- Activity in the mortgage market is growing, rates are falling
- What are the requirements for potential borrowers
- What to look for when concluding a mortgage agreement
- What to do when there are problems with payments
Mortgages are the best choice for those who want to buy a new apartment. Since the beginning of the year, the situation on the mortgage lending market in Russia has noticeably improved. There is an increase in the activity of borrowers, while banks, in turn, offer more and more favorable conditions.
Margarita Chigina. Winter evening
However, despite the increasing availability of mortgages, banks do not lower their vigilance and select borrowers very carefully.
Activity in the mortgage market is growing, rates are falling
Gradually, mortgage lending in Russia is gaining momentum. According to the Agency for Housing Mortgage Lending (AHML), the volume of mortgage lending in the country since the beginning of 2011 has grown by 2.1 times compared to the same period last year. In quantitative terms, the indicator amounted to 74,200 issued loans (which is 1.8 times more than last year). According to the forecasts of AHML, the volume of the Russian mortgage market may grow by another 45.9 – 56.8% by the end of this year.
It should also be noted that mortgage rates are falling, that is, mortgages are becoming more and more affordable for the population. In the first quarter of 2011, according to the Bank of Russia, the weighted average mortgage rate fell to 12.4%. Experts note that in the entire history of consumer lending in Russia, this is the minimum value of the mortgage rate. At the same time, you can find more profitable offers with a rate of about 10.5%.
What are the requirements for potential borrowers
The fact that mortgages are gaining momentum and becoming more affordable does not mean that it has also become easier to get a loan to buy a home from Russian banks. Banks’ requirements for borrowers remain quite strict.
The bottom line is that the bank, providing money in a mortgage, expects to get it back on time with interest. It is not profitable for banks to take apartments from insolvent clients and deal with their subsequent sale. That is why banks first of all must make sure of the financial solvency of a potential borrower, which requires the client to provide a large number of securities.
Mortgages, unlike ordinary consumer loans, have a number of peculiarities, therefore, the requirements of banks when registering a mortgage have their own specifics.
Age:first of all, it should be understood that, since a mortgage is a long-term loan, it has some age restrictions. As a rule, Russian banks issue mortgage loans to individuals between the ages of 18 and 65. As you can see, the maximum bar is limited by the retirement age. Banks, of course, prefer younger clients, although now you can find mortgage programs where the maximum age of the borrower is set at about 75 years (by the time all payments on the loan end).
Kuzma Petrov-Vodkin. A worker’s family on the first anniversary of October. 1927
Experience:for confidence in stable work and solvency of the client, he checks his work experience. Many credit organizations require at least 6 months of seniority in the last job. However, at present, many of the mortgage recipients are not employed, but are entrepreneurs. In this case, it is important for the bank that the successful entrepreneurial activity of a potential borrower is at least 2 years.
Income:When calculating the client’s solvency, the bank requires the provision of a certificate of income for a certain period (six months, a year). The bank’s credit department then analyzes the income. If, according to the results of calculations, the share of the potential borrower’s income that will be used to pay off the mortgage loan does not exceed 50%, then such a borrower is recognized as solvent. Note that the bank may also take into account additional sources of income: payments on bank deposits, income from part-time work, dividends on shares, income from renting real estate and any other confirmed sources of income.
There are also programs when the bank takes into account the income of not one borrower, but the total family income. In this case, you can expect to receive a larger loan amount..
What to look for when concluding a mortgage agreement
The mortgage agreement defines the financial relationship between the lender and the borrower. Since in this case the amount of the contract can be impressive, then the preparation of the document must be approached competently. To minimize possible abuse of rights arising from the mortgage agreement, the agreement should include conditions that will provide the parties in certain situations with the right to act at their own discretion.
Among the prerequisites for a mortgage agreement are the following:
- Conditions for the emergence and termination of the mortgage right.
- Obligations of the creditor (bank).
- Rights and obligations of the parties under the mortgage agreement.
- Warning about satisfying the claims of the creditor.
- Guarantees for the parties.
Sometimes situations arise when you have been repaying the loan for several years, and then suddenly the bank raises the rate. Such moments should be clearly indicated in the contract, you just need to read it carefully. The mortgage agreement must contain an exact list of conditions under which the bank has the right to raise the interest rate. For example, a change in the refinancing rate of the Bank of Russia, a change in the LIBOR or Mosprime indices (independent indices showing the average price of interbank loans).
It is also important to carefully study the clause of the agreement, which indicates the penalties for late payment. Often fines can be simply huge and this must be borne in mind so that later they do not become an unpleasant surprise for you..
Be sure to ask how much you really have to pay when drawing up a contract. Ask the bank employees to provide you with the full cost of the loan, which will include not only interest, but also all possible commissions and other hidden fees. This information will enable you to fully assess the cost of the given mortgage. And choose the most optimal option among several bank offers.
What to do when there are problems with payments
A mortgage loan is issued for more than one year, the term of the mortgage can be up to several decades. During this time, a lot can happen – the economic situation in the country will change, you can lose your job or your income will become noticeably lower than it was when you applied for a loan. Sometimes even a completely reliable borrower may have some problems with mortgage payments.
Firstly,if the situation with the borrower’s work changes sharply, he must immediately notify his creditor bank and agree with the credit institution on the further procedure and conditions for servicing the mortgage, taking into account the changed circumstances.
Year of Lyme. SMS. 2007
Secondly,even if the borrower has lost his job, it is not worth “running” from the bank. This could lead to litigation, which the creditor bank is likely to win. The sale of the apartment will then be handled by the bailiff service, and the arrested real estate will be put up for auction and sold at the lowest acceptable price, with a large discount. Remember that bailiffs are not at all interested in the profits of an insolvent borrower. The main thing for them is that the cost of the apartment fully covers the amount of debt. If the borrower, by agreement with the bank, sells the apartment on his own, he has every chance to bail out more for it and receive part of the amount for himself. It is possible that the apartment has risen in price since the time of purchase, that the borrower can even count on a certain profit.
Thirdly,it must be remembered that banks often go to meet bona fide borrowers (especially when they warn them in advance about possible financial problems). In this case, the credit institution can individually provide the borrower with the opportunity to pay by installments for monthly payments. The option with the sale of a mortgaged apartment is possible only if you cannot pay the mortgage, and an alternative repayment option will not be found.
There is no need to be afraid of the bank, you can always agree. Remember, it is not profitable for the bank to take away the apartment from the borrower, so he will first try to solve the problem that has arisen without using extreme measures.
In conclusion, I would like to note that the recovery of the Russian economy after the global crisis has led to the fact that banks are increasingly willing to provide the population with mortgage loans. Banks are not only issuing more and more loans, but also lowering rates, making mortgages more affordable for a wider number of people. According to many analysts, the development of mortgage lending should have a positive effect on the growth of the real estate market and on the increase in demand for apartments..
I would also like to note that now is the most optimal moment to purchase housing on a mortgage: Russian banks have set a minimum down payment (10%), the mortgage rate is also at a historical minimum (10.5-12.5%), developers have become more active, the supply of apartments in the primary market has grown, and housing prices have stabilized so far.
If you want to buy a new apartment, it’s time to contact a bank. You just need to collect all the necessary documents and confirm your income. Remember that banks impose strict requirements not only on borrowers, but also on mortgage objects. Banks are more willing to give loans for the purchase of new ready-made housing, where the risks are less.