% of the City's neighborhoods registered a monthly price increase.
13) What property can I buy taking into account the maximum amounts granted by the banks that announced loans?
Taking into account that a 40 m² studio apartment has a price of US$97,248, while a two-bedroom and 50 m² is worth US$116,539 and a three-bedroom and 70 m² is US$160,480, the maximum amount granted by the banks that announced loans It could allow you to buy up to a four-bedroom that today can even be obtained from US$200,000 in the neighborhoods of the Federal Capital that defend the lowest prices on the market. It is important to clarify that, in all advertised loans, the borrower must have 20 or 25 percent of the value of the unit they will purchase. Taking into account that the maximum amount is $250 million, you can even purchase a unit for up to US$300,000.14) Where should you buy to access credit with the lowest market rate?
The line with the lowest rate is from Banco Ciudad and is 3.5%, but it can only be accessed by those who buy a single, permanent family home located in the downtown area . This is within the perimeter included by the Sustainable Urban Development Fund (Fodus) program that includes San Juan, Entre Ríos, and Callao Santa avenues. Fe, Leandro N. Alem and Paseo Colón, on both sidewalks. It must be taken into account that this area is within the Buenos Aires Government's plan to promote the reactivation of the downtown area, which includes tax benefits for developers who convert offices into homes or facilities for those who move to the downtown area as tenants. Now this line of credit is added for those who want to buy a home in that area.The rest of the requirements are the same as the general loan : being a client of the bank with proof of earnings, financing is up to 75% (maximum $250 million), for 10, 15 and 20 years, and the percentage of salary that must not exceed the fee (25%). For example, in relation to the amount of the monthly payment: for every $10 million requested over 20 years to acquire a home in the downtown area, the initial monthly payment is $58,149 ($10,000 less per month than in the case of a property located outside of that area).
15) How much does a square meter cost in downtown Buenos Aires and for what amount can you get an apartment?
The Zonaprop index reveals that the square meter in that area ranges between US$1,400 and US$2,000 , also depending on each microzone. In examples, the real estate platform's publications reflect that the cheapest unit is published at US$37,500, has 26 square meters and is at 800 Viamonte, but there are also options in Suipacha and Corrientes Avenue 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 $116,300.16) What is the difference between the loan to build or to buy from Banco Hipotecario?
There are no big differences . The only thing is that if the borrower asks for the money to build, the entity proposes an advance payment and two disbursements against the progress of the work – not a single payment as when buying a property. The rest of the conditions are maintained : up to $250 million and up to 80% of the construction budget is financed. In this case it must also be used for the construction of a first or second home. And the same rates are used: 8.5% and the preferential rate of 4.25% during the first year for the bank's clients. The maximum payment term is also 360 months (30 years). The capital is adjustable by UVA and the monthly fee payable cannot exceed 25% of the applicant's income.17) What happens with the lines that are to finish building a house?
In this case, the Mortgage Holder lowers the amount to be loaned: it is $125 million in a single disbursement . This money can represent up to 50% of the construction budget . Then the same conditions are maintained.18) What if the loan is to expand or renovate a house?
It is the only case in which the Mortgage Holder finances up to 100% of the budget without exceeding 35% of the value of the current guarantee . The credit is for up to $125 million in a single disbursement. The credit must be used to expand the first or second home. It has a rate of 8.5% . The first 12 installments for clients with bank credit have a rate of 4.25% , which means a 50% promotion in the first year. The maximum payment term is 360 months (30 years), the capital is adjustable by UVA and the monthly payment to be paid cannot exceed 25% of the applicant's income.19) How many meters can be built with the maximum amount of $125 million that the Mortgage Bank lends for expansions or renovations?
With the maximum amount – approximately US$125,000 – that the Mortgage Holder can grant, a little more than 80 square meters can be built, taking as a reference that the construction cost of a house is around US$1,500/m² . “The cost of construction measured in dollars registers an increase of 35.5% in 2024 while the average price of apartments rose 1.1%,” analyzes Leandro Molina, director of Zonaprop, adding that building today costs almost three times as much. of what it cost in October 2020, the minimum of the series, and 30.2% above the 2012-2023 average.20) 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 that much average income to apply for it. This measure, with specific variations in their 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: “ Everyone starts with these schemes when they have inflation ,” comments González Rouco and He adds: “Other countries, with more stable economies, can grant loans with fixed installments.”In any case, the UVA credit was highly criticized by broad sectors, since, when adjusted for inflation, it could make the situation very difficult for the debtor, who was faced with having to pay very high installments that did not increase at the same rate as salaries. . This situation may have been difficult with the current context of high inflation , but the default rate of UVA debtors is 1%, “something very low,” says González Rouco. In any case, without an indexed unit in an economy with an inflation of 10% per month there would be no credit.
21) What must happen in the Argentine economy so that UVA fees do not skyrocket?
The evolution of inflation is key because it is what determines the increase in the quota , but another variable to observe is the fluctuations that people's real salaries go through, which since December has fallen by 25 percent compared to inflation. “ The key is for the salary to grow more than inflation ,” explains González Rouco and recognizes that today salaries in the country are at a historic low, which is why if the economy grows they should be recomposed . “Until now, inflation has adjusted faster than salaries, which is why we have a smaller universe of borrowers,” Spina analyzes and clarifies that at some point in a favorable context for the economy it will be reversed. This means that whoever pays the monthly payment-income ratio today could improve in the medium term, which means that the mortgage payment will eat up a smaller percentage of their salary.Another key indicator will be the evolution of the dollar : a possible devaluation and the impact that an increase in the exchange rate -pass through- has on prices could become a problem because inflation would be generated.
22) Could the credit effect increase the price of rentals due to a decrease in supply?
The sources consulted clarify that if the previous rental law had been maintained, the effect would have been immediate but today with greater freedom to establish the conditions of the contracts and an improvement in annual profitability, which today is between 4% and 5% – in a pandemic. was 2% -, the owners will not make the decision to sell the property they offer for rent : “they will think about it.” “The rent/price ratio stands at 4.67% annually and fell in the last month due to the slowdown in the increase in rental prices. Today it takes 21.4 years of rental to recover the investment, 4.2% less than what was required a year ago,” explains Molina from Zonaprop. Balvanera and Paternal remain the best neighborhoods for investors seeking income, with an average return of 5.7%, 5.6%, respectively. While Palermo (4%) and Belgrano (4.1%) are the ones that generate the least profitability.Ultimately, the decision to migrate from rent to sale will depend on each case and whether the owner has the “need to get rid of the property . ” "There may be specific situations, but if we take as a reference that only 125,000 mortgage loans were granted in the two years of greatest boom in the last 25 years in a country with 10 million people who rent (three million homes), I do not believe that the new lines move the compass,” says González Rouco.
23) How was the Uvas credit experience in 2016-2018?
In 2016, the UVA (mortgage loan that is indexed to the Purchasing Value Unit - UVA) was created and, for two years, a mortgage credit boom was generated in Argentina . Until then, the loans were paid through a fixed fee, something unthinkable for the inflationary context of today's Argentina. To access it it was required to have approximately five average salaries; Furthermore, so that the creditor did not lose money, he requested very high initial payments, since they would not vary throughout the year. “But in the unstable context of the country, with one of the highest inflations in the world, few dared to lend money with that legal framework. That is why there was never a mortgage loan; "People couldn't access it," explains González Rouco and justifies why an indexed unit like the UVA is the only possible option in an inflationary economy.24) What tool could make viable lines of mortgage credit that do not skyrocket even in a context of inflation?
Rouco defends UVA-adjusted credits , that is, loans offered long term, with a repayment period of 20 years or more, but accompanied by a compensation fund. This fund would allow debtors to pay a fee adjusted for salary (unlike what is currently paid, which is adjusted for inflation) and for the creditor to charge a fee indexed for inflation. The fund would be in charge of “compensating” for the differences.This solution would allow the person who lends money not to lose due to inflation , it guarantees that it can be returned and helps the debtor not to be constantly on the hook, in contexts where inflation can be very high. But how is this achieved? The compensation fund is fed, in part, by differences: if in a month the salary-adjusted quota rises more than the inflation-adjusted quota, that extra is allocated to the fund; and the day when salaries rise below inflation and the debtor pays less, that extra would come out of the fund and cover what is missing.
Parallel to this, the economist adds a tool that he believes could help lower the entry barriers to credit even further : “Today to sit in a bank and ask for a loan you need to have saved approximately 20% or 25% of the value of the property.” property; However, there are some schemes in the United States and other countries, known as mortgage insurance that can help: they allow that, by paying insurance, it is not necessary to have that 20% , but rather you could enter with 5% . The specialist explains that it makes sense for them to ask for that 20% savings, but he believes that " if we want young people to access a mortgage loan, it is necessary to lower the barriers to entry ."
25) Why is a credit boom not expected like in 2017?
The indicator with which González Rouco anticipates the demand for credits is still far from generating a large volume. “The household income requirement of between $2.9 million and $3.2 million reflects that there is not a mass market. “They are lines aimed at professionals with good relative income compared to the average in a poor country ,” she answers. His indicator reflects that only at the end of the year and considering good development of the economy, the demand for credit will be half of what occurred between 2017-2018. A period in which 100,000 lines were granted, with eight months in which an average of 10,000 monthly credits were signed. “In the case of Banco Hipotecario, they finance up to 80% of the value, when generally it is 75% -as Ciudad offers-, so the access barrier is lower . It is still a lot, but it means less than on other occasions,” explains the economist and, regarding the income required to be able to apply for the loan, he points out: “They are levels close to those that someone from the middle or upper middle class could access.”26) Why is there no financing in Argentina?
“Argentina is, perhaps, the only country in the world in which the majority of people buy a T-shirt in installments and an apartment in cash ,” González Rouco points out in his book. The specialist explains that there is financing for small purchases, but for what is important and for which there should be financing, it is not possible to access it.www.buysellba.com
