Find out how mortgages work in the United States KATYUSCIA

Find out how mortgages work in the United States

Find out what it is and what are the advantages of the type of credit most used by North Americans

Have you decided that you are going to buy a property in the United States? So before choosing the house, the address or whether or not it should be close to Disney, it is first necessary to better understand how the mortgage works in the USA . After all, this is the most used financing modality in the country.

Generally speaking, a mortgage is a way of obtaining credit for real estate financing or a bank loan by offering a guarantee, in this case a property. In the United States, the mortgage is so common that it is estimated that almost half of Americans have acquired their own home through this resource.

But to better understand what a mortgage actually is, how this system works and what are its advantages and disadvantages, continue reading this article.

What is the mortgage?

Despite not being so common in Brazil, the mortgage is one of the most common types offered by banks in the US for granting credit – financing or loan – to individuals or legal entities.

To understand better, imagine that you wantbuy a house in usa, but which does not have the total amount required for payment available in cash. The first thing to do is look for bank credit lines so that the bank pays for the property in cash instead, and you pay the bank in installments, with interest added.

In this case, the bank needs some guarantee that serves as proof that you will actually pay the full amount. After all, a financial institution cannot take risks with each new grant of credit. In addition to your good credit history, one of the ways to "guarantee" that the loan will be paid in full is through a mortgage.

How does the mortgage work in practice?

In the mortgage, theproperty financingbecomes the guarantee that you, the person who requested the credit, are committed to the payment. In other words, whoever acquires a house in Orlando through a mortgage only becomes, in fact, the owner after the property is fully paid off. While this does not happen, it is as if the owner of the property were the bank.

But calm down, this does not mean that the house is acquired in the name of the bank, it is in the name of the person who requested the financing from the beginning. It turns out that while discharge does not happen, the bank has a guaranteed right to take it in case of default.

In addition, it is worth remembering that, in the United States, it is necessary that at least 25% of the total value of the property be offered as a down payment, since no bank finances 100% of the total value.

The interest rate for financing granted to foreigners who wish tobuy house in orlandomay vary between 3.45% and 8.5% per year, taking into account the profile of each customer and the down payment offered.

What are the benefits of taking out a mortgage?

In addition to obtaining credit to finance the property, does the mortgage offer any other advantage?

Yes, as already mentioned, the mortgage offers very advantageous financing interest rates, even more so if we compare it with the rates currently in force in Brazil, which reach 11% per year. But that's not all.

See how the mortgage in the USA works in terms of advantages:Possibility of refinancing the payment and having more than one mortgage on a single property;

There is no need to dispose of the property, that is, transfer it to the name of the creditor institution;

Possibility of using the mortgage as a line of credit for loans;

In the US, interest on your mortgage is tax-deductible;

Ease of payment, as it is possible to pay in installments the total amount of the credit granted;

Ease of obtaining credit.

US mortgage facts

A curiosity about the mortgage in the US is that due to its ease and preference on the part of North Americans, this modality of granting credit was one of the main factors responsible for stimulating the real estate bubble of 2008, which generated a deep crisis in the financial system. North American.

It so happened that, after much granting loans and financing in the form of mortgages, in mid-2007 the banks began to become suspicious and began to deny many requests, which made the situation even worse.

That's when institutions started selling mortgage credit papers to each other, but many suffered losses and everything turned into a snowball.

Therefore, since then, some regulations have been created and changes have been made in the way the mortgage was originally granted. In any case, this model of home ownership continues to be the most popular in the United States.

Therefore, foreigners who are thinking of purchasing a home in Orlando, either for living purposes or for investment invacation house rental, the mortgage remains one of the best options.

Any questions about how the US mortgage works?

In this article, we explain what a mortgage is, how this type of credit works, what are the advantages of opting for a mortgage and also its relationship with the 2008 crisis . contact one of Authentic's expert brokers and ask your questions, okay?

But if you want to know more about how thereal estate investing in usa, which documents are required, which interest rates are charged, visit our blog and see some of the content already published on the subject.1