Mortgage against housing: pros and cons of such schemes in 2021

Any liquid asset owned by the borrower can be used to ensure the return of borrowed funds to the bank: commercial real estate, a car, housing, a deposit account. The phrase “secured mortgage” is often used in everyday life, meaning any lending secured by property. But in banking practice, in addition to mortgages, non-targeted mortgage lending is used. What is the difference, what are the conditions and requirements - below.

Such “cunning” terminology

A bank loan secured by real estate can be a mortgage or a non-primary mortgage loan. There is a subtle difference between them based on:

at the facility and lending procedure;
in essence, property rights are the sum of three “components”: ownership, use and disposal of property. The absence of any of them is a restriction on the exercise of property rights.

A mortgage involves the transfer of property as collateral to the bank, in which the right to own and use remains with the borrower, and the right to dispose of it is transferred to the creditor bank. If the debtor does not fulfill his obligations, the creditor receives the right to sell the mortgaged property and cover the resulting losses with the funds received. Characteristic features of a mortgage:

the purchase of housing in both the primary and secondary markets is financed;
targeted lending is carried out - money is issued for real estate, which is then registered as collateral;
the buyer will be required to make a down payment from his own funds, the amount of which is 10-20% of the cost of the purchased object;
A loan agreement is signed with the borrower.

There is another borrowing option - a mortgage secured by existing real estate, or they also say - a non-targeted mortgage loan, a pawnshop mortgage. The borrower, in agreement with the lender, provides any liquid real estate as security. Moreover, the collateral may belong to the recipient of the loan, the guarantor, and the co-borrower. The right to dispose of the property remains with the owner, but is limited by the right of pledge, which is registered as an encumbrance. There is no down payment, but the bank will issue a loan in the amount of 70-80% of the market value of the mortgaged property. The market price is confirmed by appraisal companies.

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Banking practice confirms that mortgages are used mainly when purchasing new or under construction housing: an apartment, cottage or townhouse. Non-targeted mortgage lending is used for financing and other purposes: to purchase an apartment or house on the secondary market, buy a car, vacation packages, pay for treatment. In any case, the creditor bank retains the primary right to satisfy claims through the sale of the mortgaged property.

When non-targeted lending is secured by existing real estate, two agreements are usually signed with the bank - a loan agreement and a mortgage agreement.

Sample Mortgage Agreement

The terms of the loan agreement are detailed in the article: Mortgage loan agreement: what to pay attention to when signing

Features of a pawnshop mortgage

The main feature of such lending is the concept of “collateral discount”. This is a coefficient that reduces the original value. The bank puts forward its coefficient, then multiplies the market value of the collateral housing by it and obtains the possible amount that can be issued to the borrower. Let’s say Gazprombank offers a loan with a collateral coefficient of 30%, the collateral apartment costs 2 million rubles, we get 2,000,000* 0.3= 600,000 rubles.

There are special requirements for collateral housing. Only in case of full compliance will the property be accepted by the bank as collateral. Each financial institution has its own conditions, so it is recommended to contact several banks at once.

The apartment should not be under encumbrance.
Khrushchev houses, small families, dorm rooms, houses with wooden walls will not be considered by financial institutions.
The apartment or house must have all communications: electricity, gas, sewerage, water.
Redevelopment must be legal.
The house must not have been built before 1950.
The house must have at least 5 floors (some banks lower the bar to 3 floors).
A house in disrepair will not be considered.

The loan amount can reach 70-80% of the estimated value of the collateral housing.

The borrower should adhere to the following procedure:

Submit an application to a bank branch;
Invite an appraisal company;
Provide the credit institution with documents for the collateral apartment;
Provide documents on the intended use of the loan;
Insure your apartment, life and status;
Sign a loan agreement with the bank;
Get money and buy an apartment.

More detailed information can be obtained from the branch of the bank chosen by the borrower.

Mortgage secured by an apartment: conditions and requirements

“First-class” collateral - this is the description bankers give to a liquid asset that can be quickly sold if the debtor does not fulfill its obligations. This is how residential real estate is characterized. But in order for the pledged object to quickly “turn” into money, the requirements must be met. Bank conditions, collateral and borrower requirements for mortgages and non-targeted mortgage lending are somewhat different.

A mortgage secured by an apartment is one of the most inexpensive. Today, the interest rate is 11-12% per annum. Its size is reduced for participants of certain lending programs:

for young families with at least two young children, subject to the attraction of state support funds - up to 6% per year;
military personnel, participants in the savings mortgage system - up to 9%;
clients refinancing loans from other banks - up to 9.5%;
buyers of real estate in accredited new buildings.

A mortgage secured by an apartment places more demands on the borrower: creditworthiness, discipline, good credit history and payment of a down payment. Registration is carried out in the following order:

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the loan applicant submits an application to the bank and a package of documents confirming citizenship, place of work, length of service and income of the family budget;
after receiving preliminary approval from the lender, the borrower selects the mortgage object;
conclude a preliminary contract for the purchase and sale of real estate, which contains a clause requiring the buyer to make a down payment;
the bank finalizes the loan and transfers funds to the seller;
The purchase and sale agreement and the mortgage are registered by Rosreestr.

A mortgage secured by existing housing is issued at 12-14% per annum, and also has the following advantages:

the borrower can buy housing on the secondary market, completely ready to move in, often with furniture and household appliances;
you can take out a non-targeted mortgage secured by an apartment or other real estate owned by relatives or guarantors;
variety of objects - city apartment, mansion or country cottage, townhouse.

The lender's requirements for the loan recipient are no less strict than with a target mortgage, and are complemented by close attention to the property, both purchased and transferred as collateral:

title documents are carefully checked, attention is paid to the composition of those registered, avoiding registration of minors and incompetents;
absence of encumbrances for any reason;
have a negative attitude towards property rights formalized by a court decision;
the lender is “picky” about the technical condition of the collateral and the presence of unauthorized alterations. The “age” of real estate should not exceed 30-40 years from the date of construction.

As borrowers, the bank prefers clients with well-paid positions; lends to private entrepreneurs with caution, avoiding using loans for business purposes. It is mandatory to insure the collateral, the purchased property and the life of the borrower.

The procedure for issuing a non-targeted mortgage loan is similar. But upon registration, a down payment is no longer required. Instead, the buyer may pay a deposit to the seller as confirmation of serious intentions. If the value of the pledged property is much higher than the price of the purchased property, then the bank will give 70-80% of the valuation of the pledge and then even a deposit is not needed. This kind of lending is called a mortgage secured by existing real estate without a down payment.

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Apartment from scratch: mortgage without down payment

A mortgage, despite overpayments for using a loan, remains one of the most popular ways to buy an apartment. However, not everyone manages to save even for a down payment, which, according to different programs, can range from 10% to half the cost of the purchased home. Especially for such clients, some banks offer a mortgage without a down payment, but not all new buildings can obtain it.

Large selection for “old” Moscow

Mortgages without a down payment can be obtained in 60% of mass-segment projects in the “old” borders of Moscow, in exactly half of the residential complexes on the primary market of New Moscow and in 20% of new buildings in the Moscow region - these are the data of a study conducted. In “old” Moscow, six banks operate with “zero” mortgages: Vozrozhdenie, SMP Bank, Metallinvestbank, Promsvyazbank, Rosselkhozbank and Otkritie. Moreover, the first three offer mortgages without a down payment quite widely, and the last three work with individual projects, developing programs directly for them, or they offer to use maternity capital as a down payment.

In total, mortgage offers without savings are offered in 34 new buildings in the mass segment of “old” Moscow. The most favorable conditions for the combination of interest rates and the amount of monthly payment are offered in the projects of PIK Group, where Bank Vozrozhdenie is ready to provide a mortgage without a down payment. If you take out a mortgage for 15 years, the minimum monthly payments will be 37.5 thousand rubles per month. These figures are relevant for the Severny microdistrict when purchasing a studio with an area of 27.8 square meters. m for 2.97 million rubles. Inside the Moscow Ring Road, a studio will be a little more expensive: 23.3 sq. m in the VLublino residential complex will require payments of 41.9 thousand rubles per month.

Residential complex "Vlyublino"

The top ten projects in “old” Moscow with a minimum monthly payment for a “zero mortgage” also include the Annino Park residential complex, Meshchersky Les, Rimsky-Korsakov 11, Varshavskoe Highway 141, Green Park (PIK Group of Companies) “Luchi” (from LSR Group), “Nekrasovka” (DSK-1 project), Domashny microdistrict (from PSN Group)

If you have not been able to save up a down payment, but you are confident that the bank will approve the mortgage, it makes sense to pay attention to the offer of furnished apartments. This way you won’t have to invest additionally in repairs, because they are included in the price of the apartment, and, therefore, all costs will already be taken into account in the monthly payment. The most attractive option in this category is also offered in the Severny microdistrict - a studio with an area of 27.03 sq. m. m worth 3.1 million rubles, the monthly payment for which will be 39.1 thousand rubles per month.

Residential complex "Annino Park"

New Moscow is cheaper, but there are fewer banks

It’s not surprising that in New Moscow you can find offers where the monthly payment will be slightly lower than in the “old” borders, because purchasing budgets there are smaller. At the same time, there are still quite a lot of options here: “zero mortgage” is available in half of the Novomoskovsk projects, or more precisely, in 20 new buildings. However, if in “old” Moscow you can choose among six banks, then in New Moscow only three players are quite active in this segment. Metallinvestbank services 11 of the 20 new buildings in which this product is offered, Vozrozhdenie Bank has 9 projects and SMP Bank has 7. As Metrium Group analysts note, a number of projects also offer “zero mortgage” from such large players as Raiffeisenbank, Otkritie, Transcapitalbank and Sberbank, but these will either be individual programs developed for a specific residential complex, or under the guise of “mortgage without a down payment” there is hidden the possibility of using maternity capital instead of one’s own savings.

Mortgage rates without a down payment in New Moscow, just like in the “old” borders, start at 12.95% per annum. At the same time, housing can be purchased under these conditions only in PIK Group projects as part of a joint campaign with Bank Vozrozhdenie. For all other partners of this credit institution, the base rate will be 13% per annum. At Metallinvestbank and SMP Bank, loan servicing will cost 14% per annum.

It is interesting that the first place among projects with minimum payments was not the PIK Group project at all, but the Andersen residential complex from ]Desna-Land[/anchor]. With a loan term of 15 years, the monthly payment for the most affordable apartment (a 25-square-meter studio for 1.99 million rubles) will be 26.5 thousand rubles. In second place is the Moskvichka residential complex from the Granel Group of Companies, where the monthly payment for a studio with an area of 19.78 sq. m (2 million rubles) will be 26.6 thousand rubles. In third place is the residential complex "Barkley Honey Valley" from ]"Barkley"[/anchor]: here the monthly payment is 26.8 thousand rubles per month for an apartment with an area of 20.4 square meters. m (worth 2.01 million rubles). The same complex is a leader among projects with a “zero” mortgage, where you can purchase an apartment with a fine finish from the developer.

“Mortgage without a down payment in our project is provided by Metallinvestbank and Surgutneftegazbank. There are the usual conditions - the rate in both banks is 12.5% subject to life insurance, the loan term is up to 25 or up to 30 years. There are also special conditions: the rate is 12% under the Metallinvestbank program for the entire loan term. But the promotion applies only to those apartments that do not participate in discounts and promotions from the developer,” says First Deputy Chairman of the Board of Barkley Alexander Krasavin.

130 “lucky” people from the Moscow region

In the Moscow region, four banks are active in the mortgage segment without a down payment: Vozrozhdenie, Metallinvestbank, SMP Bank and Surgutnefetegazbank. They work with more than 130 new buildings in the Moscow region, which is about 20% of all projects implemented on the local primary market.

The lowest rate is offered by Surgutneftegazbank - from 12.55% per annum, but only employees of organizations serviced by this bank can receive it. For everyone else, the mortgage cost will be 12.95% per annum. Surgutneftegazbank works with an extremely limited pool of developers in the Moscow region: PIK Group, MITs Group, Samolet Development, Etalon-Invest and a new player in the local market - . At Vozrozhdenie Bank, mortgage rates without a down payment start at 13% per annum, but for clients of PIK Group, Inteko and PSN Group, a reduced rate of 12.95% per annum applies. And in SMP Bank and Metallinvestbank the rates are 14% per annum.

Among all the new buildings near Moscow that offer the opportunity to purchase apartments on a mortgage without a down payment, the cheapest purchase will be in the residential complex “New Biserovo 2” from the developer “Aquasport”, located 21 km from the Moscow Ring Road along Gorkovskoe Highway. The most affordable apartment (24 sq. m.) here costs 1.3 million rubles, and the monthly payment will be 17.3 thousand rubles. In second position is the Gosudarev House residential complex from the Granel Group of Companies, 7.5 km from the Moscow Ring Road along the Warsaw Highway. For 18.9 thousand rubles per month you can buy a studio with an area of 18.71 square meters. m and cost 1.42 million rubles. Then there are three new buildings with similar monthly payments (about 20 thousand rubles): “Vostochnoe Butovo” from PIK Group, “Lukino-Varino” from “SU-22” and “New Zelenograd” from the developer IKON Development.

Residential complex "Gosudarev House"

In a number of residential complexes in the Moscow region, where mortgages are offered without a down payment, an option such as finishing from the developer is also available. Of course, due to the increase in the “body” of the loan, the monthly payment will also increase. For example, if we take the residential complex “Novy Zelenograd”, the difference in payment per month between an apartment without finishing and with finishing for a studio of 20 square meters will be about three thousand rubles.

What's the catch

The main disadvantage of mortgage programs without a down payment is the higher interest rates for using loans compared to standard programs. The lowest cost of servicing a “zero mortgage” was recorded in the banks “Vozrozhdenie” and “Promsvyazbank” - from 12.95% per annum, while such a rate can only be obtained in a limited number of projects, and for the rest it will be higher. At the same time, it is now possible to get a “regular” mortgage at rates of 8-10% in a number of properties under certain conditions that are not difficult to fulfill, but this will still require initial savings.

In fact, the cost of servicing a loan without a down payment may be even higher. Many banks provide for an increase in the base rate by several percentage points in the event of a client refusing insurance, a ban on the assignment of claims, and other parameters. In addition, as a rule, when applying for a “zero mortgage,” the bank charges increased one-time fees, which also increase the effective interest rate on the loan.

Of course, the monthly payments will also be higher: not only will the rate be initially higher, but also the amount of the principal debt will be larger and will amount to the full cost of the apartment. Thus, the monthly burden on the family or personal budget will be much greater. In addition, you will also have to prove to the bank your ability to withstand this load: you must agree, it looks rather strange for a borrower who could not save up even the minimum down payment, but promises to pay 40-60 thousand monthly for the next 10-15 years. Of course, the bank will have to study the solvency of the potential client, and the information received may well satisfy the bank: such clients often have decent deposits.

“The program without a down payment is designed not only for those who do not have their own funds, but also, for example, for those who keep savings on deposits with a good rate and do not want to close them early so as not to lose accrued interest. Thus, a buyer can purchase an apartment today at low summer prices without investing his own funds,” notes Pavel Timoshenko, head of the department of partnership sales, mortgages and subsidies at FSK Leader. According to Director of Information Policy and PR ]Urban Group[/anchor] Yana Maksimova, such programs are also suitable for entrepreneurs who do not want to withdraw capital from circulation.

“Increasingly, we are encountering cases where clients who had not previously thought about buying real estate at all, due to the huge supply of new buildings on the market and affordable prices, decide to purchase this or that property right now. And it is precisely this category of clients that does not want to waste time saving up a down payment, but decides to make a purchase right now. That is why we can expect that programs without a down payment will become more widespread, provided that the rates are attractive at the level of 12.5-13%,” comments Mortgage Director Tatyana Guseva. However, at the moment, mortgage loans within the framework of standard programs with a minimum down payment (from 10-15%) with lower interest rates still remain more in demand.

August 24, 2021

Author: Ekaterina Sakharova

Mortgage secured by share

Ownership of a property can be joint, owned by several persons, each of whom is allocated a percentage share. Many loan applicants are interested in whether it is possible to get a mortgage secured by a share in an apartment or a residential building. Indeed, a bank can provide a loan if shared ownership serves as collateral, but subject to the following conditions:

the collateral must be of interest to the lender - the respectability of the property and location are assessed; technical condition;
the market value of the share must satisfy the banking structure, provide loan coverage and some discount;
notarization of the consent of co-owners to register a pledge;
absence of elderly or underage persons in the list of residents.

The issue of issuing a loan against a share in property is decided by banks individually. Lenders give preference to verified borrowers who have proven their commitment. You must be prepared for the fact that the interest rate on a share pledge may be slightly higher.

What is a home equity mortgage?

A mortgage against housing is a kind of barter, the parties of which are the creditor bank and the borrower, who draws up a financial obligation for the purchase of new real estate, while the previous housing will become collateral for the financial institution.

The category features are as follows:

Lending conditions are usually softer than the basic ones;
The borrower has the right to direct his choice to purchase a property in both the primary and secondary housing markets;
The down payment condition may be omitted;
The previous real estate object serving as collateral for the mortgage must be appraised (as practice shows, its value may be underestimated compared to the average market indicators in the region where such housing is located);
It is not necessary to involve co-borrowers.