Mortgage apartment: what rights and restrictions does the owner have?

Sale of a mortgaged apartment or its donation

When buying an apartment using bank borrowed money issued as a mortgage, the property is pledged to insure risks. If the client stops paying and owes the bank a large amount, the lender will have the opportunity to recover the money by selling the collateral. But, in fact, a home purchased with a mortgage is the same property of the buyer as an apartment purchased with their own money.

You can often hear the phrase that mortgaged housing belongs to the lending bank. But that's not true. The owner of an apartment or house is a borrower who pays the bank for using credit money. This provision is regulated in the Civil Code of the Russian Federation, Art. 346 and Federal Law-102 Art. 37. The owner can do almost whatever he wants with his property, but with certain restrictions:

• You can sell an apartment only with the consent of the bank;
• You can also issue a deed of gift for mortgaged housing with the permission and consent of the creditor bank.

In addition, it is important to comply with additional conditions that are specified in the loan agreement.

The sale of living space purchased with a mortgage is possible according to two schemes:

1. Sell ​​the property along with the outstanding mortgage. In fact, this is a re-issuance of a mortgage to another borrower.
2. Close a bank loan, remove collateral. And only after that sell the property to the new owner.

Which scheme to choose depends on the amount of debt and the repayment period. Not everyone will be able to get approved for a consumer loan of several million.

Sale with bank consent

Before starting a sale or purchase transaction, the borrower must obtain the bank's consent. To do this, you should submit an application to the creditor bank. It happens that, in principle, the bank is not against the transaction, but does not approve of the candidacy of the new borrower, who will become the owner of the mortgaged home.

For example, the current owner of the apartment who took out the mortgage is a 35-year-old TOP manager of a successful company with a salary of 150 thousand rubles. And after the sale, the property will go to the 23-year-old unemployed or pensioner. Such a deal and the solvency of the new borrower are questionable for the bank, so it will not agree to this option. Either the new client has a bad credit history or a high debt load.

If the new borrower meets the bank’s basic criteria and his salary is sufficient to fulfill his obligations, the likelihood of approval is quite high.

Three ways to sell a home with a mortgage

The sale of mortgaged living space after repayment of the mortgage can be implemented in three ways:

1. Apply for a consumer loan in your name or a relative’s name. Use these funds to close your mortgage. Sell ​​the home and use the money received to repay a previously taken out consumer loan. In this case, you can resolve the issue without the bank’s consent. If all transactions are planned in advance, the overpayment of interest on a consumer loan will be minimal. It will take from several days to a month to implement the plan.
2. Agree with the buyer on an advance payment, which will be used to pay off the balance of the mortgage. In this case, the bank's permission will be required, because the real estate purchase and sale transaction is concluded before the property is withdrawn from the collateral. Not all buyers will agree to such a scheme, because it is very risky for the new home owner.
3. Conclude an agreement with the buyer under which he gives money to pay off the balance of the mortgage not to the borrower, but directly to the bank. In this case, the bank’s consent will also be required to conclude a transaction between the seller and the buyer. This scheme is used more often than the first two, when the amount of mortgage debt is still quite large. Banks and realtors will help both parties prepare documents and take into account all legal aspects.

The bank does not have the right to directly prohibit a borrower from selling an apartment. But he may not approve of the transaction. While the property is pledged to the lender, it will not be possible to sell the home without his consent or without raising other money.

Is it possible to register a person in a mortgaged apartment?

Regarding registration of housing purchased with a mortgage, many disputes and conflicts arise between the bank and the client who took out the loan. Their reason is the lack of direct data in the legislation on resolving this problem.

It is important to know that the law allows you to challenge in court all the terms of mortgage agreements that restrict the right of registration.

From the legal side, the owner of the mortgaged property is considered to be the borrower, and not the lender, since purchasing an apartment with loan money gives the buyer the same rights as when purchasing a home with their own funds. In this case, the financial institution is only the holder of the pledge, and not its owner. Accordingly, the creditor can impose restrictions on the home owner only on certain actions that are prescribed in legislative acts.

Controversial issues surrounding the registration of relatives and other citizens on mortgage square meters are due to the lack of specific regulations in the Russian Federation regulating the registration of the borrower, as well as his relatives at the place of residence.

Many lenders stipulate all conditions in contracts for the provision of mortgage loans, including the registration of tenants in the real estate on the loan.

It is imperative to find out all the bank’s requirements for the possibility of registering other citizens when choosing a lender to apply for a mortgage.

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.

When is it better to take out a mortgage - before or after marriage?

The buyer of the apartment is formally considered the owner of the property. However, housing taken on a mortgage often becomes the subject of disputes between spouses. If the owner bought an apartment before the official registration of the marriage, then upon its dissolution it remains with him. If the spouse was able to prove participation in the payments, the court will allocate him a share in the residential premises. Its size will be equal to the number of payments.

Therefore, when paying off mortgage debt, it is important to follow the following recommendations:

• the owner must personally make payments. If a spouse makes a payment from his personal account, this may become a reason to dispute the apartment;
• If the spouses have entered into an oral agreement to divide the mortgage, payments should be made from personal accounts. Otherwise, you won’t be able to prove your participation in repaying the loan.

Therefore, lawyers advise drawing up a written contract. You should also save all receipts that you can use as proof of payment. If a minor child is registered in the apartment, the court will allocate a larger share to the parent with whom he will remain.

Repair and redevelopment

Any owner can make repairs to his home, including those who bought an apartment with a mortgage. The bank will not dictate what type of repair to do, budget or luxury Federal Law-102 Art. 30. The main thing is that in the process there is no deterioration in living conditions and a decrease in the initial value of the property.

Significant redevelopment can lead to such consequences. A three-room apartment can become a two-room apartment, and a living space with a separate bathroom can turn into a studio apartment with a swimming pool. Formally, this is a change in the object of collateral that must be included in the contract. Therefore, some banks indicate that changing the original apartment design is possible only after obtaining permits from the authorized bodies.

In fact, all apartment owners are required to first obtain permission, and then break down walls or combine rooms. But some homeowners neglect this sequence and legitimize ready-made alterations. Therefore, creditors, out of fear of such actions on the part of the owner, write down a clause in the contract - obtaining consent for redevelopment from the bank.

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.

Who can be registered

The borrower and his immediate relatives will not have any difficulties registering for mortgage housing. The procedure will not differ much from registration in an apartment purchased without borrowed funds. But it will not be possible to register distant relatives or a stranger in a mortgaged home.

Advice! The agreement contains a clause according to which the borrower does not have the right to register other persons without the approval of the bank. However, in practice, most mortgage homeowners ignore this clause. But to avoid misunderstandings with the bank, it is better to write a corresponding statement.

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.

How to avoid late payments or being forced to repay early

If there is no money for the next payments due to a worsening financial situation, it is better not to wait for delays or to be forced to terminate the contract early at the initiative of the bank. The borrower has at least three options to get out of the situation:

• mortgage holidays;
• restructuring;
• refinancing.

Which option is best for the borrower to decide together with the bank employee. However, the most profitable way is to get approval for a mortgage holiday. But not everyone will be able to qualify for them due to legal restrictions on this type of deferment of payments. Federal Law-353 Art. 6.1-1.

If there are no rights to holidays, you should compare the conditions for restructuring and refinancing in your servicing bank or in another.

Mortgage holidays

From August 2021, all mortgage borrowers in the Russian Federation can apply for mortgage holidays legally. At the same time, the bank cannot refuse a borrower who has met all the conditions:

• an apartment purchased with a mortgage is the borrower’s only home;
• the total amount of the loan issued by the bank does not exceed 15 million rubles;
• the borrower applies for a mortgage holiday for the first time;
• The borrower's income decreased by 30% and he found himself in a difficult life situation.

Difficult situations include:

• registration as an unemployed person;
• receipt of disability of 1 or 2 groups;
• loss of ability to work for a period of 2 months or more;
• reduction in wages and other income;
• the birth of children, with a simultaneous decrease in income.

During the quarantine period due to coronavirus, borrowers can also ask for preferential mortgage holidays. They differ in terms of:

• the initial mortgage amount for Russians is up to 2 million rubles, for residents of Moscow - 4.5 million, St. Petersburg and the Far Eastern District - 3 million rubles;
• fewer reasons - a decrease in income by 30% or more compared to 2021 or loss of work with registration with the Central Employment Service.

However, you can apply for mortgage holidays due to coronavirus only from 04/02/2020 to 09/30/2020. The benefit will be given only for contracts that were concluded before April 3, 2020.

With any mortgage holiday option, the borrower’s credit history and rating will not be affected. In addition, the bank will not be able to demand early repayment of the mortgage and will not charge fines. Read more about mortgage holiday options in Brobank's articles.

Restructuring

If you are not eligible for a mortgage holiday, you can apply for a deferment or reduction in your monthly mortgage payment. The bank may offer restructuring with the condition of paying only interest for the use of loan money, without making payment on the principal debt.

Most banks have an individual approach to each borrower. The main thing here is not to remain silent about your financial problems and seek a solution in advance.

Please note: restructuring extends the loan term and increases the total overpayment amount. But at the same time, it helps to maintain the borrower’s credit history without delays, fines and penalties. This period of reducing the monthly load will help restore the family’s financial situation without selling the home, which is pledged to the bank.

Mortgage refinancing

Refinancing is the registration of a new mortgage to pay off an existing one with the same or another bank. This can be done if the offer is more favorable in terms of interest rate. It should be lower by at least 1.5-2% compared to current conditions. In addition, you should pay attention to the remaining loan term. It must be at least a year, and in some cases even half the term. This happens because with annuity payments, most of the money goes towards paying off interest at the beginning of the mortgage.

If you apply for mortgage refinancing to another bank, the borrower will be assessed as a new client. You will need to confirm your solvency and bring a current mortgage agreement. If the new lender bank is suitable for the borrower, it will transfer the money to the first lender bank, and the housing collateral will be transferred to it.

When refinancing with another bank, additional costs arise. For paperwork, re-evaluation of housing, transfer of money between banks and other costs. All of them should be taken into account before signing a new contract.

Some lenders approve in-bank refinancing. They take steps that are not very profitable for themselves, so that clients do not leave for other banks. In this case, the procedure will be much faster, and there will be no additional costs at all. Therefore, before contacting other creditor banks, check the possibility of refinancing with the servicing bank. But if the borrower is rejected, he will not be prevented from transferring the mortgage to another bank.

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 change the terms of an old contract?

This is possible if for a number of reasons the borrower cannot pay the specified amount. The Bank considers each situation individually. He may offer to reduce the amount by increasing the repayment period.

There is a procedure for debt refinancing - the borrower takes out a new loan to repay the previous one on suitable terms. In order for the bank to agree to change the terms of the mortgage agreement, the borrower must provide documents confirming the change in his financial situation.

A person becomes the owner of an apartment not after repaying the mortgage, but when the purchase and sale agreement is signed. But it is secured, so the bank can take it away if the terms of the agreement are not met. If the borrower has difficulty repaying the loan, he must notify the lenders. The bank may make concessions and change the terms of the agreement.

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.

List of restrictions on the right to use

According to Federal Law No. 102 of July 16, 1998 “On Mortgage,” when purchasing real estate with a mortgage, the borrower agrees to the restriction of ownership rights. Without the bank's consent, he will not be able to:

• sell residential premises;
• make a redevelopment;
• register unauthorized persons at the place of residence.

The listed restrictions do not mean a complete ban on these transactions. They are possible subject to compliance with the bank's conditions. If the organization is not sure of the return of the borrowed funds, it may refuse the owner of the mortgaged apartment his application.

Mandatory and optional insurances

Registration of a mortgage is possible only with insurance of the collateral - real estate. If the borrower refuses to insure the home, he will not be issued a mortgage. And the client can legally refuse life insurance, health insurance or title rights to property. All listed types of insurance are voluntary, not compulsory. Therefore, the bank cannot force the borrower to take out all these insurance policies.

Typically, if the client refuses additional insurance, the bank raises the mortgage interest rate. However, most banks offer comprehensive insurance. It already includes several risks. Such a policy is cheaper than individual insurances. For those who choose such a policy, the bank reduces the mortgage rate.

It is very important to calculate in advance which option is the most profitable for the borrower. It is important for some to insure the maximum number of risks in order to count on the insurance company in difficult life circumstances. For others, it is uncritical to increase the rate by 1-1.5% without taking out insurance policies.

Useful links:

1. Civil Code of the Russian Federation Art. 346
2. Federal Law-102 Art. 30, 37, 40.
3. Housing Code of the Russian Federation Federal Law-188 Art. 31

about the author

Klavdiya Treskova - higher education with qualification “Economist”, with specializations “Economics and Management” and “Computer Technologies” at PSU. She worked in a bank in positions from operator to acting. Head of the Department for servicing private and corporate clients. Every year she successfully passed certifications, education and training in banking services. Total work experience in the bank is more than 15 years. [email protected]

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Can a co-borrower become an owner?

Often, a buyer will take out a mortgage with a trustee to increase income and gain bank approval. A co-borrower may be a person who is not a relative of the buyer. Usually this becomes the second spouse, parents or adult child.

The borrower and co-borrower are equally responsible to the bank, so they can count on equal shares in the apartment. The co-borrower also has his own responsibilities:

• pay only the amount specified in the mortgage agreement;
• if during the period of purchase of the apartment he was married to the borrower, he can count on receiving a share;
• if they are not officially married, then the co-borrower receives a share equivalent to the amount of his payments;
• if he refuses his share in the apartment, he will have to make payments on the loan.

The co-borrower has the right to a share, but will not be able to fully own the apartment. An exception is if the borrower waives his obligations and the entire debt is paid by his trustee. Then the housing becomes completely his property.

Comments: 12

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Author of the article: Klavdiya Treskova

Consultant, author Popovich Anna

Financial author Olga Pikhotskaya

1. Olga
   09.23.2021 at 06:54 I am buying an apartment from a developer. But we are applying for a mortgage for our son-in-law in order to take advantage of state support for our third child (born in 2019). And I make a down payment and will pay for the mortgage myself, but I am not a co-borrower of the mortgage. Can I be included in the purchase and sale agreement as the owner?
   Reply ↓ Anna Popovich
   09.27.2021 at 18:20

   Dear Olga, no, in your case you can get registration. in a mortgaged apartment. This will require the consent of the bank that issued the mortgage.

   Reply ↓