With the rise in the Selic rate since last year, investors who took out financing at lower rates last year are laughing for nothing. Last year, mortgage rates were around TR + 6.9% per annum. However, two factors have changed in this account and the decision must consider more variables.
Currently, real estate financing rates are around 9% to 9.5% per year + TR.
Until last year, the Referential Rate (TR), which represents the monetary correction, was equal to zero.
Thus, the account should be made with only the interest rate. However, care must be taken when making the calculation. Both the TR is no longer zero, and the effective rate is not the advertised rate.
Most of the time, the advertised rate does not represent the total effective cost of the credit. Some fees and insurance must still be included.
Therefore, the total effective cost ends up rising to close to 10.3% to 10.5% per year + TR.
Currently, the TR is around 2.5% per year. Therefore, the total rate rises to 12.8% per year (=10.3%+2.5%).
At this point, you may say that it is still worth investing in the CDI and paying the interest.
However, the IR must be considered. An investment that earns 12.8% per year net of IR must yield 15.05% per year, considering an IR rate of 15%.
Therefore, to pay the financing, your application needs to yield 110% of the current CDI.
Yes, it is possible to find CDBs yielding up to more than 120% of the CDI with a term of 3 to 5 years. Also to fixed income funds with this income.
Therefore, it would be possible to earn even a little by maintaining fixed income investments and contracting financing.
For someone who needs liquidity, taking out financing can be interesting, as it is hardly possible to obtain loans as long and at such low rates as real estate financing.
However, you need to consider the risk involved. The CDI may fall from next year. But, your financing cost shouldn’t drop at the same speed. Therefore, the gain that we have today, maintaining the investment at 120% of the CDI and contracting the financing, may no longer be a reality within a year.
Therefore, the decision to contract financing and keep the money invested must consider your liquidity needs and your appetite for risk.
Michael Viriato is an investment advisor and founding partner of Investor’s House
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