We answer your most frequently asked questions about home equity loans.
Equity Loans FAQs
You can get started by completing our loan request form & we’ll get back to you ASAP.
First and foremost, you need home equity — loan potential will depend primarily on the equity that your house provides. Requirements vary with every lender, but usually include proof of income, assets, a plan for the use of funds & most importantly, how you plan to pay back the loan principal. We will normally loan up to 50% of current real estate market value.
Typical equity loan interest rates charged to borrowers are from 8% up to 18% per year, although every loan is different depending on the location of the property, risk, amount of collateral and duration.
NOTE: Lower interest rates are for qualifying “lowest-risk” equity loans, with characteristics such as: under 20% Loan-to-Value, essentially-guaranteed income (stock dividends, pensions, annuities) and a clear path to repayment of the loan principal.
An interest-only loan is a loan in which, for a set term, the borrower pays only the interest on the principal, with the principal balance unchanged throughout the term of the loan. At the end of the interest-only term, the borrower will need to pay off the principal of the loan.
Depending on the loan type, terms can range from 6 months for some hard money loans and up to 3 years for home equity loans. (some lenders will lend as long as five years)
Closing costs and fees can include costs for things such as attorney fees, appraisal fees, accounting fees, broker fees, lender broker fees, reporting, mortgage cancellation fees, escrow fees, trust guaranty fees, government fees and stamps, and loan repayment collections if needed. Just like regular bank mortgages, the closing cost is taken out of the funds disbursed to you. Closing costs are usually between 5% to 10% of your loan amount.
Loan to value (LTV) is a number obtained by dividing the Loan Amount by The Value of the Property. For example, if your property is worth $200,000 and you want to borrow $50,000, then your loan’s LTV is 25%. The lower the loan to value the easier your loan is to fund and the better the rates and terms.
We perform a site inspection. With over 30 yrs combined experience in Costa Rican Real Estate, we can give an accurate assessment of your property.
Normally one of our agents will go out and view the property to determine how much we might want to lend. On larger properties we may want to send out our own appraiser.
We will lend up to 50% of current market value of your property.
The minimum loan size with Gap Investors is US $50,000, in the case of a simple consumer equity loan. The maximum loan is in the millions, so please contact us and we can discuss the details if it is a large-scale project. We will consider lending up to 50% of current market value.
Don’t just glance over the paperwork, make sure you read and understand the entire loan document.
Here are 8 Reasons to Use a Mortgage Broker in Costa Rica!
More choice: If you go directly to one lender, you will only be offered one option. Mortgage brokers have relationships with several different lenders and are knowledgeable in each lender’s range of options. The more lenders you have competing for your home loan, the more you can save. This is especially important these days, when the banks are saying “no” more often.
Experience: Mortgage brokers are specialists who can provide expert advice and guidance on mortgage products, interest rates and current housing market conditions. They know what needs to be done, they make sure it happens and because it’s their own business, they’re in for the long haul.
Independence and Objectivity: Mortgage brokers work for you and can make objective and impartial recommendations on financing solutions through many lenders. A mortgage broker is a trusted advisor who provides unbiased advice on your financial options. Brokers are committed to you in the long term.
Access to the best rates: A lower rate can save you thousands of dollars over the life of your loan. Mortgage brokers have many lenders trying for their business and as a result you are more likely to receive a lower rate.
Skilled negotiators: Mortgage brokers act in your best interest and do all the negotiating to secure competitive rates and terms that borrowers could never achieve on their own.
Time and energy: Shopping for a lender can be frustrating and extremely time-consuming. Mortgage brokers can shop dozens of lenders in the time it takes you to find one private lender from craigslist.
Personal attention: Mortgage brokers work one-on-one with each individual client, evaluate their specific needs and find a lender who suits them personally. Brokers specialize in home equity loans and are commission-based, so it is in their best interest to get you the best rate possible, or they don’t get paid.
Paperwork: Mortgage brokers help their clients complete and submit the necessary paperwork and documentation required by the lender. As well, the broker can walk you through all the steps leading up to the closing of the mortgage transaction.
Due diligence: Click here to learn about our The Due diligence process.
Most loans require a broker for the lender and a broker for the borrower so the fees will be split between all the brokers that are working on the loan.
Then there are the office expenses, which include advertising, website maintenance, salaries, internet costs, communications, due diligence. Gap spends much of its time and energy on site visits that can entail long trips with overnight stays in many cases. Many site visits generate a 0% return as they do not fit our criteria or are not suitable for our lenders.
You can use a home equity loan for anything. Common uses include debt consolidation (paying off high-interest credit card debt), home repairs or improvements, college for the kids, or to buy an automobile. You can also use a home equity loan to pay for medical emergencies or as a business investment to buy another piece of property.
The major advantage of a home equity loan is lower interest rates. The interest rate you pay on your average home equity loan is lower than the interest rate you will pay on your average credit card by 6% to 8% or more. Home equity loans also have a lower interest rate than personal loans and other types of non-secured debt.
We work with a pool of investors that normally individually fund the loan. In case of large loans, several investors may pool together to fund the loan.
No, we never charge hidden or up-front fees. If we do not fund the loan, there are no fees charged.
A mortgage lien is placed on the property by the lender. In the case of some larger loans, lenders may employ a “fideicomiso de guarantía” (guarantee in trust), whereby the property title is conditionally transferred to a registered trustee for the duration of the loan.
Every loan is different, but we have funded loans in less than 48hrs. The norm is one to two weeks after the application has been approved.
We recommend you first apply with Costa Rican banks for a traditional mortgage. You’ll find that banks are highly risk-averse and have certain collateral, income and residence requirements. If you don’t fit within their set parameters it will be difficult to get a bank loan.
If everything is in good standing, we will attempt to rewrite the loan, possibly using the current lender or offer the loan to a new lender.
No we don’t do second mortgages. If you already have a mortgage on you home you will need to borrow enough money to pay off the first so that the new lender can take that position.