Currently, there are several dozen credit institutions in Moscow that issue mortgage loans (there are more than 180 of them in Russia). How to choose a bank offering optimal lending conditions for home purchases? Let’s start with what is available to the consumer even before contacting the bank, because most banks do not spare funds to advertise their mortgage programs.
For the convenience of analysis, mortgage programs can be divided into the following main components: target market, loan currency, down payment, annual interest rate, loan size, loan term, application consideration time, amount of additional costs for obtaining a loan.
Target market
The overwhelming majority of banks issuing mortgage loans operate only in the secondary apartment market (it is estimated that about 70% of mortgage programs are provided for clients purchasing ready-made housing). Among the active players offering programs for buyers of new buildings are Sberbank, DeltaCredit Bank, Raiffeisenbank, Vneshtorgbank, Gazprombank, MDM-Bank and some others. However, it should be noted that, according to experts, Sberbank accounts for up to 90% of loans issued in the primary market. At the same time, not all houses are considered for crediting in the primary market, but only new buildings approved by the creditor bank. Basically, these are buildings that have already been built and handed over to the state commission. If the house is not ready, then the bank reserves the right to check the developer and refuse to issue a loan without giving reasons. The unpopularity of the purchase of apartments in new buildings among mortgage lending institutions is mainly due to such factors as the prolonged construction time and the lack of a pledge until the moment the apartment is registered.
Loan currency
Most banks offer mortgage loans in US dollars (over 70% of the programs). Some banks (Sberbank, DeltaCredit Bank, Vneshtorgbank, International Moscow Bank, etc.) offer loans in dollars and rubles. Banks Societe Generale Vostok, MDM Bank, Gazprombank and some others add euros to rubles and dollars. The Moscow Mortgage Agency and the Agency for Housing Mortgage Lending (AHML) work only with ruble loans.
An initial fee
Basically, the practice is of the classic, accepted throughout the world, an initial payment of 30% of the cost of housing. Some banks (DeltaCredit, City Mortgage Bank, MDM-Bank, Soyuz, etc.) have mortgage programs with a 20% down payment. Sometimes there are offers with a 10% or even 0% down payment (for example, from FORA-bank), but such offers, as a rule, are accompanied by higher interest rates (and during the first 18 months they are usually higher than in subsequent maturity period). Practice shows that it is extremely difficult to get a loan in excess of 75-80% of the cost of housing, and in the primary market the down payment is usually about 40% of the cost of housing.
Annual interest rate
At present, the average base interest rate is 11% in foreign currency and 15% in rubles, which is two to three times higher than similar rates in economically developed countries. At present, the rate of interest rate reduction in our country has slowed down and, according to the forecasts of the Association of Russian Banks, by 2008 it will amount to 8-8.5%, which is also too much for a civilized market.
The minimum foreign exchange interest rates can now be noted at VIP-bank and Pervoe OVK bank. (Rosbank) – 10%, but they do not belong to the leaders of the market in question. Such large mortgage players as Vneshtorgbank, City Mortgage Bank, Raiffeisenbank, DeltaCredit and International Moscow Bank practice interest rates from 10.5% for most of the loans issued. The maximum foreign exchange interest rates (18%) can now be noted at Lokobank, FORA-bank and the European Trust Bank.
Banks DeltaCredit, Raiffeisenbank and Gazprombank also use the so-called floating interest rates LIBOR, which can change depending on fluctuations in the financial indicators of the world market. For this reason, the conclusion of an agreement at such a rate has increased risks for the consumer, since over a long period of lending, they can change both upward and downward in interest rates..
Loan amount
The size of the mortgage loans provided is very diverse. Minimum loans can be $ 2 thousand (DeltaCredit Bank), maximum – $ 400 thousand (City Mortgage Bank and International Moscow Bank) and even $ 500 thousand (National Mortgage Company and First OVK). On average, loans are issued in the amount of $ 10 thousand to $ 200-300 thousand.
Credit term
The terms for which mortgage loans are provided can range from six months to 27 years. The maximum term is quite rare (such programs are available at FORA-Bank, the European Trust Bank and AHML) and is practiced only for ruble loans. In general, the attitude towards such long-term loans in our country is negative, both among banks and among consumers, who are morally not ready to bear the credit burden for so long. Basically, the term is from 10 to 15 years. As a rule, the loan term depends on the age of the borrower, since the loan must be repaid before reaching retirement age.
Application consideration time
Basically, the application review period is 14 days. Credit committees work the fastest in Absolutbank (from 1 day), MDM-Bank (3-5 days), Union (5 days) and European Trust Bank (up to 7 days); the slowest – in the bank First O.V.K. (2-3 weeks) and the International Industrial Bank (1 month).
Additional costs for obtaining a loan
Most often, additional costs for obtaining a loan amount to up to 1.5% of the loan volume, but for some this may be a more significant amount. Additional costs include: application processing fee (1–2.6 thousand rubles), cash withdrawal fee, one-time bank commission, loan service fee, fee for renting a cell, for opening an account, etc..
In addition, the borrower should remember that in order to obtain and maintain a mortgage loan, it is necessary to annually pay bills for insurance of your life and property, make one-time payments for the appraisal of the purchased apartment and pay registration fees for the sale and purchase of the property. Moreover, banks, as a rule, offer to pay for the same insurance not where it is convenient for the borrower, but only in those companies with which the bank cooperates.
There are several factors to consider when choosing a mortgage program. Firstly, determine your financial situation and goals. Are you planning to stay in the house for a long time or only a few years? Calculate your budget and assess your credit score. Next, research and compare different mortgage types like fixed-rate, adjustable-rate, or government-backed loans. Consider the interest rates, loan terms, and possible down payments. Finally, consult a mortgage professional who can guide you through the process and help you select the best program for your needs.
Choosing a mortgage program can be overwhelming, but a few key considerations can help simplify the process. Start by assessing your financial situation, including your income, credit score, and debt-to-income ratio. Next, determine your long-term goals and whether a fixed-rate or adjustable-rate mortgage aligns with your plans. Research various lenders, comparing interest rates, fees, and terms. Seek advice from a mortgage professional who can guide you through the options and potentially save you money. Ultimately, the question remains, how can one ensure they are making the best decision when selecting a mortgage program?
To ensure you are making the best decision when selecting a mortgage program, it is important to carefully consider your financial situation, long-term goals, and research different lenders. Assessing your income, credit score, and debt-to-income ratio will help determine what type of mortgage you qualify for. Consider whether a fixed-rate or adjustable-rate mortgage aligns with your financial goals and risk tolerance. Comparing interest rates, fees, and terms from various lenders will help you find the most competitive offer. Seeking advice from a mortgage professional can provide valuable insight and potentially save you money in the long run. By taking the time to thoroughly evaluate your options and seek expert guidance, you can feel confident in your decision when choosing a mortgage program.
To ensure you are making the best decision when selecting a mortgage program, it’s important to carefully evaluate your financial situation, long-term goals, and available options. Consider factors such as your credit score, income stability, debt-to-income ratio, and future plans before choosing between a fixed-rate or adjustable-rate mortgage. Research different lenders and compare interest rates, fees, and terms to find the most competitive offer. Seek guidance from a mortgage professional who can provide expert advice and help you navigate the process. By taking the time to analyze your needs and explore your options, you can make an informed decision that aligns with your financial goals and secures a mortgage program that suits your needs.
I would like to know what factors I should consider when choosing a mortgage program. Are there specific criteria to look for, such as interest rates, loan terms, and down payment requirements? How do I determine which program best suits my financial situation and long-term goals? Any tips or resources to help me make an informed decision would be greatly appreciated.