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Financing for construction: what is it and how does it work?

Financing for construction: what is it and how does it work?

It is possible to finance the construction of your home on the lot you already own. See how construction financing works.

In the housing scenario in Brazil, it is a fact that most people want to get out of rent. After all, it is a cost comparable to a installment of financing for construction , and the rental values ​​are increasing.

For many people, acquiring land for the construction of the house the way they always wanted is a big dream. But what a lot of people don’t realize is that it’s not unattainable — it’s entirely possible to achieve this achievement.

There are those who think that the act of acquiring land to build a house should consider both investments, treating them as one. In fact, that’s not always how it works. See below for some information to complete this project!

How is the financing for those who already have a plot of land?

For people who already have a lot and want to build a house, this type of credit guarantees financing of up to 100% of the total value of the work. In addition, the discharge period can reach 35 years, depending on some details and the preference of the interested party.

In view of this, the transfer of the financed amount takes place according to the progress of the work . There is the release of each installment of the loan in each phase of the construction completed and inspected by the institution that granted the financing.

Financing will only begin when the property is completed. For this, you must be the owner of the land , which needs to be settled and with the definitive deed . The other documents must also comply with the Law.

How is land and construction financed?

In this case, things are a little different. To benefit those who do not have a financial reserve, in this modality, it is possible to start and proceed with the construction through a specific real estate financing, in which it will be feasible to finance 80% of the acquisition of the land plus the construction of the property.

For this, it is possible to use the FGTS as part of the payment . The credit conditions required in this modality are similar to those for construction-only financing, and the interest rate is around 5%. First, it is necessary to apply for the financing of the land. Only after the construction project is approved by the city will it be possible to proceed with construction financing.

How do developers and builders help with construction financing?

They help in this process by providing guidance to the buyer , in order to mediate the hiring of the professionals involved, such as an engineer for the creation of the project. They also act in the mediation of bank financing , making it more accessible to the buyer.

It is an advantageous partnership to ensure the smooth progress of the construction, without interruptions due to lack of money, until the most awaited moment, which is the delivery of the keys. Unlike when the owner builds gradually, things can get a little more complicated, as this type of financing has a defined schedule with a stipulated deadline for completion of the work.

What are the prerequisites for housing financing for construction?

For the approval of a loan, banks and other financial institutions carry out an individual credit assessment, analyzing each case. However, there are prerequisites. The conditions for the bidder are:

  • have never benefited from funding from the SFH system;
  • do not own another land or property in the same location;
  • work for at least three years under the FGTS regime;
  • be of Brazilian origin and be over 18 years of age.

Regarding the terrain , the requirements are:

  • be located in the same municipality where the interested party works;
  • be registered at the Real Estate Registry Office;
  • have, in relation to the destination of the property, urban residential purposes.

With the knowledge about how construction financing works, it is much easier to guarantee your land or the construction of your house in the best possible conditions. There are good options even for those who don’t have a large budget, and the dream of owning can indeed be achieved!

Did you like this post? Also check out our tips for buying a good land !


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