Having a home of your own is one of the most common dreams among young professionals today, and it is also common for them to have to resort to some type of credit in order to achieve it. How to buy a house is an important decision, before taking it it is essential to know all the means of financing available. One of the methods that the government has promoted to reactivate the real estate market is UVA credits. If you are thinking of taking out one, it is important that you know how it works, what is the total financial cost and what are the adjustment variables to avoid surprises on the way to your goal.
What does UVA mean?
The “UVA” is the Purchasing Value Unit reported by the Central Bank of the Argentine Republic (BCRA). It is an index based on the average construction value of a square meter in the Autonomous City of Buenos Aires, Córdoba, Rosario, Salta and the Litoral area. So, this means that if inflation produces an increase in the cost of construction, the value of the UVA will also increase.
What is a UVA credit? And how is it different from a traditional loan?
It is a mortgage loan in pesos that is updated according to the value of the UVA. The difference with traditional loans is that the UVA has a variable rate that adjusts according to inflation.
This type of variable rate loan is presented as an alternative to access financing, since in a country where economic instability makes fixed rates difficult to establish, they are practically unattainable for the majority.
What to consider before taking out a UVA credit?
Like any financing method there are pros and cons that are key to know to make the best decision. Some points to consider before signing the contract are the following.
Who can get a UVA credit?
One of the main advantages of UVA credits is that they are accessible to those with average incomes. This means that a large part of the population that previously could not access a loan can now do so, with a monthly fee similar to a rent. However, there are still other restrictions such as age and working status.
For example, it is important to consider that at 65 years of age the loan must have been canceled. This is good news for the youngest, who can access payment terms of between 20 and 30 years but not so much for the older ones.
In addition, another not so positive aspect is that banks aim to offer these loans through salary accounts. Those who are autonomous or monotributistas will not be able to access UVA credits.
How do you adjust the quota?
The UVA credit is a good option as long as your salary is adjusted according to inflation, since the amount to be paid month by month is updated in the same way.
However, we know that most of the time our salary does not have the same speed of adjustment as inflation. So, the advice would be that even trusting that we can keep more or less updated, we should get a comfortable fee. For example, if we have a saving capacity of 15,000 pesos, the ideal is that our monthly fee is not 15,000, but leave a margin as a precaution.
If taking the necessary collections our salary does not accompany and the margin is not enough, fortunately this type of credit has a kind of emergency exit. When inflation exceeds 10% of salary, the bank can extend the term. This means that we will be indebted more time, but the monthly fee is reduced.