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November 30, 2020
To finance the purchase of a home in Colombia, there are two financial alternatives:
The first is a traditional mortgage loan, and the second is a housing lease.
There is no option that is better than the other; both systems are very good. That is why an initial approach (interview) with the client is carried out in order to determine which option provides the best solution for the buyer.
Depending on each person’s particular situation—such as their economic activity, the type of property they wish to purchase, or their tax conditions—it is necessary to evaluate which option is the most suitable to finance the purchase of an apartment for sale in Medellín.
A housing lease is a financial leasing contract with a purchase option.
With this alternative, when purchasing the property, a minimum down payment of 15% of the property’s value is required (this depends on the financial institution and the amount to be financed). The bank carries out an appraisal of the property, and once it is approved as collateral for the lease, a deed is executed in the name of the bank. In this deed, the leasing holder legally acquires the right to exercise the purchase option on the property, meaning that:
They may pay off the remaining balance of the loan at that time, or they may transfer the purchase option to a third party.
When taking out a housing lease, the lessee is responsible for paying the property taxes and keeping the property in perfect condition. If any structural modifications are to be made, authorization must be requested from the bank. Once the lease is fully paid, the deed is transferred to the lessee’s name.
There are very important aspects to consider when choosing a housing lease:
The first, and one of the most important, is that it offers a higher financing percentage (up to 85%).
The second is that since the property is registered in the bank’s name, the lessee is not required to pay wealth tax on the property. This does not apply to social interest housing.
There is no need to establish a mortgage. The lessee pays for a deed for the bank to take ownership of the property, and another deed when the purchase option is exercised to become the owner.
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Another very significant benefit arises when purchasing a used property. If the seller already has a housing lease with a financial institution, the new buyer may take over the lease with the same institution. This makes the process much more efficient, as there is no need to execute a new deed—only a transfer of rights between the seller and the buyer.
Now let’s talk about mortgage loans. If you are looking for an apartment or a house for sale, this option is a way to finance the purchase of this type of property.
The bank grants the loan, and at the time of executing the deed, the property is registered in the buyer’s name with a real guarantee, which is a mortgage.
This product allows financing of up to 70% of the commercial value. The required down payment is 30%, and as mentioned above, the property will be registered in the buyer’s name. Therefore, the buyer must include it in their tax return and pay taxes on this asset. If the property is later sold, the outstanding loan balance must be paid in order to release the mortgage and transfer the deed to the new buyer.
With this brief explanation, we would like to emphasize that the best product to finance your home will always be the one that best fits your current needs.
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