Mistake 1. Taking out a mortgage with a maximum required payment
The logic is ironclad: the larger the monthly payment, the faster the mortgage is paid off, the less the overpayment is.
This is direct savings. In practice it turns out a little differently. Let’s say the income is 30,000 rubles, the mortgage payment is 17,000. This is even more than half, but the borrower has read a hundred articles about how to live on 5,000 rubles a month, so he can also save.
Let’s not talk about the fact that constantly living in a regime of catastrophic savings is harmful and you can break loose - this already depends on willpower. But in such cases, even small force majeure events lead to delays.
How to do it
Take out a loan for at least 30 years, but with conditions that you can fulfill without straining.
Even if you expect your income to increase, take a mortgage that you can afford now. If you have money, you will close your mortgage early or find another use for it.
To do this, you need to reconsider all possible options and offers of banks: someone offers profitable programs for young borrowers, families, bank clients, someone reduces the rate with additional insurance or on the condition that you collect a lot of documents to confirm reliability.
Risk of loan delinquency
As a rule, borrowers link their ability to pay mortgage payments to their current salary, considering the amount received as an estimate of their “worth” in the labor market. But even if the current salary (or income)
objectively reflects the value of the borrower as an employee
(based on qualifications, demand)
or as a businessman
(demand for the goods and services he offers)
, it is necessary to provide for the likelihood of situations in which income will be received intermittently, and wages will be paid with delays.
What is the problem?
Remember!
The bank considers the mere presence of overdue payments as a deterioration in the client’s solvency and is preparing to take measures to get their money back.
If wages are delayed, the borrower will not be able to pay the contribution on time; if you are fired, you will need some time to look for a new job, and then you will need to wait some more time for your first salary. You also need to take into account salary restrictions associated with the probationary period, a modest salary for a temporary job (if during the search there are no offers that meet expectations)
, or complete absence of any work
(due to limitations in health, age, skills, qualifications, etc.)
.
In turn, the bank (in case of delays in paying monthly installments)
The contract provides for the possibility of terminating contractual relations unilaterally. A representative of the credit institution will file a claim in court and demand repayment of the debt by foreclosure on the property that is pledged. Today, most banks stipulate this possibility for themselves if the borrower is late with payments on three or more installments within 12 months.
How to prevent the situation?
If at the time of applying for a loan everything is in order with your income, you need to take care to ensure timely payments in any situation. Accordingly, a way out of the situation may be to reserve a certain amount intended for payments, for example, within six months; an alternative option is to take out a loan from another bank.
However, the best way out is to receive part of the loan provided in cash (or to a bank card)
, which are not used to purchase housing
(repairs, other expenses)
, but are simply kept “just in case.”
During the time you have the money, you will pay interest on its use, however, firstly, you are guaranteed to be able to fulfill your obligations to the bank, and, secondly, mortgage interest is much lower than interest on a consumer loan ( if you are thinking of taking out a loan to pay the fee in case of delay in salary)
.
Mistake 2. Renting a house for too long and not taking out a mortgage
Dawn Huczek / Flickr.com
Taking out a mortgage is scary, especially when you're renting. When renting, you don’t have a headache because of taxes, repairs and utilities; you can drop everything and go to the Himalayas, without fear that bank employees will fly in after you. But the money is spent on the loan, and it seems that it will never end. But to make sure it’s time to take out a mortgage, all you have to do is take a calculator and do the math.
I took out a loan from the bank for 1,550,000 rubles for 10 years. Monthly payment - 21,700 rubles. If you pay according to schedule, the overpayment will be 1,054,000 rubles. But I’m trying to pay off the debt ahead of schedule, and if I maintain the right pace, I’ll overpay no more than 600,000.
If I rent the same apartment all this time, I will pay at least 1,800,000 rubles, and that’s if the rental price does not increase.
How to do it
Find a bank, sit down and calculate what apartment you can buy right now. If you don’t have enough for housing that you can immediately move into, take out a mortgage in a house under construction. This is also possible if you search and analyze the offers of banks.
DeltaCredit Bank has a “Mortgage Holiday” - this is a program where the first year or two, monthly payments are reduced by half, just enough to cover both rent and mortgage while the house is being built.
And when the house is completed and you no longer need to rent anything, this part of the budget will begin to go towards repaying the loan. But we must take into account that not a single bank will give out goodies for beautiful eyes. Typically, the rate for a loan with concessions is higher than for a regular one.
Additional expenses
Many banks are not shy about making money on them. The down payment and the state fee for registering a mortgage are not all the expenses that the borrower faces.
Commission of the bank
Especially “greedy” credit institutions try to take money from the client for any, even meager, service. The borrower must be prepared for the following payments:
- for consideration of the application;
- for issuing a loan;
- for currency exchange;
- for transferring money from account to account;
- for issuing a bank card.
Experts advise that before applying for a loan, find out from the bank all the hidden fees and additional costs for applying for it.
Payment for appraiser services
Expert opinion
Evgeniy Belyaev
Legal consultant, financial expert
Ask
Some banks insist that valuations be carried out only by their accredited valuation specialist. This makes it impossible for the borrower to choose an appraisal company. In this case, the assessment cannot be disputed. You will have to pay for it exactly as much as the appraiser says. It is difficult to argue with banks on this issue. Most likely, you will have to agree to their terms. If the client decides to refinance with another bank at a lower rate, he will have to make a new assessment.
Insurance
Insurance of property purchased with a mortgage and pledged to the bank is reasonable and justified. But many credit institutions put forward additional conditions and insist on other types of insurance:
- life and health of the borrower;
- property rights to real estate;
- risk of violation of the terms of the loan agreement.
It is noteworthy that the beneficiary of such insurance is the bank, and the client is forced to pay expenses in the amount of 0.5% to 1.5% of the loan amount.
It is worth trying to refuse additional insurance services that bank employees openly impose. This must be done persistently. For example, at Sberbank the client will simply increase the mortgage rate by 1% for this.
Mistake 3. Forgetting about moving
Many people generally throw this point out of their heads. But imagine that you are young and have an interesting profession. They offer you a move, but there is one catch: a 30-year mortgage. Or your family is growing, you need a larger apartment, but you already have an existing mortgage for a two-room apartment.
How to do it
Why not go to another city or to the north for high salaries, rent a house there and pay the extra money for the mortgage payment? Why not try to sell the apartment with collateral?
A mortgage is not tied to a location. If you wish, a mortgaged apartment can be rented out and sold if you agree on this with the bank. Yes, these are always additional difficulties, but if plans have changed, all difficulties can be overcome.
And don’t be afraid to take out a loan for real estate where you will live, choose an apartment with a reserve of meters. By the way, few people think about it, but you can take out a mortgage not only for an apartment, but also for a house.
Buying an apartment with a mortgage: what to pay attention to?
It all starts with choosing a bank. It is worth contacting only those credit organizations that have long been known and have proven themselves in the field of mortgage lending. It would be a good idea to find out the opinion of direct borrower clients about the bank that interests you.
Read reviews, ask friends and relatives who bought mortgaged housing. Reputable banks always “work” to build on their reputation, so they are ready to accommodate their clients who have any difficulties with payments.
Have you decided on a bank? Start looking for an apartment. You have 2 options: new building or secondary housing. And again you need to make a choice.
Buying in a new building
When you decide to build a new building, ask the bank employees for a list of developers accredited by them. Typically, banks cooperate only with reputable developers, so the range of risks for the borrower is somewhat narrowed here. The bank acts as a significant guarantor for the client.
Before issuing accreditation, the reliability of the developer and all documentation for the land and construction are checked. The apartment will become the property of the borrower only after the house is put into operation. At the same time, an encumbrance will be issued on the living space in favor of the bank until the loan is fully repaid.
When purchasing housing under construction, ask the developer:
- Constituent documents;
- Project documentation with state examination and declaration;
- Investment contract;
- Permission to build a house;
- Title documents for the land plot;
- Insurance contract or guarantee;
- Extract from the State Register.
Assess the degree of readiness of the house, ask the contractor about what is planned to be built next to the house (some objects located in the neighborhood may create serious inconvenience).
When purchasing housing in a new building, it is better to enter into an equity participation agreement with the developer. In the event of bankruptcy of a construction company, the claims of shareholders will be secured by a double burden. Such an agreement will also protect the client from double sales of the apartment.
Buying a secondary product
Banks are also checking secondary housing. Only apartments in buildings that were put into operation no more than 30 years ago are financed. Banks do not even consider illiquid real estate in the form of small families, old Khrushchev apartments or rooms in communal apartments as an object of purchase and collateral.
When choosing an apartment, pay attention to communications, the condition of the premises, and how recently major repairs were carried out. It’s even worth asking about your neighbors, not only from the seller, but also from the residents of the house. Problematic neighbors can ruin your life for years to come. The bank will not deal with this, so worry about it yourself.
Check by all means the legal “purity” of the apartment before signing the contract. After registration of ownership of the home, the problems that arise will be yours alone, and only you (and not the bank) will have to deal with the “dark spots” of the living space purchased with a mortgage in court.
Currency risks
Mortgages are usually issued for 10, 20, or even 25 years. During this time, life in the country can change dramatically. In financial terms, this manifests itself first of all in the depreciation of the ruble, an increase or decrease in real estate prices, etc. For the borrower, this may threaten an increase in the rate and monthly payment. This is why experts recommend taking out a mortgage loan exclusively in domestic currency. It is also important to pay attention to the type of bet.
Take out a loan at a fixed rate rather than a floating rate, even if banks offer very attractive rates. Any instability in the country will affect the value of the floating rate, and therefore increase the cost of the mortgage.
Risks associated with collateral
Being pledged for such a long time, the purchased property may be damaged or lost as a result of natural disasters or illegal actions on the part of third parties.
Look at the same topic: Foreign currency mortgage borrowers - the latest news for today
Loss of an apartment
Damage or loss of property can have the most unpleasant consequences for the borrower. In such a case, the borrower must first notify the bank about the incident. If the property is damaged, the bank will give time to restore and repair the premises. In the event of a total loss, the borrower will be required to provide another equivalent collateral. If this is not the case, the bank has the right to terminate the agreement and demand early repayment of the debt.
Third party claims
If third parties claim their rights to the apartment, then problems will again arise for the borrower. The property is secured by the bank for the entire loan period, even if the owner changes. The pledge always follows the thing - this is Russian legislation.
Mistake 4. Forget about repairs
Irene Mei / Flickr.com
Buying an apartment when the developer has barely managed to obtain a building permit is profitable. The price per square meter at the excavation stage is much lower than in finished housing. Especially if the apartment is rented as a construction project - this is when you have an empty box in front of you and room for creativity. Only you need to invest a large amount in this creativity.
Even if you buy a home on the secondary market, after moving you cannot do without repairs: somewhere you need to move an outlet, somewhere the wallpaper is disgusting. If you forget about this, the housewarming party may be delayed (or you will also have to take out a loan for repairs).
How to do it
There are three options:
- When you take out a mortgage, pay a smaller down payment, but immediately set aside “repair” money. It's better to put them at interest.
- Save for renovations while you pay off your mortgage. The same mortgage holidays that we talked about can help.
- Look for a developer who immediately rents out a renovated apartment. At a minimum, you can live in it, that is, finish the mortgage, and only then repair something.
Risks associated with collateral
The mortgaged property may be destroyed due to a natural disaster or fire. There are cases when third parties challenged the purchase and sale agreement of a mortgaged apartment.
Loss of property
For the borrower, death or significant damage to the collateral has extremely unpleasant consequences. He not only lost his property, but also must provide the bank with other loan security to replace the lost one. If the housing is simply badly damaged, then the borrower is obliged to notify the lender and agree with him on the timing of repairs. It is better to do all this in writing.
It must be borne in mind that if the financial institution does not arrange a new pledge, then it has the right to demand early repayment of loan obligations.
Third party claims
Sometimes a mortgaged apartment becomes the subject of legal proceedings brought by third parties who claim their rights to it. All risks in this case again fall on the borrower. After all, the bank will not lose the right to the pledge in any case, even if the apartment is returned to the previous owner. In Russian legislation, the pledge follows the thing, so the encumbrance on the apartment will remain. And the borrower who has already paid part of the cost of the apartment and interest on the loan remains in the most disadvantageous position.
Mistake 6. Not reading the contract
Barbara Krawcowicz / Flickr.com
Even if you have already discussed everything with the manager, even if the consultant has answered a hundred of your questions, read and clarify everything that you do not understand. Even if you ask an obvious stupid question, just do it.
How to do it
Read the agreement and all documents it refers to (for example, general bank lending conditions). Make a summary of the main provisions: when you need to pay, what documents to update, which companies to insure with, where to call if there are problems.
Mistake 7. Forgetting about tax deductions
Are you aware that there is a tax deduction for a mortgage? Both for the purchase of an apartment and for interest on the mortgage. This deduction can be for a round amount - up to 650,000 rubles.
How to do it
Collect certificates of income and payments, submit an application to the tax office (if you don’t know how, then there are many companies at your service that will arrange everything for you in 20 minutes), receive money. By the way, if you are married, your significant other can also receive a deduction. The spouse is entitled to compensation, even if he is not the owner of the property, and many people forget about this.
Mortgage pitfalls
A mortgage is often the only way to purchase an apartment or house. And many are afraid to take out a loan for many years - it is difficult to predict what will happen in a year or two, not to mention longer periods. But in the end, the majority still decide to take this step: there is no particular choice - either this way or not at all. Actually, there is nothing so dangerous in a long-term loan. But you need to clearly remember a few important points and use them to your advantage. And you need to start when choosing a loan.
Additional terms
Choosing an insurance company
Types of payments
Loan repayment method
Personal income tax refund
1. Do not evaluate the attractiveness of a loan only by
the interest rate .
You should always pay attention to additional conditions - commissions, fees, and so on. Of course, interest is a very important indicator, but inattention to seemingly small details can significantly increase the cost of the loan. You need to study additional fees especially carefully when transferring money to repay a loan and when completing a mortgage transaction.
2. Choose an insurer yourself, and not just from those offered by the bank.
When issuing a mortgage, a credit institution usually requires insuring the purchased property and the life of the borrower. Look at the existing offers on the insurance market and choose the most acceptable one. The bank has no right to impose any company. It’s better, of course, to choose from among the bank’s partners. But in principle, any other company is possible - but then, before signing the insurance contract, you will need to convince the bank that the company you have chosen meets the reliability criteria.
3. Correctly navigate the payment system.
Banks usually offer two standard types of repayment - differentiated and annuity. Don’t be afraid of unfamiliar words, but delve into the specifics. In a differentiated payment, the amounts to be repaid are different every month - they start with large ones and gradually decrease. But every month you repay the same amount of principal, the amount of accrued interest changes. With an annuity system, all debt is evenly divided into equal monthly payments. But at the beginning of repayment, you pay only a small part of your principal debt and the lion's share comes from paying off interest. With each payment, the structure changes - the share of repayment of the principal debt increases and the interest payment decreases.
The difference in overpayment can exceed one hundred thousand rubles in favor of differentiated payment. It costs the borrower less, but it all depends on financial capabilities - whether it will be possible to repay the first large payments. With an annuity system, they are leveled and such a loan is more accessible. And yet, if there is such an opportunity, take a differentiated payment.
4. Early repayment saves money.
Another pitfall of a mortgage is how the loan is repaid. From the first payments, try to return more than expected. The lower the principal amount, the more you save on interest payments. At the same time, not only the total amount of overpayment is reduced, but also the time to repay the mortgage. You can clearly see your benefits on the website of the borrowing bank; usually there is a loan calculator that can easily recalculate the payment schedule. And by simply comparing the amounts - before making an additional payment and after - you can estimate your savings. In the agreement, the bank usually specifies the minimum amount accepted for early repayment. That is, he may not count a ruble or a hundred - and they will accumulate in your personal account until the required payment is received. Now banks often set their minimum early repayment threshold at five thousand rubles.
5. File a tax deduction.
The state provides mortgage holders with certain benefits - there is no need to be shy about taking advantage of this opportunity. First of all, we are talking about property tax deductions. At official work, we are charged 13 percent of personal income tax (NDFL). And now part of this amount can be returned. Currently, the state is ready to return personal income tax on two million rubles - regardless of whether it is the cost of housing or the payment of interest on a loan. You can use this benefit only once - if after some time you decide to take out a new mortgage, there will be no tax deduction. Moreover, if the amount of 2 million was not used in full, then the balance can be transferred to the next mortgage. Thus, out of two million, you can return 260 thousand rubles - those same 13 percent of personal income tax. If a mortgage is taken out for two spouses and each has an official income, then you can return twice as much - 520 thousand. The limit on interest repayment expenses is even higher - there you can get a tax deduction on three million. In general, this is a very solid help in paying off your mortgage. And if you use it for early repayment, the final savings will be even more significant.
6. Take advantage of other opportunities provided by the government.
Relying on your own strength is wonderful. But if there is an opportunity to get help, then why refuse? Under certain conditions, the state undertakes to subsidize interest payments or is ready to assist in some other way. Such offers are not valid for everyone. There are state programs for young families, for large families, and so on. But before going to the bank, it’s better to see if you fit the conditions of one or another government program. You can find a list of them and terms of provision on the website of the Agency for Housing Mortgage Lending.
7. If you have any problems, start a dialogue with the bank.
If any circumstances do not allow you to repay the obligatory payment on time, establish cooperation with the creditor. Moreover, if a long-term problem looms - loss of a source of income, illness or similar unexpected events. There is no need to bring the matter to the courts and enforcement proceedings. Moreover, hide from the bank or try to take out another loan to pay off current mortgage payments. As long as the situation has not gone too far, banks usually accommodate the borrower halfway. There is only one way out - debt restructuring. But there are many options - you can reduce the payment by increasing the loan term, get payment holidays, and so on. The main thing is to establish a dialogue, and not hide from problems.
8. Mortgage refinancing saves money.
There are different periods in a country's economy. Therefore, the interest rate may rise or fall. If it grows, then this does not concern you - you managed to take out a loan at lower interest rates. But if the rate decreases, then you can think about refinancing your mortgage. The borrowing bank does not always agree to this. But you can try. If they refuse, try at another bank. Usually they are happy to do this. For them, you are a new client, they do not lose your interest already included in their plan. That is, they give you a mortgage loan on market conditions - those that have developed here and now. But you have already managed to prove your credit integrity in another bank and the bank’s risk in this case is lower. Refinancing makes practical sense if the existing rate is at least one and a half percent lower than your current rate. The difference is especially noticeable if you refinance during the first half of your mortgage payments.
9. Mortgage only in the currency of your income.
This is the most common advice given to borrowers. But that doesn't make it any less important. Taking a loan in foreign currency is a lottery. But in the short term you may or may not be lucky. But in the long run you will probably lose. After all, a mortgage is usually taken out for ten years or more. And no one knows what the situation will be. If you receive it in rubles, take out a loan in rubles. There are enough other risks in a long-term loan; there is no need to increase them.
Mistake 8. Thinking that it will somehow go away on its own
Let's say something bad happens: you're late on a payment. It doesn’t matter for what reason: the reminder didn’t work, I wasn’t in the mood, the money ran out. There is no point in burying your head in the sand and continuing to pay your mortgage as if nothing happened. Even for one day of delay, the bank can issue a fine or charge penalties, and then this will result in round sums.
How to do it
The ideal option is to get insurance, but it is expensive (and if the insurance is good, it is very expensive). Regardless of whether you have insurance or not, in any unclear situation, call the bank. Minor difficulties can be resolved immediately; in case of major problems, we can negotiate and even renegotiate the terms of the mortgage. The main thing is not to disappear and treat your obligations responsibly.
If you realize that you are mentally prepared for a mortgage, find out what conditions you can count on. Use the DeltaCredit online approval service: it will help you get pre-approval for a loan without visiting the bank. Register, submit an application, get approval and upload the necessary documents - everything is quick and hassle-free.
Find out everything about mortgages
What else you need to know about the pitfalls and risks of mortgages in 2021
Experts recommend that public sector employees rely on their own finances when applying for a mortgage.
Often bureaucratic delays make it impossible to receive money from the state on time. And this entails penalties for the borrower. It’s better to pay your own money for the apartment, and when they give you a subsidy, repay the loan early. Military mortgages also have pitfalls. The benefits are valid as long as the officer serves in the Armed Forces. If he quits early, he will pay the remaining loan out of his own pocket.
Pitfalls must also be taken into account when getting a mortgage from Sberbank. Its managers usually offer optional services: additional life and health insurance for the borrower.
Expert opinion
Evgeniy Belyaev
Legal consultant, financial expert
Ask
Mortgages with state support also have their pitfalls. For example, in a mortgage agreement with VTB 24 bank, if the client refuses to insure his life, the interest rate increases from 11.4% to 11.9%. This must be taken into account when calculating monthly payments.
