How would you like your mortgage payment to change every month? This is exactly what happens to Chileans when they buy a house.
When I bought my house in the United States, I locked in a fixed interest rate and monthly payment amount. That monthly payment was fixed for the next 25 years. With each passing year, inflation made that payment seem cheaper and cheaper.
Contrast that with the situation in Chile where monthly mortgage payments fluctuate based on inflation.
Chilean homeowners pay their monthly mortgage payment in Chilean pesos. However, the amount fluctuates based on the value of the Unidad de Fomento (UF). When it comes time to pay, the current value of the UF is converted to pesos and the homeowner pays that amount.
As the UF rises or falls against the Chilean peso, a homeowner will pay more or less each month for their house. In talking to some Chilean homeowners, it seems that while the UF goes up and down, the overall trend is upward.
Consider the impact a variable housing payment has on the average Chilean. As inflation rises, they need their income to rise as well or their finances will be severely pinched.
If you are looking to rent or buy property in Chile, you will likely encounter the UF as part of the deal. In fact, real estate billboards promote new housing developments and quote the starting price in UF.
The UF is so prominent in Chilean finances that unless you are just visiting the country on vacation, you are bound to encounter it and have to figure out how it converts to pesos. You can see the current value of the UF here: valoruf.cl and then use this converter to see what that means in your currency.
Juan Castañeda says
Due to the earthquake in Chile last year, some of the fire department buildings collapse. We decided to support the firefighters in Tome that lost everything they had. We already sent them money and we are organizing a fundraising summer activity to help them. If you will like to support this effort feel free to contact us.
Juan Castañeda – Chairman