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Home Loan Market Heats Up With Low Interest Rates
Banks are looking to increase their loans portfolios and are looking to the middle class with easy and accessible home loans. (vivienda).

The banks are using low interest rates and in some cases a fixed rate for the first years and a variety of terms as a hook to get customers through their doors.

Competition between the banks - state and private - is fierce and has prompted bankers to sharpen their pencils and find creative ways to attract customers.

For instance, home loan interest rates at private banks have gone from 18.95% on June 5, 2006 to 11.09% on June 5 of this year. On June 5, 2005, the interest rate on home loans was 21.43%.

At the state banks, the rate on home loans was 18.56% on June 5, 2006 and 11.18% on June 5 2007 and 20.56% on June 5, 2005.. according to figures by the Banco Central de Costa Rica (BCCR).

Some 25 different home loan products geared specifically to the middle class, are now available on the market, on loans in colones and dollars.

The market being sought by the banks are those earning between ¢350.000 and ¢850.000 Colones (us$670 and us$1.650) net monthly - the group considered middle class -that was unable to obtain credit easily in the past or the payment plans based on the high interest rates offered was over their ability to make the monthly payments.

However, at an 11% interest rate and 15 year term say, a ¢20 million colones (us$39.000) loan would require a monthly payment of only ¢227.000 colones (us$439), while the same loan at 20% would have been ¢351.000 or almost 60% of income.

A family earning ¢600.000 net monthly that did not qualify last year, can do so now.

The Superintendencia General de Entidades Financieras (SUGEF) - the banking regulator - stipulates that not more that 40% of net income can be used to pay a home loan.

Leading the number of home loan products is the Banco Nacional (BN) with at least seven different types of home loan products ranging from terms of 14 years to 30 years. The Banco de Costa Rica (BCR) offers six products in a program to place ¢60 billion colones in the hands of homeowners in the next six months.

The private banks are also active in the market, offering all types of terms and bonuses to get their share of the home loan market.

For those in the market for a home loan, the best is to shop around and compare the offers made by the different banks, both private and state.