Bank Mortgages For Brazilians To Buy Property.

Also see  Affordable Housing Brazil    Affordable Housing Brazil Projects

In Brazil, the banks can finance both the companies and clients. There are mortgage options for both financing the companies to help the construction of new projects as there are to finance the acquisition of a property by the final consumer. There are different interest rates and lengths of mortgage contracts to serve all purposes.

The same banks who finance a new R$ 5 million apartment on the beach to a rich buyer will also finance an R$ 30 thousand one bedroom property in the suburbs for a minimum wage worker. Of course the bank’s interest rates vary with the level of risk profile.  

The public bank Caixa Economica Federal (CEF) has access to government reserves at subsidised interest rates to promote housing for  poorer people and help reduce the housing deficit that is 80% concentrated on that social class. Depending on the financial status of the buyer and the price of the property rates can drop as low as 6% a year and included bonus of up to 50% off the price.

That means that, if it’s the Brazilian residents first property, and they are receiving the minimum wage and the price of the property is not superior to a certain limit the buyer can get 50%  discount on the total price and still pay the remaining half in up to 30 years with a 6% a year interest rate. This discount will be paid by the profit acquired when lending money at bigger rates like 8,16% or 10,25% a year. (CEF) 

If you are in the lower middle class, you will be making between R$ 3 and R$ 5 thousand monthly. For these clients, the interest rates are around 8% yearly and the length of contracts can also be up to 30 years (360 months). For the people who make more than R$5.000,00 monthly, the middle class, and the upper class, both public and privates banks are more or less equivalent on their interest rates and options.  

The bank financing of construction, due to the favourable conditions achieved in the recent years is a fast growing business that stimulates civil construction throughout the whole country. These achievements are namely: a stable and growing economy, legal security through new real state laws (ex: Alienação Fiduciária), increasing income of workers, flow of foreign investments, controlled inflation, etc.

This combined with a  governmental willing to pay at least part of our social debt with the poor working class and a housing deficit currently around 8 million of houses creates a very profitable business for the construction companies and their investors and for the lower income classes, the banks financing, especially CEF, are essential and decisive for the purchase of a new home. 

Source: ABECIP e CEF. 

  About the Bank Mortgages in Brazil. (continuation)

 Current Status and Estimates for 2008.

  The property financing market is breaking new records every day. In May 2008 , according to ABECIP (Brazilian Association of Real State Credit Entities and Savings Accounts), Brazil reached the biggest monthly volume of mortgage contracts in the last 20 years. 22.069 properties were financed through the banking system (houses or apartments). 

This was an increase of 35,6% from May of 2007. And the total value of these transactions was R$2.27 Billion just for  May, an increase of 57,8% from May last year. In the first five months of 2008, Brazil has seen the banks finance 95.956 units in a total of R$9.74 Billion.

This amount of money is already more than was mortgaged in the whole  of 2006.  The estimates of ABECIP is that this year there will be R$ 25 billion financed in mortgages in Brazil, making the Brazil property sector year on year growth of 36.6% .

 The graph below shows volume of Brazil property transactions over a 20 year period (Source Brazil Central Bank)

This Next Graph shows the volume of transactions for Brazil property over the past 5 years. Growth for the 5 year period was a staggering 578% and the forecast for 2008 is 270,000 units (revised upwards from 230,000 since this graph) financed which would represent year on year growth of 27.5%

Source: BACEN

This Next Graph shows the $R value of transactions for Brazil property over the past 4 years. Growth for the 5 year period was a staggering 578% and the forecast for 2008 is R$25 Billion (revised upwards from R$21 Billion since this graph) which would represent year on year growth of 27%

Source: BACEN