What can I use a home equity loan for?
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.
What are the advantages of a home equity loan?
The major advantage of a home equity loan is a lower interest rate. 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 3% to 4% or more per month. Home equity loans also have a lower interest rate than personal loans and other types of non-secured debt. Monthly payments would be lower as well, as you are paying interest only and not principal plus interest.
What are the loan requirements?
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.
Do you offer personal loans or auto loans?
No. We do not offer personal loans, auto loans, or any kind of loan other than equity loans secured by a mortgage on your property.
Do you offer loans to purchase property?
Yes, our lenders can provide loans to purchase property, when they meet the same requirements as a home equity loan. This will mean a down payment of at least 50% of the value assessed by Gap Equity Loans.
Do you charge any up-front or hidden fees that I will have to pay before I get my loan?
No, we never charge hidden or up-front fees. If we do not fund the loan, there are no fees charged.
Note: Properties outside of the “GAM” (Greater Metropolitan Area) have a $500 fee for site inspection and in-house property evaluation specific to the needs of our lenders.
How much money can I borrow against my property?
We will lend up to 50% of the current market value of your property. However, a lesser amount is better. A better interest rate can be offered at less than 50% Loan To Value. (LTV)
What is the minimum and maximum that I can borrow?
The minimum loan size with Gap Equity Loans is $50,000 USD, in the case of a simple consumer home 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.
How long can I borrow the money for?
Depending on the loan type, terms can range from 6 months, up to 3 years for home equity loans. (some lenders will lend as long as five years). If you pay down the loan by roughly 10% or more and are never late with your payments, we can probably just continue with the same lender, or it would be easy for us to put in a new lender with a new term.
Who lends the money to me for my loan?
We work with a pool of investors that normally, individually fund our loans.
What happens to my property title during the loan term?
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.
Why can’t I just get a bank loan?
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 (locally earned, locally taxed) and residence requirements. If you don’t fit within their set parameters it will be difficult to get a bank loan.
What are the closing costs involved in a home equity loan?
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 approximately 7% of your loan amount.
What kind of interest rate should I expect to pay?
Typical equity loan interest rates charged to borrowers are from 10% up to 18% per annum, 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.
What is an Interest Only Loan?
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.
If the loan is Interest Only, how do I pay it down?
Many of the loans brokered through Gap Equity Loans have a 3 year term, with a prepayment penalty applying only during the first year. You can pay down the principal at any time however, and it is highly recommended to do so during the loan term in order to improve terms of refinancing with us, or with a bank.
What does “Loan to Value” mean?
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.
CLICK HERE to use our FREE Loan to Value calculator.
How do you value my property?
We perform a site inspection. With over 30 years 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.
Note: Properties outside of the “GAM” (Greater Metropolitan Area) have a $500 site inspection fee. This includes all beach areas, Arenal, Puerto Viejo, Monteverde and Quepos.
What is the purpose of a site inspection / in-house evaluation?
If we are performing a site inspection / in-house evaluation, it means that the loan looks good to us so far.
The site inspection also gives us the opportunity to meet with the borrower. This is an important aspect of the loan arrangement, since we will be interacting together for the period of the loan term. Establishing a mutual level of comfort is important to us.
Things will always come up over a period of the loan, so it is vital that we feel comfortable calling each other for whatever reason that may arise. As far as the pictures go, try to think of the site inspection as you would if you were selling the house.
Make sure your house is clean, the grass is cut, even wash the car if it will be in the pictures. This shows the borrower that you are a conscientious person that will keep the property in good condition should it ever have to go the lender for unforeseeable circumstances.
Last but not least, we will be reviewing your application with you and help you with any questions or line items that you may have had problems answering online. This is the final step in the approval process to receiving your loan.
Following the above recommendations gives us the tools to work with to explain to a lender why you should be approved for that loan!
Can you put a second mortgage on my home?
No, we don’t do second mortgages. If you already have a mortgage on your home you will need to borrow enough money to pay off the first so that the new lender can take that position.
How long will a home equity loan take to close?
Every loan is different, but most of our loans are closed and funded within a couple weeks once all the requested information has been provided by you.
What exactly do the brokers fees pay for?
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 Equity Loans 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.
What must I do at closing?
Don’t just glance over the paperwork, make sure you read and understand the entire loan document. The lender’s lawyer, by law, has to explain to you the exact wording of the legal document in English or Spanish prior to signing.
What if I am late on my payments?
The best way to handle a late payment is the following — CALL US BEFORE THE DUE DATE! Give us a heads up if you will be late. We can discuss why you will be late, and perhaps we can help. We will then call the lender and explain you will be late and why! This alleviates the knee-jerk reaction the lender will have if you simply don’t pay on time and we have to call you to find out what happened.
How do I renew my loan once the term is up?
The loan will likely be renewed if you are never a “day late or a dollar short”.
We say likely, because circumstances change. The lender may choose to not renew because he would like his capital back for personal, medical reasons etc.
However, never missing a payment or being short on the payment, is worth it’s weight to us in Gold! Very easy for us to refer you to a new lender. We strongly suggest you pay down the loan by a minimum of 10% or more, so the loan amount does not increase.
Geopolitical situations may affect the renewal process, which are beyond anyone’s control. (Global financial crisis, Global conflicts, and Natural disasters) are a few examples.
What happens in a foreclosure?
The foreclosure process can take between 4-8 months, depending on the location of the foreclosure. Upon foreclosure, the full amount owed — loan amount, all missed interest payments, late fees and legal fees — are to be paid to the lender.
If the foreclosure process is started, the collateral property will go into an auction and the highest bidder will obtain the property. The proceeds from the auction will be split between the private lender and borrower (if applicable).
For example, if the lien on the collateral property is $100,000 and during the auction, the property is sold for $200,000, the first $100,000, all missed interest payments, late fees and legal fees are deducted and returned to the lender, and the remainder will be given to the borrower.
How do I get started?
You can get started by completing our loan request form & we’ll get back to you ASAP.
What is a Property Plano?
All recorded and titled property has a plano catastro, also known as a survey plan.
It details the boundaries of the property, the total size, ownership, the Folio Real number, and the date it was registered among other things. Planos, as they are referred to in Costa Rica, can be found in the Registro Nacional (Public Registry), as well as at the municipality in which the property is located.
What is a Folio Real number?
All registered properties have a folio real number (i.e. 6-123456-000) of which the first number represents the province where it is located, the second refers to the specific folio property number, and the third to the property rights as in number of owners (000 means only one owner).
How can I check the status of my property?
You can go to the National Registry: http://www.rnpdigital.com/index.htm where anyone can check the status of a property.
Go to “Sistema de Certificaciones y Consultas Gratuitas” on the top left side of the webpage. A new tab will open and then first time users will have to go to “Registrarse por Primera Vez” in the top left hand portion of the page. After filling out the form you will receive an email and click on the link and enter your user email and password on the left hand side under “Ingreso para Usuarios Registrados”. Then go to “Consultas Gratuitas” on the left hand side and next you will see a list of all the types of “Consultas” you can do for “Bienes Immuebles” (Real Estate). To obtain a certified property report click on “Consulta por Numera de Finca”. After this, you will have to enter the number of the property’s province or “Provincia” (first number of the Folio Real number on the Plano), the folio real number of the property (middle numbers of the Folio Real number on the plano), and the number of the property right “derecho” (which is the last 3 digits of the Folio Real number on the Plano). Once you enter the said information click on the “Consultar” (consult) button. A certificate with all the information of the property will appear on the screen.