Mortgages are the ideal solution for those who no longer wish to rent where they live, but rather own their own property. It bridges the gap between savings and the cost of the property by providing a repayment term that is usually over two decades or more. With this in mind, it’s important that customers choose a product which they can be committed to over the long term. With this review, we take a closer look at the Banco do Brasil Mortgages range to determine whether the products are compatible with products from across the globe.
Find out how this range compares to that of Deutsche Bank.
About Banco do Brasil Mortgages
When a bank carries a history that dates back to the eighteenth century, there is no denying that there is a strong foundation. For Banco do Brasil, this strong foundation paved the way to one of the strongest and biggest banks in the world, based on its asset value. The bank faced some tough economic times and managed to pull itself through two bankruptcies. It follows the traditional banking structure but also incorporates modern banking techniques. This provides customers with the best of both worlds where convenience and preference are concerned.
Why Consumers Should Consider Buying Instead of Renting
The thought of getting into debt for thousands of dollars is enough to send many running in the opposite direction. This is especially true in the case of mortgages, as it also happens to be a long-term loan agreement. Renters should consider the option to buy if they can afford it, and here is why.
The Opportunity to Add an Asset to the Portfolio
Those who rent tend to have a low net asset worth unless they spend their money on investing, savings, and the purchase of assets other than property. Property is a great way to add to the asset portfolio and offers customers a double benefit. The first is the asset addition and the second is that it provides housing as well. Many other investments or assets only serve a single purpose.
Property is often the number one choice for investors to stick their funds in as the property markets seem to be progressively more stable than many other types of investments. Although this does not guarantee growth, property is still a good option if it satisfies all the other criteria for good property purchases.
It Can Produce an Income
Property owners who have some space on their land or an extra room in their house can consider renting this out in order to generate an additional income. This means that the property can serve a third purpose that brings in a return that doesn’t have to wait until the sale of the property. Although this additional income often increases the tax burden, the benefits still outweigh this burden in many instances.
There is More Freedom in an Owned Property
Renters are often limited by their lease agreement in terms of what they can do with the property. This means not being able to style the property entirely to their own needs or wants. In some instances, renters aren’t even allowed to change the paint color or hang pictures.
Banco do Brasil also offers a savings range and we recently did a review.
Banco do Brasil Mortgage Product Offerings
Residential Real Estate
This is the go-to product for those who wish to get their financial needs sorted out when purchasing a property. Slightly different terms and conditions apply to this type of loan compared to the commercial real estate.
- Customers can apply for a loan of up to 80% of the value of the property. They would need to provide at least a 20% deposit.
- Furthermore, the term is up to 35 years which reduces the installment size for easier cash flow.
- Also, customers can include the costs of applying for the loan in the loan amount, such as attorney fees and more.
- There are two different financing legs for the various property types. Properties up to $950,000 ($800,000 in some states) are financed through SFH and higher loans through CH.
- The property will act as collateral for the loan.
- Customers have up to six months to start paying their loan and will only be liable for the interest portion during that period.
- Finally, customers enjoy some flexibility in their payments as they can choose a month of the year to skip an installment payment.
Commercial Real Estate Financing
Customers who wish to extend their personal asset portfolio will find the commercial property option to be ideal. These are suitable for businesses and can be used by the owner or rented out for an additional income.
- The loan amount is a maximum of 80% of the value of the property. There is also a limit of $5 million that can be paid over 360 months.
- There are certain restrictions that apply, such as the type of material used, the location, and with a maximum value of $10 million.
- Furthermore, the property can be new or an existing building.
- Customers have up to 6 months to start paying their installments and will only be liable for the interest portion of those first six months.
- Finally, to alleviate cash flow problems customers can choose a month a year in which to skip an installment.
What We Like About Banco do Brasil Mortgages
These loans offer customers some flexibility in terms of the properties they wish to finance. Commercial properties are ideal for those who wish to extend their business portfolios whereas the residential properties provide personal assets. The loan types are simple and easy to understand.
When you work through the various loan options, the loan packages are offered in two different pricing tiers. This also means that the fees and conditions are slightly different. All this information is available to the client upfront which is a bonus where full disclosure is concerned.
The loans are up to 80% of the value of the property, which reduces the risk for the bank. In the long run, this can benefit the customers as a reduction in risk means that the bank may be more open to rate negotiation.
Finally, those who have found a property that is a little out of their price range may be able to still afford the loan, thanks to the extended term. The norm is 20 years, however, the bank grants a loan term of up to 35 years.
Other types of finance offered by Banco do Brasil include consumer loans.
What We Don’t Like About Banco do Brasil Mortgages
There is a single option for both residential and commercial real estate. Also, when the two products are compared side-by-side there is no real difference apart from the name.
The loan term of up to 35 years may seem like a good idea initially, however, few consumers are aware that the longer they pay on their mortgage, the more interest they pay over the period. This means that those who opt for a 20-year loan will effectively pay less over the term.
Furthermore, although some of the fees are discussed upfront, not all the fees are which could leave customers out of pocket when the loan is finalized. They could also have a nasty surprise when they see their installment for the first time if they’ve not been made aware of all these fees.
Finally, customers are required to put down at least 20% deposit as the bank only finances 80% of the loan. While this reduces the risk for the bank, it does make it very difficult for customers to purchase a property of their own and it may take many years to save up that deposit. It also increases the risk that customers will approach lenders for an additional loan to make up that 20% at a higher rate, as the loan will be unsecured.
Critical Reviews Banco do Brasil Mortgages – 8 of 10
Although there are a few minor things the bank needs to take care of where their mortgages are concerned, this is a well-balanced selection of products. Furthermore, customers are aware from the start that the loan selection includes commercial and residential options which opens up the playing field.
The 20% deposit can pose mixed feelings for many, however, it does force the customer to choose their property carefully and not overspend. It also reduces the overall repayment of the loan as customers pay a huge lump of it upfront. The same goes for the longer loan term. By adding an additional 15 years to the bond, customers will pay more over the period. But it will also create a window of opportunity for those who are in the lower income bracket. These customers can enter the property market without the burden of a high installment.
What we would like to see is Banco do Brasil increasing their loan option range. Or, provide a bit more information on the existing ones. This includes readvances and investment property options. The other thing the bank can do to improve their rating is to make all the loan fees available. They can also provide more guidance in terms of the interest rate calculations.
Banco do Brasil also offers current accounts and the full review is available.