There is a new mortgage record in Russia: in January, domestic financial institutions issued 96 thousand housing loans worth $265 billion, RBC reports, citing data from Dom.RF and the consulting firm Frank RG. For comparison: in January last year, Russians took out 78 thousand loans worth 189 billion rubles.
Currently, mortgage rates are approximately one percent lower than a year ago - 7.85-8.05% per annum, noted head of the analytical Mikhail Goldberg .
In 2021, the average mortgage rate was 10.56%, in 2018 - 9.66%, in 2017 - 11.45%, in 2016 - 12.9%, in 2015 it reached 15% . Citizens who took out a home loan several years ago are now trying to refinance their mortgage or even repay the debt ahead of schedule. According to the Central Bank of the Russian Federation, in the third quarter of last year, compatriots closed housing loans worth 524.8 billion rubles ahead of schedule - a record figure since 2021. In what cases is early loan repayment unprofitable?
When the mortgage is at a low interest rate
As First Deputy General Director of the appraisal and expert company, professor at the National Research University MGSU, Doctor of Economics Kirill Kulakov says , early repayment of a housing loan may not be profitable if the mortgage was issued at a low interest rate. Now mortgage rates in our country are at a historic low; they have never been so low. In a new building, for example, you can buy an apartment on credit at a maximum of 6.5% per annum under the preferential mortgage program. And some developers additionally subsidize the reduction of rates to 2-3% per annum.
“Even now, with low rates on bank deposits and other financial instruments, there are options for investing funds at an interest rate greater than the interest rate on a mortgage loan. But over time, deposit rates may rise, and the mortgage interest rate is usually fixed for the entire term,” explains the expert.
Inaccessible housing. Why do banks refuse mortgages? More details
Cons of a home loan
Despite a number of advantages, there are also disadvantages; a mortgage from Sberbank cannot be called ideal for several reasons:
- Strict requirements for borrowers. The percentage of refusals at the bank is quite high (you will learn about the reasons for the refusal and what to do when receiving it here). The main reasons for rejection of applications are low income (mainly the client’s official earnings are taken into account), bad credit history, and the type of activity of the borrower that is not acceptable to the bank (for example, individual entrepreneur).
- Lack of transparency in the information provided. Advertising slogans about low rates often hide unaccounted for additional payments that are included in the cost of the loan. For example, insurance.
- Imposing insurance. When applying for a mortgage, the client is not required to insure life and health. However, persistent employees often persuade you to insure yourself under the pretext of a possible refusal to issue funds. This, in turn, increases the loan amount.
- The application review and registration process may take a long time. If the maximum review period of 5 days is indicated on the Sberbank website, this does not mean at all that it will be observed. Depending on the workload of employees and the information provided by the client in the questionnaire, the period may extend to several weeks. More information about the application review period can be found here.
When you take out another loan to pay off your mortgage
For non-payment of the loan, the bank has the right to take away the collateral, that is, the apartment, from the mortgagee. This is one of the most common fears of debtors. Some of them, fearing that they will not be able to service the mortgage, take out a consumer loan, with the help of which they pay off their housing debt and, on the one hand, calm down, but on the other hand, they take on a much larger debt load: the interest on consumer loans is significantly higher than on housing, and it’s much easier to fall behind on them. And the overpayment in this case turns out to be impressive.
Experts say it’s more profitable to take out a mortgage or save for housing
On average in Russia, a mortgage will allow you to take ownership of a two-room apartment 4 years and 1 month earlier than renting, but you will have to overpay 353,704 rubles for this.
As company experts explained to Rossiyskaya Gazeta, in order to calculate what was more profitable, the following situation was taken as a basis: two people work in a family, the income of each of them corresponds to the average salary in the region (according to Rosstat). The family is ready to allocate half of their total income (that is, one average salary per month) to pay the mortgage. The down payment on the mortgage is 20% of the cost of the apartment (under the terms of the “family mortgage”). The interest rate for a “family mortgage” is 6%. The family is also ready to allocate half of their total income (one average salary per month) in order to save money to buy an apartment and the current rental of a two-room apartment.
It turns out that on average across the country it will take 5 years and 3 months to pay off a mortgage, whereas if you rent a home, you will only be able to save up for an apartment in nine years and four months.
Of the 78 regions that took part in the study, mortgages in Crimea turned out to be the most profitable in terms of time. Despite the overpayment of 1,243,637 rubles (which is more than a third of the cost of a “kopeck piece” on the secondary market), you can obtain ownership of it in 12 years and 8 months. That is, 25 years and 5 months faster than renting a home and saving money.
Second place goes to the Chechen Republic. Having overpaid 16.6% of the market value of the two-room apartment, the family here has the opportunity to become owners 13 years and 8 months earlier than if they had rented a home and saved money to buy it. Moscow takes third place. The time advantage of a mortgage compared to a lease is 12 years and 11 months. You will have to overpay for speed in the capital 3,668,995 rubles, that is, more than 36% of the market value of the capital’s two-room apartment.
The top ten is closed by North Ossetia, where the mortgage advantage is 7 years and 1 month. If you have to rent and save in this region for 13 years and 7 months, then by overpaying 316,854 mortgage rubles you will be able to acquire a 2-room property in 6 years and 5 months.
The smallest time gain is provided by a mortgage in the Magadan region. Having overpaid 107,925 rubles, here the family will be able to become owners only 9 months earlier than if they rented housing and saved money. It will take 2 years and 7 months to collect the required amount while living in a rented apartment, while you can pay off the loan with the bank in 1 year and 10 months. The second place from the bottom is in the Murmansk region. Here the time difference in favor of a mortgage is 11 months, and the overpayment for those who choose a mortgage loan is 101,273 rubles. The Kemerovo region takes third place: the time gain for mortgage holders compared to tenants is 1 year and 7 months. For speed, the family will overpay 128,070 rubles, or 8.4% of the market value of a two-room apartment.
In the Kamchatka Territory, Arkhangelsk and Chelyabinsk regions, a mortgage will allow you to get your own “kopeck piece” faster by 1 year and 11 months than renting and savings. The family from the Kamchatka Territory will have to overpay the most (210,315 rubles), while residents of Arkhangelsk and Chelyabinsk will pay an additional 160,970 rubles and 150,985 rubles, respectively.
When there is no financial cushion left
The coronavirus pandemic and related restrictions have shown us how important it is to have savings. In March last year, the Scientific and Technical Institute found that more than 60% of Russians have no savings at all.
Now compatriots are determined to save money, and a lot of it: every fifth Russian would like to save an amount from 20 to 50 million rubles before retirement, according to the results of a survey of the non-state pension fund (NPF) of Sberbank and Rambler. With this money, citizens are going to travel, eat well and receive quality medical care. 22% of compatriots expect to save 5-10 million rubles so as not to skimp on basic needs. 18% of respondents named the amount at 750 (!) million rubles, and 14% - 74.5 million.
Article on the topic
The rich pay too. Which of the stars bought a home with a mortgage? Having savings for old age or for a rainy day is, of course, right. It is wrong to spend them all at once, even on such an important matter as early repayment of the mortgage. Trying to get rid of the credit burden at the expense of all available savings, the borrower is left without an insurance amount in case of unforeseen circumstances. And this is fraught with additional costs. For example, you will need money for treatment, and you will have to take out a loan, the rate of which will be higher than the interest rate on the mortgage.
What does the term of a mortgage loan affect?
Everyone knows the three main criteria for lending - repayment, payment and urgency . Any provision of borrowed funds must satisfy these three criteria, otherwise this action will no longer be recognized as a loan.
Without repayment, the provision of funds will be considered a gift, without payment - by installments, and without urgency - generally nonsense. The term of use of borrowed funds is the main feature of lending.
Mortgages are characterized by fairly long periods of using money . Usually it is 10, 15, 20 years, sometimes more. The maximum mortgage term is 30 years.
The mortgage term is always fixed in the loan agreement by mutual agreement of the parties. Moreover, each borrower has the legal right to repay the mortgage loan early if his financial condition improves. The bank cannot prevent this, nor can it charge additional fees or interest for this.
Banks often stipulate such sanctions in mortgage agreements, deliberately forgetting to notify the other party to the transaction about this. Therefore, you need to carefully read the text of the agreement to check for such nuances that are unfavorable for the borrower.
Why do you need to think about the term when you take out a mortgage? It is important to determine the deadline at the stage of registration of the transaction, because the conditions for further cooperation with the bank will depend on this factor.
The timing can directly influence the following factors:
- Risks associated with delay . During the very long period of validity of the mortgage agreement, anything can happen to the borrower. At best, he may find himself in a financial crisis or lose his job; at worst, he may get sick or even die. In such a situation, there are real risks of loss of real estate for the payer. Therefore, you should not take on very long-term obligations, or if it is impossible to choose another scenario, be sure to insure your life and health.
- Early repayment . When the borrower makes partial early repayments of the mortgage loan, the remaining amount of the debt is recalculated. As a result of such manipulations, even on a very long mortgage, the overpayment can be significantly reduced.
- Overpayment . The longer the period of use of borrowed funds, the higher the overpayment. This must be taken into account when signing a long-term mortgage agreement.
Whether to take out a long-term mortgage or not is a personal matter for everyone . It all depends on the priorities and current needs of the borrower. A long-term mortgage is fraught with large overpayments, but it allows you to reliably service an existing loan even with a small income.
When the mortgage is almost paid off
Early repayment is unprofitable in the last years of the loan, says Irina Zhigina, an expert at the Russian Ministry of Finance Project on Financial Literacy . Most often, mortgage holders receive an annuity loan, in which mostly interest is paid in the first years. Each year as part of the payment, the amount of interest decreases and the principal debt increases. Therefore, if you make early repayments in the first years, there will be a recalculation of interest and a reduction in overpayments on them. If you make an early repayment at the end of the loan term, there will be no savings, since the principal debt is being paid off, the expert explains.
Underwater rocks
Sberbank's mortgage lending conditions seem attractive at first glance. However, in the process of completing a transaction, the client may encounter unforeseen difficulties that he did not even suspect when contacting the bank.
Difficulties in registration
During the transaction procedure, you need to be prepared for additional costs:
- payment for appraiser services;
- opening a safe deposit box and account;
- accompaniment of a realtor or lawyer;
- payment of insurance premium;
- National tax.
The amount prepared to pay the down payment may not be enough due to the fact that the property valuation turns out to be too high. It is advisable to accumulate initial capital in excess of the planned amount.
When looking for an apartment, the seller may require documentary evidence that you have been approved for a loan. Sberbank is not willing to issue such certificates, and may even refuse.
The assessment of the selected object is carried out only by an accredited Sberbank company. The lending conditions state that the client can choose a third-party organization if it meets his requirements.
However, it’s not worth the risk, since by paying for the services of an unaccredited specialist, you risk throwing money away - the bank may not accept the appraiser’s document, citing irregularities in his work or other reasons.
Unpleasant surprises of the contract
It is recommended that you read it carefully before signing the agreement. Better yet, have it analyzed by a lawyer. However, for each client Sberbank prepares a standard agreement, a sample of which can be found on the official website. Therefore, you can find out all its nuances long before contacting the bank.
What to pay attention to:
- Penalty for late payment and penalties. The amount of the penalty depends on the Central Bank refinancing rate. When a large debt is formed, a fairly large amount may be added to the principal debt. It is better to know in advance what will happen if you do not make the payment on time.
- Condition for termination of the agreement by the bank. The document clearly states the situations in which Sberbank has the right to demand cancellation of the agreement and early repayment of the loan: systematic delays, use of housing for other purposes, when the lender refuses to inspect the property, when the insurance contract is terminated, etc.
- Use of real estate. Particular attention should be paid to the point regarding the rights and obligations of the borrower. Since the apartment is encumbered by the bank during the term of the contract, the borrower does not have the right to perform certain legal actions without the consent of the lender. For example, selling housing, renting out, remodeling, registering other persons. You can find out how to remove the encumbrance after paying off the debt here.
We talked in more detail about the Sberbank loan agreement in this article.
When planning to take out a mortgage, you should weigh the pros and cons several times, and also carefully read the documents on the loan product that are in the public domain. To avoid risks, you should consider in advance possible options for minimizing them.
How to inspect the rooms?
Before purchasing residential property, you need to carefully examine the area in which it is located. Public transport stops, shops, schools, clinics and playgrounds should be within walking distance from a multi-storey building. Find out if there is a landfill, industrial enterprises, power plants or other dangerous objects near your home.
Take a closer look at the local contingent. Avoid buying homes in crime-prone areas. Assess the landscaping and cleanliness of the yards, pay attention to the location of garbage containers. Write down important details in a notebook and take video footage of the area. The collected information must be compared with the proposals of other developers. Carefully inspect the entrances of the building. The abundance of syringes, condoms, beer bottles and cigarette butts on the staircases does not mean anything good.
Study the data specified in the certificate of ownership (footage, series of the house, size of usable area, etc.). Compare this information with the parameters of the real room. Redevelopment of rooms must be legalized. If the owners made illegal manipulations with the main walls, then the new owners will have to be responsible for the “repairs”. They will be forced to return the structure to its original state (otherwise the property will be forcibly sold). This mortgage pitfall can result in loss of property and significant financial costs.
Carefully inspect the rooms for cracks, unevenness, mold and signs of insect activity. Make sure plumbing, electrical wiring, radiators and pipes are in working order. Assess the level of sound insulation and check the ventilation openings.
Observe how the seller behaves during the inspection. If he is nervous, then you need to increase your vigilance and inspect the interior more carefully. The identified shortcomings will help reduce the cost per square meter by 10-15%.
Boundaries of the borrower's rights regarding the collateral apartment
Every future borrower should learn to distinguish between reasonable and legal restrictions on property rights in housing with encumbrances and cunning bank tricks. For example, some restrictions are really necessary, such as:
- rental of mortgaged housing;
- uncoordinated redevelopment;
- ban on the sale of collateral.
But such conditions as a ban on early repayment of a loan, the bank’s permission to unilaterally change the amount of established interest contradict the existing legislative framework of the Russian Federation. And they need to be challenged in court, based on the law “Protection of Consumer Rights”.
Consideration of application and selection of apartment
The procedure for processing documents takes from 5 to 10 working days. During this period, your documents are reviewed by the bank's security service. Therefore, we recommend that you provide only reliable information.
Bank employees can call the company and ask whether you really work there and find out the actual amount of your salary. In addition, the borrower will be identified using a common database. This is an interbank structure where persistent defaulters are displayed. If you are considered unreliable, the loan will be denied without giving reasons. In this case, the information will be entered into the credit history database.
If no contradictions are found, the bank will give you the required amount. But you won’t receive it in your hands; the funds will be placed in depository storage, and the borrower is given 120 days to choose a suitable home for purchase. If, after the specified period, it is not possible to find a suitable apartment, the procedure for obtaining a mortgage is repeated.
Please note that Sberbank will not approve any housing. The apartment must meet certain conditions. Dilapidated and dilapidated housing, real estate intended for demolition, and wooden buildings are not considered.
The procedure for obtaining a mortgage also implies the removal of encumbrances, that is, the selected living space should not be pledged or seized by a court decision.
Possible currency risks
The borrower may also encounter problems such as:
- depreciation of the ruble;
- exchange rate fluctuations;
- falling real estate prices.
Considering that mortgage loans stretch over decades, the risk of encountering such phenomena is quite high. For a mortgage client, this leads to a monthly increase in the amount of payments and a multiple excess of the loan amount over the cost of the mortgage home.
Experts do not recommend taking out long-term mortgage loans in foreign currency, strongly advising you to take out a loan only in ruble equivalent.
There is no need to be deluded by lucrative offers and low annual rates when taking out a mortgage in foreign currency. You need to be prepared that in this case the banking structure will definitely change these conditions in the direction of increasing interest rates even with minor fluctuations in the foreign exchange market, and this happens all the time in our country. It is especially worth avoiding loans with a “floating rate”, in which the borrower will not even know what bill the banking organization will issue him next month .
Experts do not advise taking out a mortgage in foreign currency, but only using conventional lending offers
Risks of loss of property
The owner of the mortgage is obliged to notify Sberbank in writing of any damage to the collateral property. In addition, the timing and types of repairs are agreed upon. If the object is completely lost, the borrower is obliged to provide new collateral for the loan within a month, or repay the debt ahead of schedule.
The contract should check:
- for what violations the contract is terminated;
- how the issue of seizure of collateral property is resolved;
- in which court is the resolution of controversial issues provided?
Often, despite federal laws, a bank may state in documents that it has the right to seize property before a court decision if the terms of the contract are violated. In this case, bankers can take the collateral through bailiffs, bypassing the court.
The location of the court provided for the resolution of legal disputes is also important. The requirement to consider cases under the agreement in the court at the place of registration of the bank has no basis.
Additional expenses
Don't forget about the additional costs that accompany any mortgage transaction. You will have to pay a state fee for paperwork. Sberbank offers borrowers to use the electronic registration option. In this case, the bank can reduce the loan rate by 0.1% per annum.
Any document certified by a notary is an additional expense that should be taken into account. To avoid getting into an awkward position, you should first find out the full scope of expenses before getting approval for a mortgage from Sberbank.
The pitfalls of credit transactions can be so significant that they can change the borrower’s opinion about the need to take out a mortgage.
