All the pitfalls of mortgages and how to get around them in 2022

Before applying for a mortgage loan, due to the presence of increased risks and a long period of cooperation with the lender, each borrower should study the proposed conditions in as much detail as possible, and it is better to take everything into account and calculate. Today we’ll take a closer look at the existing mortgage pitfalls and how to avoid them.

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

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.

A mortgage is usually called a loan to purchase a home. If we interpret the concept literally, this is a type of real estate pledge. Until the borrower fully repays the debt, the owner cannot fully dispose of the property - for example, sell it. Let's figure out how to take out a mortgage correctly; what documents need to be provided; What are the risks and pitfalls?

Features of a mortgage loan

A loan that is issued for the purpose of purchasing a home using its security is commonly called a mortgage. As a rule, such a loan is issued for a long period and at a relatively low interest rate. What causes the low interest rate? First of all, the lender has virtually no risk of non-repayment of funds. Even if the borrower fails to make payments, the property will remain pledged and will be sold. And the proceeds will be used to pay off the debt.

At the legislative level, mortgages are regulated by Law No. 102-FZ of July 16, 1998. The procedure for military mortgages is prescribed in Law No. 117-FZ of August 20, 2004 and in Decree of the Government of the Russian Federation of May 15, 2008 No. 370. In this article we tell you how to get a mortgage for ordinary citizens, not military personnel.

Not all properties can be purchased with a mortgage. The list of real estate is given in Article 5 No. 102-FZ. This is, for example:

• Apartments.
• Cottages and residential buildings.
• Parts of apartments, houses.
• Land.
• Garages.
• Garden houses.
• Parking spaces, etc.

Mortgage loans are issued according to a standard scheme. The basic principle of how a mortgage works is as follows:

• First, a person contacts the bank and submits an application - it must indicate the purpose (type of real estate) and the loan amount.
• Next, the bank studies information about the borrower and makes a decision on approval or refusal.
• After that, a suitable property is selected, and documents for housing are submitted to the bank.
• At the next stage, subject to approval, a mortgage agreement is concluded between the bank and the individual.
• Then the financial institution prepares documents to encumber the property and register ownership. At this stage, a mortgage on the property is also drawn up, which remains with the bank and is returned to the client only after full payment of the debt.
• At the final stage, after all the paperwork has been completed, the money is transferred to the seller of the property.

Conditions for obtaining a mortgage

Who gets a mortgage? The conditions for registration vary depending on the type and type of housing (resale, new building, private house, apartment, etc.), as well as on the nature of the borrower’s employment. Despite a number of special requirements, there are a number of standard requirements for mortgage transactions. Let's list the main ones:

• Age of the borrower – the law allows for a mortgage to be taken out from 18 years of age. In practice, banks are more willing to work with borrowers from 21 to 65 years old, that is, people of working age. The maximum age is determined at the date of final repayment of the loan.
• Work experience - the chances of getting a mortgage approved increase for those who are officially employed or have other sources of income. For example, this is registration as an individual entrepreneur, as a payer of the PIT (professional income tax), work under civil law contracts. The longer the work experience, the more willingly banks give loans.
• Amount of income – people are often concerned with the question: with what salary can you get a mortgage? The Bank of Russia instructs financial institutions to calculate the maximum debt load of the borrower, therefore, as a rule, banks refuse to issue a loan if the amount of loan payments exceeds 50% of the borrower’s income.

That is, if your monthly salary = 60,000 rubles, the mortgage contribution should not be higher than 30,000 rubles. For the accuracy of calculations, it is necessary to take into account additional income (dividends, from rent, from self-employment, entrepreneurship, etc.) and mandatory costs (for the maintenance of dependents, for utility bills, other loans, etc.).

• Down payment - each bank determines the mandatory availability and size of the down payment independently. Usually this is 10-15% of the property value. The amount varies by region and type of object. There may be no down payment if maternity capital is paid instead. The larger the contribution, the lower the interest rate under the agreement, the smaller the amount of payments.
• Availability of a guarantor or co-borrower - if the borrower’s income is low, reliable co-borrowers and guarantors will help to borrow a large amount.

What risks are there in a mortgage?

Before taking out a mortgage, weigh all the possible risks. We talk about the main pitfalls and how to “avoid” them:

• Excessive workload is the main risk for a potential borrower. If income decreases or a person remains unemployed, it will become difficult to make contributions. To prevent this from happening, you need to carefully consider all possible repayment options. Consider the term of the loan, the size of the installments - in some cases it is better to pay longer, but with lower monthly payments. Then the risks of delay are reduced, and free money can be used to repay the loan early.
• Currency risk - appears for those who take out a mortgage not in rubles, but in dollars or euros. Due to sharp fluctuations in the exchange rate, the amount of debt owed to the bank may increase sharply, making repayment of the loan impossible.
• Hidden fees – as a rule, banks do not charge any additional fees when applying for a mortgage. However, some financial institutions continue to charge clients fees for opening and maintaining a loan account, for issuing a loan, for completing an application, for transferring money, etc. All of these fees can cost a pretty penny, so carefully review the terms of your contract for any hidden fees or additional charges. If something confuses you, clarify all the details and ask for changes to the contract.
• Changing the interest rate - the bank does not have the right to change the rate unilaterally (Part 2 of Article 29 of the Federal Law “On Banks and Banking Activities”). An exception is situations when this is expressly provided for in the terms of the contract or in the law. In any case, the lender is obliged to notify the borrower in advance about upcoming changes, and the client needs to carefully read the agreement before signing it. You can challenge an increase in the interest rate through the court.
• Registration without a down payment - as a rule, if a mortgage is issued without a down payment, you will have to repay the loan at a higher interest rate. It is better to first save (for example, using a deposit, savings account or individual investment account) at least the minimum amount, and then take out a loan.
• Purchasing insurance - according to the law, it is only necessary to obtain insurance for the collateral, that is, for the purchased housing. If the bank also offers to insure your life, health, etc., remember that you are not obligated to do this.

Annuity and differentiated payment

Even at the stage of applying for a mortgage, check whether there are any fees for early repayment of the loan. Also find out which debt repayment option is provided - annuity payments (interest is paid first, then the principal - the payment will be the same every month) or differentiated (first the principal is repaid, then interest on the loan - in this case the payment will be will decrease over time). The first option is better to choose if the size of the payment is critical. The second is when you want to minimize overpayments on interest.

How to get a mortgage

In general, the procedure for obtaining a mortgage loan is the same everywhere. To choose the best option, you need to take into account the provisions of current legislation and monitor offers on the market. Here are step-by-step instructions for getting a mortgage.

How to get a mortgage - step by step algorithm:

• Estimate the size of the down payment - usually you need to make 10-15% of the cost of housing. There are programs without a down payment, but the more you pay at once, the more profitable the repayment schedule will be.
• Find out about current options for government support - there are special programs for various categories of beneficiaries. For example, as part of state support, large families can repay up to 450,000 rubles of debt, and families with children have the right to use maternity capital as a down payment (or use it to pay off the principal debt) or take out a soft loan at 6% per annum. All of these programs, when executed correctly, can reduce the amount of payments. If you decide to take advantage of the benefits, notify the bank about this in advance, before concluding the agreement.
• Select a bank - choose a credit institution from the list of institutions that work with specific government support programs. For example, the list of banks for preferential mortgages at 6% per annum is approved by the Ministry of Finance. If you do not plan to use benefits, you can choose a bank based on the terms of the mortgage. Check the interest rate, presence/absence of a down payment, and requirements for borrowers.
• Submit an application for a mortgage to the bank - after you have selected a bank, you can submit an application for a mortgage. Additionally, you need to prepare a package of documents - see an approximate list below. Usually they ask to provide a passport, SNILS, 2-NDFL certificate, a copy of the work book, etc.
• Obtain the bank's consent - after reviewing all documents, a decision is made to approve the loan or refuse it. In the second case, you need to clarify why the refusal, correct the reason and resubmit the documents.
• Select a suitable property - based on the approval of the application, you can select housing for a mortgage. The object must comply with the bank's conditions, and its cost must be within the approved loan amount. In turn, the bank must approve the property (not be in disrepair, have no encumbrances, etc.).
• Conduct a real estate assessment - if everything is in order with the housing, you can order an assessment of the property. This procedure will allow you to record the market value of the property in order to find out the exact loan amount.
• Conclude agreements with the bank and the home seller - usually bank lawyers help in completing a real estate purchase and sale transaction. Carefully study the terms of the mortgage loan - check the transaction amount, interest rate, commissions and penalties, prohibitions and obligations.
• Obtain a mortgage and make final payments to the real estate seller - it is recommended to make payments to the seller through a special account or safe deposit box.
• Register the ownership of the home and the mortgage - the property document is drawn up in Rosreestr. This can also be done through the MFC.

What documents are needed for an apartment mortgage?

The list of forms may vary depending on the bank and the specifics of the transaction. All copies must be certified. Here is a sample list of documents for a mortgage loan:

• Application form in a jar.
• Passport of a citizen of the Russian Federation.
• A copy of the work book.
• Help 2-NDFL.
• SNILS and INN.
• Marriage documents.
• Educational diplomas.
• Copies of employment contracts.
• Copies of children's birth certificates.
• Copy of military ID.
• If necessary, the bank may request additional documents.

Also, don’t forget about the new feature – “Digital Profile”. If you have a confirmed account on State Services, then when filling out an application for a loan, you can give your consent to the request for your data from the CPU and the credit institution will automatically receive confirmed data from official information systems. You won't need to bother with physical copies of documents. Read more about your digital profile here.

Should you take out a mortgage now or is it better to wait?

In the first half of 2021, the Bank of Russia has already raised the key rate three times. From June 15, 2021, the rate = 5.5% per annum. What does such an increase mean for potential borrowers? The answer is obvious - many banks have already increased the interest rate on mortgage loans. In addition, the state mortgage support program is limited in time, and no one can say whether it will be extended or whether the conditions will change. And without it, mortgages will become less affordable. In the near future, it is difficult to say how much mortgage rates will increase, but we can say with confidence that they should not be expected to decrease.

In 2021, the situation for mortgages remains favorable, but it is difficult to say what will happen next. But before deciding to apply for a loan, it is important to analyze your own financial capabilities in detail and weigh the pros and cons.

Is it possible to pay off a mortgage early?

Now almost all banks allow you to repay a mortgage loan early without sanctions. This can be done at your own expense or with the help of social payments - for example, through maternity capital. There are three options for early repayment - reducing the size of the monthly payment, shortening the payment period and a combined method.

Regardless of the option chosen, the first thing the borrower must do in order to close the debt before the due date is to notify his lender, that is, the bank. And remember, the sooner you start paying off your mortgage early, the more profitable it is, since overpayments on interest are reduced. All features of early repayment must be specified in the terms of the contract.

What happens if you don't pay

If the borrower stops making mortgage payments on time, the bank will begin to charge penalties and fines on the overdue amount. The specifics of collecting sanctions are established in the loan agreement. After the expiration of the period specified in the agreement, the bank has the right to go to court to repay the debt at the expense of the mortgaged housing. Even your only home can be put up for auction; having children won’t help.

What to do if you can't pay off your mortgage

If it becomes difficult to repay your mortgage, you need to avoid delays and immediately inform the bank about it. Possible ways to solve the problem are refinancing, loan restructuring, applying for a mortgage holiday, approving a deferment, etc. Try to provide documentary evidence that your income has decreased (or other extenuating circumstances have arisen) and it has become difficult to cope with your loan load. If the information is confirmed, the bank may meet halfway and reduce the size of the monthly payment or allow you to pay only the amount of interest, or offer another way out of the situation.

Limitation of the borrower's rights

In a loan agreement, a distinction should be made between reasonable restrictions that protect the interests of the lender, and “tricky” clauses that put the borrower in a pre-disadvantageous, dependent position on the bank. The first includes a ban on selling, renting, or remodeling an apartment without the consent of the credit institution. It is reasonable.

But the agreement may contain clauses that do not make it possible to repay the loan early, or allow the bank to unilaterally change the interest rate. Many of these conditions directly violate civil law, so they can and should be challenged in court, guided by the law “On the Protection of Consumer Rights.”

Calculate rural mortgage

On special services and websites of banks, you can make a preliminary calculation of the parameters of a mortgage loan.

First, set the parameters you are interested in: region, real estate market, type, cost of the property, and more. Based on individual characteristics, the calculator will calculate the loan amount, interest rate and monthly payment of two types.

In addition, you can see an approximate loan payment schedule. Even the overpayment amount will be displayed.

Text: Alina Volkova

Currency risks

Noticeable fluctuations in exchange rates, depreciation of the ruble, and falling housing prices are a reality that any mortgage borrower may face. After all, such loans are taken out for decades. And for the bank client this means the following:

• increasing the amount of monthly payments;
• a multiple excess of the loan amount over the market price of the mortgaged apartment.

To reduce currency risks to a minimum, you should take out loans for the purchase of real estate only in rubles. You should not give in to the persuasion of bank managers and take out a mortgage at a “floating rate”. Even if the interest rate on the loan seems very attractive, it is worth considering that with the slightest change in the foreign exchange market, the bank will simply increase the rate. As a result, it may become unaffordable for the client.

It is important to understand that when concluding an agreement with a “floating rate”, the borrower never knows what loan bill the bank will issue him next month.

Pitfalls of special programs in 2022

In 2022, effective programs will be implemented to assist special categories of Russian citizens when applying for a mortgage:

• family mortgage at 6% per annum;
• military mortgage;
• maternal capital;
• young family;
• social mortgage;
• rural mortgage;
• Far Eastern mortgage;
• wooden mortgage.

Each has its own nuances.

Mortgage at 6% per annum for families with children

Such a mortgage will be available to families who will have a second or third child between the beginning of this year and the end of 2022. The rate of 6% will apply for a maximum of 8 years from the date of loan issuance. After this period expires, the rate will be tied to the refinancing rate (its current value + 2 percentage points).

You can only buy housing under this program from legal entities. The purchase amount is limited to 3 million rubles for the regions and 8 million for Moscow.

Military mortgage

A mortgage for military personnel who have been participants in the savings-mortgage system for over 3 years will allow them to buy comfortable housing worth up to 2.33 million rubles at 9.5% per year.

With the help of NIS, the borrower can save up for a down payment, and through monthly payments transferred from the budget, the debt under the loan agreement is repaid. It is impossible to resign during the validity period of such an agreement, otherwise the bank will terminate it and the military man will be obliged to return the funds received to the state.

Maternal capital

Maternity capital funds can be used for credit purposes immediately after the birth of a child who has given such a right. The amount of 466,617 rubles can be used to pay the principal and interest or pay the down payment.

The expense item is determined by the borrower himself in agreement with the Pension Fund, who will transfer the money to the bank within one month.

Young family

Young families in which spouses are under 35 years old can apply for a preferential mortgage with subsidies from the state budget. The size of such a subsidy depends on the number of family members, region of residence and the average price of 1 sq. m. m. in a specific municipality.

To participate in this program, you will need documentary evidence of your need for improved housing conditions.

Social mortgage

Social mortgages are issued for an approved list of categories of citizens of the Russian Federation - single-parent families, large families, low-income citizens, disabled people and families with disabled children, employees of budgetary organizations. Such persons are offered free subsidies or an interest rate compensated from the budget.

Registration is carried out in the order of placement on the queue as those in need of housing.

Wooden mortgage

A wooden mortgage means obtaining a loan for the purchase of suburban wooden real estate, thereby stimulating the development of low-rise construction and the development of remote areas.

The purchase of environmentally friendly housing will be subsidized by the state by reducing the interest rate to 10%. The subtlety of a mortgage is that there is no need for collateral for the home being purchased. The loan amount cannot exceed 3.5 million rubles, and the down payment will be from 10%.

Rural mortgage

This support program from the state applies to rural residents who work in socially significant enterprises or are engaged in agriculture. Program participants are entitled to a preferential mortgage at a rate of 0.1 to 3% per annum. Detailed conditions here.

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.

How to get a rural mortgage

To become a participant in the government support program, you must meet many criteria. Before collecting documents:

1. It is necessary to find out whether a specific area falls under the rural mortgage program. The support measure was developed in accordance with the state program “Comprehensive Development of Rural Territories,” which states that the exact list of all rural areas is compiled by the regional government. For example, in the Leningrad region, such a list was approved as part of the state program of the region “Comprehensive development of rural areas of the Leningrad region” by order of the regional government dated December 27, 2021 No. 636;
2. Make sure that you are eligible to receive a preferential loan: you are a citizen of Russia, aged from 21 to 65 years, with temporary or permanent registration in rural areas. In addition, you are employed in the village, are solvent and can confirm this;
3. Research banks that can provide rural mortgages in your area.

Once you have verified all the information and are a candidate for a mortgage loan, start collecting documents. List of required papers:

1. Borrower application form;
2. Passport with registration mark;
3. Second document confirming your identity (optional). For example, a driver's license or passport;
4. Documents confirming the presence of a down payment;
5. SNILS and INN of the borrower;
6. Registration at the place of stay (if you have a temporary residence permit);
7. Confirmation of the financial condition and employment of the borrower (to prove solvency, you must request a certificate of income in form 2NDFL).

This list is approximate and can be changed by the bank privately, so always check the information on the organization’s website or with employees.

When purchasing real estate from the owner, do not forget to check the apartment for encumbrances and other problems. Order an extract from the Unified State Register of Real Estate. The easiest way to do this is online on the EGRN.Reestr website . The report will be generated on the same day and sent to your email.

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.

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.

Video: Pitfalls of a mortgage agreement

Pitfalls in legislation

The different stages of concluding a mortgage transaction have their pitfalls. In addition, there are nuances in the legislation, in the chosen product of a particular bank, and in the personal fears and limitations of the borrower.

Let's take a closer look at the existing pitfalls in Russian legislation.

Pledge of real estate

The key regulatory act regulating the relationship between the parties to mortgage lending is 102-FZ “On Mortgage”. This law determines that the purchased housing, after the transaction is completed, will be pledged to the lender and will become collateral for the loan received.

In simple words, this means that until the end of the loan agreement, the property essentially belongs to the bank and the borrower has the right to dispose of it only with its permission. That is, any transactions for the sale, exchange, donation, redevelopment or other improvements/changes in the pledged property must be agreed upon with the lender.

CONCLUSION: Any actions with the apartment that could reduce its market value are prohibited to the client.

By signing the agreement, the borrower automatically gives voluntary consent to all these restrictions, which will be lifted only after full repayment of the debt and removal of the encumbrance in Rosreestr.

You will learn how to get around these pitfalls of a mortgage from the articles: “Is it possible to sell a mortgaged apartment”, “Is it possible to rent out an apartment purchased with a mortgage”, “Redevelopment in a mortgaged apartment”, “Is it possible to donate or bequeath a mortgaged apartment”.

Possibility of eviction for non-payment

The Civil Code of the Russian Federation and 102-FZ stipulate the circumstances under which a borrower may lose his home. The basis may be non-fulfillment or improper fulfillment of its obligations by the client. That is, if there are constant delays or even in case of refusal to service the loan, the bank has the right to foreclose on the pledged property.

As a rule, before going to court, the bank carries out pre-trial work, which includes providing the borrower with a credit holiday, providing government support measures and writing off part of the debt, options for refinancing and restructuring the loan. If all these tools do not help, then the bank turns to the judicial authorities.

If the court satisfies the creditor's demands in this matter, the borrower will be forcibly evicted from the apartment. The housing is then put up for auction, and after the sale, the bank compensates for its losses using the proceeds.

Currency risks

Mortgage loans as a result of the 2014 crisis, when there was a sharp drop in the ruble exchange rate, have lost their relevance today. Most Russian banks have abandoned foreign currency mortgages for obvious reasons.

By taking out such a loan, in the event of exchange rate fluctuations, the client assumes the risks of increasing the amount of the monthly payment and a significant increase in the final cost of the loan in relation to the market price of the property.

Even if there are options for obtaining a mortgage at minimal interest rates in dollars or euros, you should opt for a ruble loan with lower risks.