Buying a new home is an expensive pleasure, so many families are forced to raise borrowed funds. Mortgage lending today is more profitable than conventional loans. At the same time, you can save additional money on it if you consider the option of purchasing an apartment on the secondary market. We will tell you in this article what pitfalls you may encounter when buying an apartment with a secondary mortgage and how to avoid them.
Advantages and disadvantages
Buying an apartment in a new building or at the construction stage is not always economically justified: the price per square meter is higher, the time frame for putting the house into operation is very conditional, and the opportunity to get a bank loan is not guaranteed. That is why in recent years the segment of secondary housing in the real estate market has grown significantly.
Buying an apartment with a mortgage: step-by-step instructions from an expert
The advantages of "secondary"
- price - for an old vest it is lower than for an apartment in a new building;
- the presence of developed infrastructure - schools, kindergartens, retail outlets, transport interchanges, etc.;
- the opportunity to move in immediately after purchase - in order for his offer to be competitive, the seller tries to make at least minimal cosmetic repairs. With some effort, there is a chance to find an apartment decorated in the latest fashion;
- the likelihood of getting a mortgage to purchase a secondary property is higher - banks are more favorable towards such applications due to the high liquidity of a finished apartment than to options for purchasing new buildings.
Disadvantages of buying second hand
- increased interest rate on a loan for the purchase of new housing;
- It is not always possible to find an apartment with the desired characteristics;
- the degree of wear may require additional investments for major repairs;
- risks associated with possible legal consequences from previous owners.
Nevertheless, buying an apartment on a secondary mortgage is invariably in demand: the main criterion is its more reasonable cost from an economic point of view.
What additional steps are possible in obtaining a mortgage?
The procedure for obtaining a mortgage is quite stable, so there will be no deviations from the above stages. However, for some citizens, this stage may involve collecting the documents necessary to submit an application. This step is necessary in any case, but the set of documents may vary. For example, sometimes the bank does not require official confirmation of income, but due to this “bonus” it increases the overall interest rate on the loan.
Also, in some cases, the bank may additionally require an updated income certificate. This happens if the client was unable to choose a suitable apartment within the 3 months allotted to him. The reason for updating the certificate may also be other situations due to which the procedure for obtaining a mortgage has been delayed.
Sometimes, in order to reduce mortgage rates, citizens are advised to prepare the ground” at the bank. The most favorable conditions are offered to current bank clients, so it is recommended to apply to banks whose cards have been issued. However, priority is given to salary card holders, since monthly transfers will serve as additional confirmation of the borrower’s income. Some banks offer discounts for meeting certain requirements. For example, Sberbank reduces the mortgage rate with electronic registration.
How long does it take to get a mortgage approved?
To get loan approval, you must:
- Answer the questions in the questionnaire. On the Rosbank Dom website, in a special application form, you must indicate your last name, first name, region, type of property, contact phone number and e-mail. All you have to do is agree to the terms of data processing and click the “Submit Application” button.
- Upload scans of documents and digital signature. To obtain preliminary approval, it is enough to provide documents in electronic form. How long it takes to consider a mortgage depends on the bank. At Rosbank Dom you can get a preliminary decision online in 10 minutes.
- If the answer is yes, choose a convenient date and time.
Renting housing to tenants
The owners of an apartment purchased with a mortgage can rent it out to other residents, even if they have not yet paid off the bank. The bank's consent is not required in this case. 40 FZ-102. This is stated in the law, but the civil code allows creditors to introduce conditions into the contract that will prohibit the rental of mortgaged housing. And many banks use this right. Therefore, if the mortgage agreement states that renting is prohibited, the owner will not be able to transfer his living space to other tenants. Sometimes a condition is included in the contract that the bank’s consent must be obtained in order to rent out housing.
If the owner violates such terms of the contract, the consequences may be different:
- the bank will not check who lives in the housing and then it will be possible to pay off the mortgage at the expense of the rent paid by the tenants;
- the bank will find out that it is not the owner who lives in the apartment, but strangers and will oblige the borrower to repay the mortgage early.
It is not necessarily written in the conditions that it is prohibited to rent or rent. Other wording may be included in the text - “temporary transfer for use”, “use by other citizens without the consent of the creditor bank”. But this also applies to hiring. If the plan was to pay off the mortgage at the expense of the tenants, then you can find yourself in a difficult situation - there will be no money for early repayment, and the law will be on the side of the bank.
How long can it take to obtain a mortgage?
The process of applying for a home mortgage can take several months . This may be due to several factors:
- The potential borrower provided the bank with an incomplete set of documents or submitted documents whose validity has already expired.
- The person does not inspire confidence in the bank, so the financial institution requires additional facts to certify that the person is reliable.
- The borrower cannot find an apartment that is suitable for both him and the bank.
- The borrower has been looking for a long time for an insurance company for whose services he would not overpay.
Clearly answer the question: “How long does it take to get a mortgage?” impossible. Some people can complete a deal in 3 weeks, while others will have to process it for several months.
But if the borrower has a positive credit history, he will not raise doubts in the bank, finds a good seller and a “clean” apartment, correctly submits all the necessary documents, then he will be able to get a mortgage in 3 weeks.
It is not possible to complete a transaction to purchase a mortgaged apartment in a shorter period.
Will for real estate pledged
When a purchase and sale transaction is completed, the property immediately belongs to the buyer. The bank does not appear in the documents. But at the same time, an encumbrance has been placed on the apartment, which will be removed after the completion of mortgage payments.
The borrower with a mortgage is the owner of the property, so he can include the property in the will without the bank's consent. In this case, it does not matter who will bequeath the apartment to her husband, a businessman, or her minor son, a schoolboy. The bank will generally not know that the mortgaged housing appears in any will.
If the mortgage is not repaid at the time of the borrower’s death, upon entry into the rights of inheritance, the mortgage debt will also be transferred to the legal successors. Even if there is no will, the mortgaged property will still go to the heirs. And if there are several of them, then it will be much more difficult for them to divide both the property itself and the debts on it.
Read about how to draw up a will and what is needed for this in a separate article by Brobank.
Any heir has the right to refuse to inherit. This can be done in order not to pay the obligations of the deceased borrower if they turn out to be unbearable for the successor. But you won’t be able to get an apartment without paying your debts.
Registration in the housing of relatives or strangers
The owner of the living space can register close relatives in the apartment: parents, children, spouse. This is not prohibited by Russian legislation. Although some banks may prescribe a ban on registration of unauthorized persons in mortgaged housing.
When submitting documents for registration to the Ministry of Internal Affairs, they do not specify whether the apartment is mortgaged or not. Therefore, formally, the property owner can draw up an agreement with the tenant or write consent for another person to live in his apartment. It will be difficult for the bank to influence this situation. But at the same time, it is important for the borrower to observe the line and not carry out mass registration of citizens in his apartment. Then you can freely register your children, parents or siblings. Housing Code of the Russian Federation Federal Law-188 Art. 31.
Step-by-step procedure for applying for a mortgage step by step
Let's look at a step-by-step scheme for applying for a mortgage loan. Let's start with choosing a bank and finish with registering the mortgage agreement in Rosreestr and registering ownership.
Step 1. Select a bank and loan program
At the initial stage, you need to choose a suitable bank. If you receive an official salary, contact the bank that issued your salary card.
Expert opinion
Alexander Nikolaevich Grigoriev
Mortgage expert with 10 years of experience. He is the head of the mortgage department in a large bank, with more than 500 successfully approved mortgage loans.
Sberbank, VTB, Gazprom, MTS Bank and other large organizations offer special conditions to salary clients. Bonuses include expedited application processing, a simplified set of documents, and reduced interest rates. Thus, Sberbank lowers the mortgage interest rate for salary clients by 0.5%.
Before meeting with a consultant, choose the right mortgage program. Go to the bank’s website and look at the conditions, interest rate, requirements for borrowers, etc. All banks have standard programs.
Let's list the main ones:
- For secondary housing.
- To buy an apartment in a new building.
- For the purchase of a private house.
- For construction.
- Under maternity capital.
- Secured by existing real estate.
- Military mortgage.
- Refinancing.
To choose a program, decide what kind of real estate you want to buy, what amount of down payment you have on hand, what kind of housing you will leave as collateral (purchased or existing).
Example:
Let’s say you want to buy an apartment in a new building, you have money available for 1 installment in the amount of 15% of the loan amount, and you plan to leave the purchased apartment as collateral. Now you can explain to the manager that you need a mortgage for an apartment in a new building secured by the property you are purchasing; your down payment is minimal.
An important point in choosing a program is the interest rate. The amount of overpayment and the size of monthly payments depend on it. The lower this parameter, the more the borrower will save.
Also, when choosing a bank and program, pay attention to the following points:
- Financial organizations existing in the region. It makes sense to get acquainted not only with large, but also with less popular banks. They are interested in clients and often offer unique conditions.
- Reputation of the credit institution. Bank clients share information on forums and leave reviews on special services. From reviews you can learn about hidden clauses of the contract, service features, and pitfalls.
- Borrowers with a white salary can contact DOM.RF. This federal agency was created to stimulate the mortgage market. The organization does not process borrower applications directly, but cooperates with large and small banks throughout the Russian Federation.
Expert opinion
Alexander Nikolaevich Grigoriev
Mortgage expert with 10 years of experience. He is the head of the mortgage department in a large bank, with more than 500 successfully approved mortgage loans.
Banks attract new customers with promotions and discounts. They are launching social projects for young and large families, young professionals, and the military. If you belong to one of these categories, you can get a mortgage on very favorable terms.
Example:
Andrey and Irina have 2 children. Their second child was born in 2019. Parents are under 35 years old. The couple decided to take out a mortgage and submitted an application to Sberbank under the 6 percent mortgage program for large families. After passing the check, they were approved for a loan, and they bought an apartment in a new building for 2.5 million rubles. The couple also plan to use maternity capital to pay off the mortgage, then give birth to a third child and receive 450 thousand from the state.
Step 2: Meet with a Mortgage Advisor
A mortgage consultant is a bank employee who advises the borrower and verifies documents. The specialist will tell you about the terms of the programs and the responsibilities of the potential client. A personal meeting provides an excellent chance to ask questions.
Therefore, you need to come to the meeting with a prepared list of questions:
- Ask about the method of calculating the mortgage rate, late fees, application processing fees, preferential programs and promotions.
- Clarify the conditions for early repayment. Some banks stipulate in the agreement a period during which early repayment is not possible.
- Specify the list of mandatory and additional documents.
- Find out how to confirm income and whether it is possible to do this with a free-form certificate.
- Find out what options for using real estate the bank allows. For example, is it possible to make repairs or rent out an apartment?
- Ask about the validity period of the bank’s positive decision and the possibility of re-submitting an application.
- Inquire about the possibility of attracting co-borrowers.
- Find out about additional free services. Some organizations offer credit cards, a 24-hour support center, and access to online banking.
- Ask what insurance is required and which insurance companies are accredited by the bank.
When meeting with a consultant, try to look presentable. The same goes for document photography. A lot depends on your appearance. Shabby clothes, bags under your eyes, a stale appearance, stubble on your face - all this will make the clerk doubt your well-being.
It often happens that during a meeting you asked all the questions you wanted. However, after a few days you have new ones. Even if some point is lost in memory, you can always arrange a second meeting or call.
Step 3. Gather the necessary documents
Documents for obtaining a mortgage are divided into basic and additional. The first ones are required from all potential borrowers:
- Original passport.
- A copy of the work book, certified by the signature of the employer.
- Personal income tax certificate-2 or a certificate in free form, if the bank accepts it.
- A completed application form for obtaining a mortgage according to the bank's form.
The following documents increase the chances of a positive decision:
- Driver license.
- Military ID.
- Diplomas, certificates of education.
- Marriage certificate.
- Children's birth certificate.
- Papers confirming additional income.
- Property ownership documents.
Banks welcome any papers that prove financial solvency and stability.
Step 4: Submit your application and get approved
Submitting an application begins with going to the selected bank and filling out a form. The latter can be downloaded from the bank’s official website. The credit consultant will check it for errors and take all documents for review. This process usually takes 3 to 5 business days. Be sure to stay in touch during this time. Credit managers can call and request documents or ask new questions along the way.
Banks notify clients about the decision via SMS messages, emails, and calls. If the decision is positive, a bank employee will ask you to come to the branch. He will name the amount and terms of the mortgage. From now on you can start looking for an apartment.
If the application is being processed for more than 7 days, you can call the consultant yourself and find out the reason for the delay. It may be necessary to bring additional documents, or the long period of time for making a decision is due to the high workload of bank employees.
Sale of a mortgaged apartment at the insistence of the bank
In case of failure to fulfill obligations under the mortgage agreement and violation of the payment schedule, the bank may require the borrower to sell the mortgaged property. For example, the text of the agreement may indicate that the owner is obliged to sell the apartment and repay the loan if 3-6 regular payments are late.
Also, the creditor bank can prescribe many other reasons for early termination of the contract. This includes registration of unauthorized persons in a mortgaged apartment, rental of housing or unauthorized redevelopment.
Introduction to mortgage - basic concepts and terms
A mortgage is the process of buying a home using borrowed funds, in which an encumbrance is placed on the property being purchased. According to the terms of the agreement, the apartment remains the property of the borrower, but if he stops repaying the loan, the bank has the right to sell the apartment to repay the remaining debt.
A mortgage transaction involves signing a loan agreement and an apartment purchase and sale agreement. The remaining details - submitting a questionnaire to the bank and searching for suitable real estate - are not included in the concept of the transaction, although they are an integral part of the procedure.
Encumbrance is the presence of restrictions on the right to use property. In our case, the limitation is the mortgage. When housing is pledged to a bank, the owner cannot freely dispose of it. Thus, the borrower cannot sell or rent out an apartment, register third parties, or do redevelopment without the bank’s consent.
Down payment is the amount that the borrower has on hand or in a bank account to purchase real estate. In most banks, the down payment is 10-20% of the mortgage loan amount.
Expert opinion
Alexander Nikolaevich Grigoriev
Mortgage expert with 10 years of experience. He is the head of the mortgage department in a large bank, with more than 500 successfully approved mortgage loans.
The mortgage transaction occurs at the very last moment; the previous steps are considered preparation. The borrower will be required to insure the collateral. Some banks insist on life, health, and title insurance.
Mortgage insurance is insurance against the lender's risks that may arise during the process of paying off a mortgage loan. By law, only insurance of the purchased property is mandatory.
A purchase and sale agreement is a document on the basis of which an apartment is transferred from the seller to the buyer. Only on the basis of this agreement does the buyer acquire ownership of the home.
The borrower registers the agreement with the MFC or Rosreestr. This procedure takes up to 5 days. After registration is completed, the borrower signs a mortgage agreement and the bank transfers the mortgage funds to the seller of the apartment.
From this moment on, the buyer has the right to move into the apartment, taking into account the terms of the agreement with the seller. The bank will pay off the mortgage on the property only after the mortgage has been paid in full. After this, the borrower removes the encumbrance from the apartment and becomes its full owner.
When applying for a mortgage loan, you can choose 2 calculation schemes:
- Annuity. This means that the monthly amount does not change during the loan period. During the first months, the borrower pays interest on the mortgage. Then comes the principal debt. It turns out that at first interest makes up the main part of the payment, so the overpayment on the loan is higher.
- Differentiated. Implies a reduction in monthly payments by the end of the loan term. First, the borrower repays the principal debt, then proceeds to interest.
Banks give preference to the first type of payment, as they receive profit (interest) faster. However, it is more profitable for the borrower to make payments in a differentiated way in order to reduce the principal debt as quickly as possible.
An initial fee
The process of granting a mortgage has its own characteristics not only formally, but also financially. The borrower must pay a down payment, the minimum amount of which depends on the policy of a particular bank. The average down payment is 20%, but can be as high as 40%. Your own contribution looks somewhat different in the case of a loan for building a house. It may include, among other things, the cost of the building site on which the property will be built, as well as other expenses incurred by the borrower for this purpose (for example, project costs or building materials purchased independently). Alfa-Bank offers mortgage loans with a down payment starting from 10%, depending on loan conditions.
Purchase of a primary market property
We are talking about apartments sold by citizens. We can say that these are used apartments that have already had one or more owners. All mortgage banks in the Russian Federation lend to such properties, but impose certain conditions on them.
Requirements for apartments on the secondary market:
- the house is not problematic, not in disrepair, not too old (the bank will indicate the year of construction);
- There may be a requirement for number of storeys. Some banks do not lend to apartments in 1-2 storey buildings;
- Wooden apartment buildings or made of any other material, but with wooden floors, are not allowed;
- the apartment must have windows and doors and be in general good condition;
- All necessary communications have been provided to the housing;
- The apartment has its own bathroom and kitchen.
Buying an apartment with a mortgage on the secondary market is always accompanied by procedures for assessing the property and checking its legal purity. If the bank is not satisfied with something, it will not accept housing as collateral and will refuse to issue a loan. Then you need to quickly look for another option.
When making such transactions, banks often insist on purchasing title insurance. This is the protection of property rights. If suddenly some deprived person turns out to be among the owners, he can go to court and challenge the deal. If you have title insurance, the borrower receives compensation in case of loss of rights to the property.
As a standard, banks talk about the need to purchase title and personal insurance. If you refuse the acquisition, the bank will raise the rate due to increased risks. And often the increase is significant - by 1-3%.
When buying an apartment with a mortgage, do not rush to give up personal and title insurance. Refusal will trigger a rate increase. In addition, this is serious financial protection.
Paying off your mortgage before it's due
All borrowers, according to Russian law, have the right to repay loans early, including mortgages. In case of early repayment, you must contact the bank to find out the exact amount of debt on the date of deposit. It is important that the loan is closed completely, and there is not even a small amount left.
It is not necessary to repay the entire mortgage amount early. You can deposit more amounts than stipulated in the loan agreement. In this case, the bank should also be warned. Because without the borrower’s order, the money may remain in the account until the next due date.
For example, the monthly payment amount is 20 thousand rubles, and the borrower contributes 30 thousand. Only 20 thousand are automatically withdrawn from the account, and the rest of the money may lie useless. In this way, it will not be possible to reduce the amount of interest and reduce the final overpayment. Therefore, it is so important to always notify the bank that the “spare” money should be used to pay interest or interest.
Sometimes the terms of the mortgage agreement may contain a clause that prohibits early repayment of the loan in the first six months or year. Please note these restrictions. In fact, the bank cannot prohibit clients from repaying loans and mortgages early. The main condition that the borrower must comply with is notifying the bank within 30 calendar days about the early deposit of money. In some banks or agreements you can find an even shorter period of 10-15 days.
Is it possible to take out a mortgage for construction without proof of income?
It is possible, but the conditions will not be very favorable. The presence of a stable source of income for the borrower is another important signal for the bank, allowing it to reduce the rate and offer more favorable conditions.
“Some banks do not request proof of income, and also issue loans to individual entrepreneurs and self-employed people, allowing up to four co-borrowers,” continues Andrei Mozol. — Moreover, if a mortgage is requested to build a house on a plot that is already owned, then the property under construction serves as collateral. And if a loan is taken out to purchase a plot of land and build on it, then a lien encumbrance is placed on the house and often on the plot of land too.”
Many lenders require life, health and property insurance. Without insurance, lending conditions worsen or a loan is denied.
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