How can I finance a property in Chile?

Buying a property is one of the most important decisions you can make in your life, but it can also be one of the most difficult, especially if you don't have enough money to pay cash. That's why it's necessary to know the different financing alternatives that exist in the market, their requirements, their advantages, and their disadvantages.

Financing a property consists of obtaining a loan or subsidy from a public or private entity that allows you to cover part or all of the value of the property, and that you must then repay in monthly installments, with a determined interest. To access this type of financing, you must meet certain conditions, such as having a good credit history, having a minimum income and having prior savings.

In Chile, there are at least five financing options to buy a property that adapt to the different needs and payment capacities of buyers. These are:

• Mortgage loan: This is the most common and traditional financing option. It consists of a loan granted by a financial institution (bank, cooperative, compensation fund, etc.), which is guaranteed by the mortgage of the property. The mortgage loan can cover up to 90% of the value of the property, and is paid in monthly installments over a period that can range from 5 to 30 years. The mortgage loan has a fixed or variable interest rate, depending on the type of loan you choose. To access a mortgage loan, you must meet the requirements established by the financial institution, such as having a good financial behavior, having a minimum income and having prior savings equivalent to 10% of the value of the property. In addition, you must pay the operational expenses associated with the loan, such as title study, appraisal, writing, and registration.

  
  

• Housing leasing: This is a more flexible and accessible option than the mortgage loan. It consists of a lease agreement with an option to buy between a financial institution and the buyer. The housing leasing allows you to rent the property for a certain period (usually between 15 and 20 years), paying a monthly fee that includes the lease fee and the savings for the purchase. At the end of the contract, the buyer can exercise the option to buy, paying the remaining balance of the value of the property (which is usually between 5% and 10%). The housing leasing has a fixed or variable interest rate, depending on the type of contract you choose. To access a housing leasing, you must meet the requirements established by the financial institution, such as having a good financial behavior, having a minimum income and having prior savings equivalent to 5% of the value of the property. In addition, you must pay the operational expenses associated with the contract, such as title study, appraisal, writing, and registration.

  
  

• Endorsable mortgage loan: This is a more convenient and economical option than the mortgage loan. It consists of a loan granted by a financial institution in units of development (UF), which is guaranteed by the mortgage of the property. The particularity of the endorsable mortgage loan is that it can be sold or transferred to another financial institution during its validity period, which allows access to better rate and term conditions. The endorsable mortgage loan can cover up to 90% of the value of the property, and is paid in monthly installments over a period that can range from 5 to 30 years. The endorsable mortgage loan has a fixed or variable interest rate, depending on the type of loan you choose. To access an endorsable mortgage loan, you must meet the requirements established by the financial institution, such as having a good financial behavior, having a minimum income and having prior savings equivalent to 10% of the value of the property. In addition, you must pay the operational expenses associated with the loan, such as title study, appraisal, writing, and registration.

  
  

• Housing bonds: This is a more complex and sophisticated option than the mortgage loan. It consists of a debt instrument issued by a financial institution, which is backed by the mortgage of the property. Housing bonds are sold in the capital market to institutional investors (AFP, insurance companies, mutual funds, etc.), who finance the loan to the buyer. Housing bonds can cover up to 75% of the value of the property, and are paid in monthly installments over a period that can range from 5 to 30 years. Housing bonds have a fixed or variable interest rate, depending on the type of bond you choose. To access a housing bond, you must meet the requirements established by the financial institution, such as having a good financial behavior, having a minimum income and having prior savings equivalent to 25% of the value of the property. In addition, you must pay the operational expenses associated with the bond, such as title study, appraisal, writing, and registration.

  
  

• Housing subsidies: This is a more social and supportive option than the mortgage loan. It consists of a non-refundable state contribution that is granted to people or families with limited resources or vulnerable, who cannot access a loan with a financial institution, or who cannot afford their first home on their own. The housing subsidy can cover up to 100% of the value of the property, depending on the type and subsidy bracket you apply for. The housing subsidy has no interest rate or repayment term, but it does have certain restrictions and obligations for beneficiaries. To access a housing subsidy, you must meet the requirements established by the Ministry of Housing and Urbanism (MINVU), such as being of legal age, not owning a house, not having received a housing subsidy before, having a minimum savings in a housing savings account and applying within the dates established by MINVU.

These are some of the financing options to buy a property in Chile. Each one has its pros and cons, so you must analyze them carefully and choose the one that suits you best according to your economic situation and expectations. You can also combine them with each other or with other sources of financing, such as your own savings, family support, or crowdfunding.

I hope this blog has been useful to you and that you can finance your property in the best possible way. If you have any questions or comments, you can contact me.

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