How to buy and arrange an apartment in installments and how it works

Not all people have the opportunity to buy an apartment with cash. If you need to improve your living conditions, you can always find alternative options - take out a mortgage loan or installment plan. Taking into account the fact that a mortgage loan always involves overpayment of interest, buying in installments becomes obviously more profitable and interesting.

If you want to buy an apartment in Sochi in installments, then contact the specialists of Vincent Real Estate! We will help you find current options on the market that will suit you in all respects!

Installment plan for an apartment - what is it?

According to the definition of the Civil Code of the Russian Federation, installment payment is payment for goods in installments over a certain time period. In a situation with the purchase of real estate, installment plans are provided by the seller, and not by a credit institution in the form of a bank. There are no overpayments of interest in this case.

Until the installment plan is paid in full, certain encumbrances are placed on the property. A person who has bought an apartment in this way can begin to fully dispose of it only after the debt is paid in full.

Just a few years ago, only a few developers offered installment plans for apartments, and the period was very short - up to 2 years. Today, more and more companies offer clients such a service and the installment period increases to 8-10 years.

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Advantages and disadvantages of installment plans

Like any other financial instrument, installment plans have a number of certain pros and cons. We suggest starting with the positive aspects that make installment plans for an apartment really profitable:

No overpayments on the loan;
Fines for late payments are applied in extremely rare cases;
There is no need for additional expenses - registration of life insurance, title of the borrower;
Possible discounts and loyal attitude of the developer;
Installment plans are available even to clients with a bad credit history;
There is no need to confirm solvency.

At first glance, it may seem that there are no downsides to buying an apartment in installments. Monthly payments without interest do not burden the family budget so much. But in fact, there are always risks and you need to remember this.

You must first carefully study the contract that you are going to draw up. In the situation with apartments in new buildings, look at who exactly you are entering into an agreement with - the developer or the partner bank. If the contract is concluded directly with the developer, then for the payer the risks and negative consequences are minimized, and if the installment plan is issued through a bank, then you need to pay attention to the following aspects:

Are penalties for the payer specified in the contract?
Is there a strict schedule for making payments and their fixed amount;
Are there any penalties for early repayment?

In addition, in contracts with financial organizations, the term “installment plan” itself loses its relevance. Banks offer to draw up an agreement with an interest rate, which means overpayments cannot be avoided.

If you want to buy an apartment in installments without a mortgage, then the best solution is to enter into an agreement directly with the developer. However, here you need to responsibly approach the issue of verification in order to understand whether the company in front of you is reliable or not.

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The essence of the scheme

As a rule, apartments in new buildings are purchased in installments according to the following scheme. First, the buyer pays a down payment ranging from 10 to 70% of the cost of the property. The amount of this amount largely depends on the stage of construction of the new building. The balance is paid by the buyer in equal installments over a specified period or according to a schedule agreed with the seller. Perhaps, for example, this option: the terms of the first and last payment are fixed, and the buyer decides the frequency and amount of payment independently. In most cases, installment plans for an apartment range from 6 to 12 months. It is important that the debt is fully repaid before the new building is handed over to the State Commission.

Where to find real estate in installments?

As a rule, information about the possibility of renting an apartment in installments without interest is presented on the official websites of construction companies. However, not all developers inform their potential buyers about this, giving preference to clients who are ready to immediately make a full payment or those who plan to take out a mortgage loan from a bank.

In addition, it is possible to buy an apartment in installments on the secondary market (more on this below). Finding a seller who is ready for such conditions is a rather difficult task. You need to review hundreds of advertisements and clarify everything point by point.

The best solution is to contact a professional real estate agency, whose specialists always have their finger on the pulse and are aware of all current situations. When planning to buy an apartment in installments in Sochi, you can turn to the specialists of Vincent Real Estate for help!

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How to buy an apartment in installments from a developer

Many construction companies have their own procedure for purchasing an apartment in installments in new buildings. These can be either completed and commissioned houses, or objects under construction. When studying the conditions, the buyer needs to pay attention to a number of significant nuances:

Are there any additional conditions in the housing installment contract - penalties, fines, penalties;
what are the conditions for the transfer of ownership of the apartment - immediately after concluding the transaction and making the first payment or after paying the entire amount;
is there a possibility of early repayment of debt;
the size of the first payment, the possibility of using maternity capital;
what are the conditions for making installment payments - the schedule and amount of each payment;
when the deadline for putting the facility into operation is set - for new buildings at the construction stage;
is it possible to renew the contract with another buyer - in case it is not possible to pay the installments;
what are the conditions for termination of the contract - is at least partial repayment of the amount paid to the buyer provided?

Buying an apartment in a new building

The purchase and sale of an apartment in a residential complex under construction in installments is carried out under an equity participation agreement (DPA). The developer must attach a detailed payment schedule with the amount and timing of payments.

As for the legal aspects, the legislation does not provide a special list of documents required to obtain an installment plan from the developer. The most important thing is your passport and individual taxpayer number. However, some companies may personally put forward a number of additional requirements in relation to borrowers:

Down payment amount from 20 to 50%;
Papers confirming financial status;
Availability of a guarantor.

However, as practice shows, a very small percentage of companies willing to sell apartments in installments have strict requirements, which makes this financial instrument even more convenient and accessible to a wide range of people.

A very important point is to study the contract that you intend to sign. We said above that under the guise of an agreement with the developer, you may be offered an installment plan with a partner bank. And these are completely different conditions.

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Procedure for registering an apartment in installments

Buying an apartment in installments is carried out as usual; there are no special differences from the standard transaction. It involves going through the following steps:

The parties will agree on the basic terms of the upcoming transaction.
A preliminary purchase and sale agreement is signed and an advance payment or deposit is made.
The seller begins to collect the documents necessary to conclude the transaction.
The parties sign the main purchase and sale agreement, which includes additional conditions.
The seller and buyer will re-register property rights through Rosreestr or through the MFC. At the same time, in the application for the alienation of property rights in favor of the buyer, an indication is made of the imposition of an encumbrance on the apartment in favor of the seller.
Submitted documents are verified by Rosreestr within 7 working days (9 days when submitted through the MFC).
On the appointed day, the buyer receives an extract from the Unified State Register of Real Estate, which has replaced the certificate of ownership since 2021. It states the encumbrance on the apartment in the form of collateral. This limits the buyer’s rights to dispose of the apartment: he does not have the right to sell or give it away without the consent of the mortgagee.
After the buyer makes the last payment, the seller contacts Rosreestr to remove the encumbrance from the apartment.

If the buyer stops paying his obligations, the seller will have to go to court.

It is worth noting that judicial practice in such cases has not yet been developed: the courts may oblige the buyer to pay the debt for an unlimited time, which is unfavorable for the seller, or simply issue a decree on a one-time repayment of the debt, which the buyer will not be able to fulfill.

Registration of the contract

Therefore, a very important aspect in such transactions is the competent execution of the apartment purchase and sale agreement, which details the payment procedure. The purchase and sale agreement must comply with the requirements of the Civil Code.

In particular, Art. 454, which indicates that one party, as part of such a transaction, transfers property, and the second is obliged to pay a certain amount for it, agreed upon by the parties. Article 488 stipulates the buyer’s obligation to make payment within the period specified in the installment agreement. If it does not fulfill the specified condition:

then must return the unpaid property;
pay the cost of the property, as well as penalties accrued on the debt.

An agreement for the purchase and sale of an apartment in installments is drawn up according to general rules and must necessarily contain the following points:

parties to the transaction: full names of the seller and buyer, their contacts and passport details;
subject of the transaction: apartment, its area, floor, address, cadastral number;
grounds for disposal of the apartment by the seller (details of title and title documents);
transaction amount: contract price of the apartment;
rights and obligations of the parties.

The features of this document are related to the specifics of the transaction.

The apartment will be held as collateral by the seller until the full amount is paid for it by the buyer with reference to Articles 488 and 489 of the Civil Code.

The agreement must contain a payment schedule, namely:

total cost of the apartment;
the amount of the first payment (down payment) in percentage and numerical terms;
quantity and size of subsequent financial tranches with specific dates,
procedure for making payments;
deadlines for full repayment of debt;
penalties for late payment (for example, 0.3% of the amount due for each day of delay);
procedure for terminating a transaction if payments are not received (for example, going to court with the seller if money is not received for 30 days or more).

In order to protect the seller, it is worth including a clause stating that the seller removes the encumbrance from the apartment and the buyer becomes its full owner only after making the last payment.

If the above rules are observed, the purchase and sale agreement will be registered as a mortgage, which will remove some of the risks from the seller.

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Installment plan on the secondary real estate market

Installment plans in the secondary market are less common, but still exist. Some sellers are ready to give buyers the opportunity to pay the amount in installments. As a rule, such installment plans are issued for the minimum period - up to one year.

Traditionally, the scheme looks like this:

A purchase and sale agreement is concluded;
A loan agreement is concluded, which specifies the missing part of the amount and the repayment schedule;
For the period while the debt has not yet been paid, the notary imposes restrictions on the apartment that do not allow it to be sold, given away or exchanged;
After the installment plan is fully repaid, all encumbrances are removed from the apartment, and the owner can dispose of it at his own discretion.

The best solution is to buy an apartment in installments from the owner with the involvement of a lawyer. Moreover, this is relevant for both the buyer of real estate and the seller.

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How to rent an apartment in installments with maternity capital?

The maternity capital certificate can be spent on improving living conditions. Including the purchase of an apartment in installments. However, the following aspects need to be taken into account:

Construction of the house is carried out in accordance with Federal Law-214;
The transaction is executed under the DDU or by joining the housing cooperative;
At the time of purchasing the apartment, the youngest child in the family was 3 years old.

It is very important to remember here that maternity capital funds will be transferred to the developer within two months. It is worth taking this into account when drawing up a payment schedule, otherwise there may be delays.

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What does installment plan for an apartment mean?

The concept of “installment plan” is similar in meaning to a mortgage loan, but has significant differences. When applying for a mortgage, the property is pledged to the lender, which is the bank. The borrower has the right to use the property until the debt is fully repaid, subject to timely payment of loan installments. If the payment schedule is violated, the lender has the right to sell the property to pay off its costs.

When purchasing an apartment in installments, the registration scheme and the rights of the parties to the agreement are different. The main difference is that the contract is concluded directly between the parties to the transaction, the seller and the buyer. The third party, the bank, is not involved in the agreement; accordingly, the amount of payments when buying an apartment in installments is less than for a mortgage loan. The buyer makes a down payment in the amount of 10-50% of the cost of housing, the remaining amount is paid in stages according to the schedule.

Important nuances of installment payment transactions

We told you about how to arrange an apartment in installments and what are the main advantages of this financial instrument. We propose to reiterate the most important provisions:

Always carefully study the contract you are about to sign;
When buying an apartment from the owner on the secondary market, the participation of a lawyer and a notary is mandatory;
Installment is a more profitable instrument than a mortgage, but payments will be higher and the term will be shorter.

For help and support on all issues related to purchasing an apartment in Sochi in installments, you can always contact specialists!
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Advantages of purchasing housing in installments

To formalize an agreement between the seller and the buyer, much fewer documents are required. The procedure for concluding a contract is simpler.
The price of the apartment specified in the contract is fixed.
Interest rates on a mortgage loan increase the final cost of real estate, sometimes several times.
When buying an apartment in installments, the commission amount is significantly lower. Moreover, some developers and homeowners offer interest-free repayment of the remaining cost.

The procedure for applying for an installment plan for real estate has been simplified as much as possible. To conclude an agreement between the seller and the buyer of an apartment, additional risk insurance, which is used by banks, is not required. There is no need to look for guarantors, pay bail, or pay extra insurance. Usually it is enough to have a passport and money for a down payment. By concluding an agreement to purchase housing in installments, the buyer simply receives the right to pay the residual value of the apartment in installments.