First of all, obtaining a loan means the need to make monthly (on a strictly defined day) payments to pay the principal and interest on the loan. In most cases, you can deposit money in cash to an account at a branch of the creditor bank or by wire transfer from another bank (for example, by instructing the employer’s accounting department to transfer a certain amount on a monthly basis according to the specified details). The main thing is that by the day of the next payment you have the required amount on your current account. If, for example, you need to leave for a long time, you need to deposit an amount sufficient to pay off several monthly payments..
In case of delay, a fine is charged (in different banks 0.2-0.5% for each day of delay in payment). However, if it is insignificant, it is explained by very good reasons, and the borrower was previously distinguished by “excellent payment discipline”, the bank can do without penalties.
10 tips for getting a loan
1. Assess your capabilities.
First of all, determine how much of the loan you can apply for and how much the apartment will cost in the end. Credit calculators, which are on the websites of many banks, will help to do this. Keep in mind that in most cases the monthly payment cannot be more than 40% of income, and the maximum loan amount is limited, as a rule, 70-80% of the cost of the purchased apartment. Credit brokers can also help in choosing a mortgage program – special agencies designed to accumulate information about mortgage service packages, advise the borrower and help him in collecting documents and obtaining a loan.
2. Agree with your boss.
Find out from the employer whether he agrees to confirm your income and in what form it will be done (certificate in the form of 2-NDFL, a free-form letter signed by the manager or a personal conversation between the boss and the loan officer). If your company is not inclined to provide information about the real salary of its employees, it is worth looking for a “loyal” bank that will agree to a different proof of income.
3. The interest rate is not everything.
It is not worth agreeing to a loan at more than 15% per annum in rubles and 12% per annum in foreign currency. However, keep in mind that a bank may declare a low interest rate, but still charge quite significant “offset” fees, such as an annual account management fee or inflated rates from a close insurance company.
4. Don’t be cunning in the interview.
You will still be taken out into the open – loan officers have a good idea of how much babysitting, car maintenance, etc. cost. And if you still manage to deceive bankers and get a large loan amount, you can create problems for yourself: monthly payments to the bank may be overwhelming for the family budget.
5. Read the contract carefully.
The ideal option is to consult with a lawyer about the “subtle” points of the contract. Points requiring special attention – the possibility of revising the terms of the loan, interruptions in payments, the responsibility of the borrower in case of delay, etc..
6. Be prepared for the unexpected.
It is possible that obtaining a loan will require additional investments from you in addition to bank fees. Quite a significant amount is usually the cost of finding an apartment – the services of a realtor, collection of documents, etc. Find out what documents are required to submit to the bank to conclude an agreement. Remember that their list can expand significantly in the process of making a deal. Keep in mind that some banks impose the services of “their” notaries at inflated rates.
7. Decide on the market.
The rate on the “primary” before registration of housing in the ownership in most banks is higher by 2-3 percentage points. And taking into account the latest changes in legislation, prices are expected to rise in the primary real estate market. However, in the case of buying a new apartment, you usually do not have to spend money on a realtor, and there is no need to check the legal purity of the acquired housing. In addition, not every “secondary housing” is suitable for a mortgage – the house should not be demolished, otherwise the bank will not agree to lend to such an apartment..
8. Pick a realtor.
The real estate agent must be loyal to the mortgage. Otherwise, he will endlessly repeat to you that the “clean” sale of the apartment would be much faster, resent when you ask for additional documents and demand additional payments. In addition, the realtor must give a guarantee of the legal cleanliness of the apartment. Getting the rightful owner of your home after two or three years of loan settlement can be costly. In this case, the insurer will pay the bank for you, but the money spent cannot be returned..
9. Check your escape routes.
Evaluate how quickly you can find a new job with an acceptable level of income for loan repayment. And if your spouse acts as a co-borrower, before applying for a mortgage loan, think about signing a marriage contract in order to avoid a significant number of problems with debt re-registration and division of property in case of divorce.
10. Think again.
According to the majority of borrowers, if it is possible to do without a mortgage and buy an apartment “clean” (for example, having received a regular loan), it is worth using it. Taking into account the interest payments, the cost of the “mortgage” apartment increases by 60-90%. In addition, until the loan is fully repaid, you will not be able to freely dispose of housing, any transaction with it must be agreed with the mortgage bank.
Misconception # 1: a loan for the purchase of an apartment is issued by real estate agencies
Oddly enough, this misconception is constantly faced by mortgage agencies. Meanwhile, loans are issued by banks, and agencies provide intermediary services – they help potential borrowers choose a suitable mortgage scheme, correctly assess their requests, collect documents, etc. About 80% of borrowers are people who exchange their property for a better one using a mortgage. This requires, first of all, an assessment of the existing real estate; in the second – the wishes of the client. In addition, banks have special requirements for an apartment purchased through a mortgage. Finding a suitable property taking into account the conditions of the bank is also the job of a realtor.
Misconception # 2: the bank does not impose special requirements on the income of borrowers, since the purchased apartment is pledged, which means that the bank does not risk anything
When buying an apartment through a mortgage, the purchased property is left as a pledge – this is a guarantee for the bank. However, the bank’s goal is not to return the money invested, but to get profit from them (i.e. interest on the loan). Therefore, certain requirements are imposed on the level of the borrower’s income. The loan amount directly depends on the size of the salary. At the request of the bank, the amount of monthly payments on the loan should be no more than 35-40% of the monthly income (official or unofficial). Based on the borrower’s income, the maximum amount of monthly payments is calculated for him, and the maximum loan amount that the bank is ready to provide to the client will depend on it. At the same time, the mortgage scheme allows you to increase the amount of income, taking into account the total income of the spouses.
Misconception # 3: when buying an apartment on credit, the apartment is owned by the bank
This error occurs due to the fact that people confuse mortgage and property. Indeed, an apartment purchased through a mortgage is pledged to a bank. However, the pledge is only an encumbrance. The borrower becomes the owner of the purchased apartment, and immediately. The borrower can live in an apartment, register all family members, or even rent out an apartment (with the permission of the bank). The only encumbrance (it is registered with the RRB) is that until the buyer repays the loan, he can neither sell nor exchange the apartment.
Misconception # 4: when buying an apartment on the primary market, the mortgage is the purchased unfinished apartment
This is not entirely true. An apartment can become an object of mortgage only after ownership is registered for it – in the case of an unfinished apartment, this is impossible. When working with the primary market, banks use two schemes. When working according to the first scheme, the client himself chooses the developer company and the object in which he buys an apartment. However, given the high risks in the field of equity participation, the bank requires the borrower to pledge the apartment he already has. After completion of construction and the emergence of ownership of the new apartment, the bank removes the collateral for the old apartment and takes the new one as collateral. In the second scheme, the bank accredits several construction companies that have passed the financial audit. In this case, the number of companies and objects that the borrower can choose is limited, but no collateral is required in the form of an existing apartment..
Misconception # 5: getting a loan costs nothing
Unfortunately, this is not true. When obtaining a mortgage loan, the borrower must be prepared for significant lump sum payments. For example, just for the consideration of the application by the credit committee (without guaranteeing the result), you will need to pay about $ 100. After the selection of the object, it will be necessary to pay for its independent appraisal (by the bank’s appraiser) – $ 100-150. For opening a bank account, they pay from 0.75% to 1% of the loan amount. After the purchase, you also need to pay insurance premiums – 1.5-1.8% of the loan amount.
Misconception # 6: without money for a down payment, you shouldn’t even think about a mortgage
The down payment (ie the amount that must be paid for buying an apartment yourself) is in various banks from 20-30% of the cost of the apartment. There are two ways to do without a down payment. The first is obtaining a loan for consumer purposes (the amount received is invested in the purchase of an apartment). The second way is available, provided that the borrower already has some kind of real estate. In this case, the transaction can be carried out under the mortgage exchange scheme. The money received from the sale of the existing property will be credited as an initial payment.
Misconception # 7: if the bank gives the borrower permission for a certain amount, the client will receive it, regardless of the cost of the apartment
If the bank has issued a loan permit to the borrower, say, $ 30,000, the borrower is counting on this amount. However, the bank stipulates that the issued loan will be no more than 80% (or 70% – depending on the bank) of the cost of the apartment. That is, if the borrower finds an apartment worth $ 35,000, the bank will give him not the promised $ 30,000, but only $ 28,000 (80% of the cost of the apartment). There is also a situation when the apartment chosen by the client is assessed below its market value (the seller’s requirements) upon an independent assessment of the bank. In this case, the bank will agree to give a loan only in the amount of 80% (70%) of the appraised value. Then the borrower has to either look for the missing money for the purchase on his own, or look for another apartment.
Misconception # 8: all risks of the borrower are insured
This is a common misconception that every mortgage transaction is necessarily insured. When buying an apartment through a mortgage, banks require the following types of insurance: insurance of property rights, property, as well as the life and work capacity of the borrower. All insurance costs are borne by the borrower. At the same time, it is not the borrower’s risks that are insured, but the bank’s risks, and in the event of an insured event, all payments will be made to the bank. If desired, the borrower can insure his own risks, but he will have to pay for this separately.
Misconception # 9: if the bank goes bankrupt, the bank’s creditors will force the borrower to pay the entire debt at once
This is not true. If a bank goes bankrupt, its assets go to creditors. But this does not affect the fate of the borrower. The borrower simply changes the beneficiary, in favor of whom he pays the remaining amount and interest. Regardless of the change of the lender, the terms of the loan agreement cannot be revised in any case.
Misconception # 10: if, after several years of repaying the loan, the borrower can no longer pay the required amount, the bank will take everything.
This is not true. By paying interest on a loan for several years, a person manages to repay some part of the loan to the bank. In addition, there is still money contributed as a down payment. This share in the apartment belongs to the borrower. In the event that the borrower can no longer pay the installments on the loan, the apartment he bought is exchanged. For the borrower, housing is purchased for the amount that he paid, and the additional payment goes to repay the debt to the bank.