The dream of owning a home remains a desire among Brazilians. When the topic is the purchase of such an asset, two modalities stand out:
financing and real estate consortium. Although they serve the same purpose - and even similar audiences - these two modalities have significant differences. Below, we explain each of them in more detail.
What is real estate financing and how does it work?
Real estate financing is essentially a loan with a specific purpose, which, as the name suggests, is to buy a property - whether a house, apartment, studio, or even commercial space. You borrow money from a financial institution to pay the seller of the property in cash. In exchange, you assume a debt with the bank, which must be paid in monthly installments plus interest and monetary corrections.
(Jakub Zerdzicki/Unsplash/Divulgação)
In this modality, the property is under fiduciary alienation. This means that the property is given as collateral to the bank until the total debt is settled. Although you can live in, renovate, and enjoy the property, the definitive ownership (the deed without encumbrances) only transfers to your name after the last installment is paid.
Amortization systems in Brazil
In Brazil, real estate financing usually adopts two main amortization systems: SAC Table (Constant Amortization System) and Price Table. In SAC, the amount amortized from the debt is fixed throughout the contract, causing the initial installments to be higher and gradually decrease over time. This model tends to reduce the total interest paid in the long term, making it an interesting option for those who can afford larger payments at the beginning.
In contrast, Price Table maintains fixed installments throughout the financing. In this case, the composition of the installment changes over time: at the beginning, most of the payment consists of interest, while the amortization is lower; as the years go by, this relationship inverts. The predictability of the installments is the main attraction of this system, especially for those seeking a more stable financial planning.
In addition to the amortization system, real estate financing usually requires a down payment, which is usually at least 20% of the property's value, and may vary depending on the bank and the buyer's profile. It is also possible to use the FGTS balance to reduce the down payment or offset the outstanding balance throughout the contract, which helps to decrease the financed amount and, consequently, the interest paid.
Advantages and disadvantages of financing
(Jakub Zerdzicki/Unsplash/Divulgação)
The main feature of financing is immediacy. If you need to move out of renting now or get married next month, this is the standard route. However, this speed comes at a high cost.
Advantages:
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Immediate possession: As soon as the contract is signed and the seller is paid, the keys are yours. You stop paying rent (if applicable) and start paying for what is yours. This is if the property was not purchased off-plan.
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Long Terms: Banks offer extended terms, reaching up to 35 years (420 months) to pay, which dilutes the value of the installments.
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Use of FGTS: It is possible to use the Guarantee Fund both for the down payment and to amortize installments or the outstanding balance every two years.
Points of attention:
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Compound Interest: This is the biggest disadvantage. Depending on the Selic rate and the spread from the bank, after 30 years, you may end up paying the equivalent of two or even three properties.
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Down Payment: Saving 20% of a property's value (plus notary costs and ITBI) is a high entry barrier for many families.
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Credit Assessment: The credit analysis is meticulous and restrictive. The bank evaluates your income, credit score, and professional stability rigorously.
What is a real estate consortium and how does it work?
A consortium works like a "collective savings" or a self-financing. A group of people comes together, under the management of an administrator authorized by the Central Bank, with the common goal of buying a property.
(Andre Taissin/Unsplash/Divulgação)
Monthly, all participants pay a fee. With the collected amount, the administrator grants one or more participants a credit letter, which is the amount for purchasing the asset.
The allocation occurs in two ways:
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Drawing: Everyone has the same chance of being drawn monthly (by the Federal Lottery).
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Bid: Those who have some money saved can place a bid (free, fixed, or included). The highest bid wins the credit letter that month.
Unlike financing, there are no interest charges in the consortium. What exists is an Administration Fee (the profit of the company that organizes the group), a reserve fund, and insurance, diluted over the contract period.
Advantages and disadvantages of the consortium
(Eric Rothermel/Unsplash/Divulgação)
The consortium is ideal for those who are not in a hurry and have financial discipline, or for those who wish to invest in the real estate market by paying fewer final fees.
Advantages:
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Lower Final Cost: Without the incidence of compound interest, the final cost of a property via consortium is drastically lower than in financing. The administration fee (usually between 15% to 22% for the whole period) is much lower than the accumulated annual bank interest.
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No Down Payment: You don't need an initial amount to start. The plan is integral (100% of the letter's value).
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Cash Purchase Power: The credit letter is equivalent to cash in hand. This gives the consortium member excellent negotiating power to secure discounts at the time of purchasing the property.
Points of Attention:
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The Wait: There is no guarantee of when you will get the property. You can be drawn in the first month or the last (which can take up to 15 years).
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Risk of "Double Payment": If you pay rent, you will need to cover both the rent and the consortium installment simultaneously until you are drawn, which can weigh on your budget.
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Adjustment of Installments: The installments and the credit letter are adjusted annually (usually by the INCC). This is good for maintaining the purchasing power of the letter, but causes the installment to rise, which requires planning.
5. What is the best option for your profile?
(Nebular/Unsplash/Divulgação)
The battle "Consortium vs Real Estate Financing" has no single winner; the champion depends entirely on your life moment and financial health.
Choose Financing if:
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You want to move immediately.
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You are paying a high rent that is almost the value of a financing installment.
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You have stability and discipline to handle long-term debt.
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You already have the down payment saved.
Choose Consortium if:
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You are not in a hurry to move.
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Your goal is to increase assets or buy a second property for investment.
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You want to avoid abusive interest rates and pay a much fairer final amount for the property.
In summary, financing sells time (you pay interest to have the asset now), while the consortium sells economy (you wait to pay less). Analyze your urgency, put the rates on paper, and make the choice that will bring you more peace of mind for your future.
CASACOR Publisher is an agent that creates exclusive content, developed by the TECHNOLOGY team of CASACOR from the knowledge base of casacor.com.br. This text was edited by Yeska Coelho.
