Mortgage is a banking service that provides for the issuance of funds to improve housing conditions. For many citizens, a mortgage becomes the only opportunity to purchase their own home. Until the debt to the bank is paid, the apartment will act as collateral. Refunds are given up to 30 years. A lot can change over this long period. Perhaps the citizen will no longer want to live in the purchased housing, but will prefer to rent it out. Many borrowers have a question about whether it is possible to rent out an apartment that has been taken out on a mortgage.
Legislative norms
Registration of a mortgage is regulated at the legislative level. The regulatory framework, namely the Law “On Mortgage,” states that real estate within the framework of mortgage lending is the property of the borrower. Consequently, a citizen has every right to dispose of the object at his own discretion.
The borrower can:
- Live on the territory of the purchased property.
- Receive income from operations with the pledged property.
Important! Renting mortgaged real estate will not be considered a violation of current legislation.
The Civil Code states that the disposal of property should not infringe on the rights and interests of third parties. In this situation, the role of a third party is the financial organization that previously issued a loan for the purchase of the designated apartment.
There is no direct ban on renting out mortgaged real estate in the laws. In this case, it is necessary to coordinate your intention with the bank that holds the apartment as collateral.
The agreement may specify how the property is allowed to be used:
- The document may not indicate that the bank imposes any restrictions on the use of the property.
- The financial institution allows housing to be rented out, but a number of requirements must be met. As a rule, one of the main conditions is the writing of a written agreement.
- The mortgage agreement clearly states the prohibition of renting out the mortgaged apartment. Ignoring such a rule may lead to a conflict situation with the creditor.
In most cases, banks use the wording from the second paragraph. Renting is permitted with written permission from the bank.
Mortgage apartment: what rights and restrictions does the owner have?
Real estate purchased with a mortgage is pledged to the bank. It sets out certain rules and restrictions that borrowers must comply with.
Is it possible to sell an apartment with a mortgage? Do I need to ask permission from the bank to rent out square meters? Let's figure out what actions need to be agreed upon, and what can be done without the consent of the lender.
Owner's rights
Until the debt is fully repaid, the relationship between the borrower and the lender is regulated by the loan agreement. The agreement fixes the borrower's right to use, own and dispose of residential premises, but with some restrictions.
Registration
When applying for a mortgage loan, many people ask whether it is possible to register a relative in a mortgaged apartment? By law, the owner has the right to register all family members in his living space. In fact, the bank can establish certain restrictions, for example, add a clause to the agreement requiring preliminary approval of all registration actions.
That is, you can register a child in a mortgaged apartment without the bank’s consent, but to register a cousin or great-nephew, you will need to notify the mortgagee. Thus, Alfa-Bank’s mortgage agreements clearly stipulate the procedure for registering real estate owners, members of their families, as well as third parties.
Rental
Since the borrower is responsible for the safety of the collateral property to the lending bank, the latter must know who lives in the apartment. The right of use allows the owner to live in it himself or move in acquaintances and friends. The question arises: is it possible to rent out an apartment with a mortgage?
It is not prohibited to rent out mortgaged property under a rental agreement, but in some cases you need to discuss this with the bank. Sometimes mortgage agreements state that the owner can transfer the pledged property for use to other persons only with the consent of the lender. Failure to comply with this rule is fraught with penalties: the bank may demand early repayment of the entire debt.
Before you rent out a mortgaged apartment, make sure that the agreement does not prohibit the transfer of the premises for temporary use to third parties.
Repair and redevelopment
You can renovate a mortgaged apartment without the bank’s consent, but remodeling it is not. That is, you have the right to change the floor screed, make a multi-level ceiling from plasterboard or tile the walls without any approval. But if you want to combine the living room with the kitchen, you will have to negotiate with the bank. Redevelopment affects the technical characteristics of real estate, can change its functional purpose and affect the cost.
Coordination of redevelopment takes place in three stages:
- Project preparation, approval of documents by regulatory authorities.
- Obtaining permission from the insurance company.
- Obtaining the consent of the creditor bank.
Inheritance
According to Article 37 of the Federal Law “On Mortgage,” the owner has the right to bequeath real estate to anyone. In this case, there is no need to obtain the consent of the bank - it should not know in whose favor the will was drawn up. Along with the apartment, all obligations under the mortgage agreement are transferred to the heirs, including those that were performed improperly.
Is it possible to sell a mortgaged apartment?
Yes, you have the right to sell the mortgaged property at any time. According to Article 346 of the Civil Code of the Russian Federation, this is permissible: you only need to obtain permission from the bank to conduct a transaction. Before you start looking for buyers, you need to resolve all issues with the lender: in the bank office or online.
There are several schemes by which you can sell an apartment with a mortgage:
- Sale with full repayment of debt during the transaction. In this case, the participation of the bank is required - it acts as the recipient of the deposit. The option is the safest for both parties, since the transfer of money occurs through safe deposit boxes.
- Early closure of a mortgage loan. For example, the borrower finds a buyer, takes a deposit from him and covers the rest of the debt with him. After the encumbrance is removed, the owner sells the property to the buyer.
- Selling property along with mortgage debt. Along with the property, the buyer receives the obligations of the mortgage debt.
In some cases, the bank puts the apartment up for sale. This most often occurs when the borrower is unable to repay the loan and accumulates debt.
Transfer to non-residential premises
The status of the property cannot be changed until the debt is fully repaid. This is due to the fact that the premises were purchased for residential purposes and not for commercial use. Loan conditions for the purchase of commercial properties differ from residential real estate - for non-residential properties the interest rate is higher.
How to obtain bank consent
You can resolve mortgage-related issues at a bank branch or online. Alfa-Bank offers borrowers comfortable service conditions: you can find out any information through your personal online banking account or mobile application, by calling +7 (495) 785-5-785 for Moscow, 8 for regions of Russia, as well as by email mail(mailto: [email protected] ).
Purpose of renting a mortgaged apartment
First of all, renting out real estate is an additional source of income. Some citizens purposefully take out an apartment on a mortgage for its further rental. This method makes it possible to own property without investing your own funds. Sometimes the cost of rent completely covers the monthly payment.
Here's who benefits from renting mortgaged real estate:
- Persons who purchased an apartment to make a profit or conduct business in it.
- Citizens who have invested money in real estate. For example, we bought an apartment for children who have not yet grown up.
Is it profitable to rent out mortgaged real estate?
Renting out real estate is beneficial for those who have their own living space. Rental income is a source of regular income. It is convenient to use the received payments to pay off the mortgage. This will avoid significant expenses from the family budget.
Rental transactions with mortgaged property are often practiced by people who bought apartments for children. Until the child reaches adulthood, or the moment the child moves in, the apartment will generate income.
Based on the rental rate, the proceeds will compensate for part of the monthly payments to the bank, or will completely cover them. Real estate purchased with a mortgage will pay for itself in 10-12 years. In large cities, this is facilitated by the high demand for rented apartments, in small cities - by the low initial cost of square meters.
What to do if the bank refuses to rent out a mortgaged apartment
Some banks allow the rental of an apartment with a mortgage; this is even stated in the agreement. In this situation, the borrower should not have any difficulties.
However, sometimes the contract contains a ban on surrender. You should not neglect the creditor’s requirements so as not to create a conflict situation. It is better to use one of the suggested methods:
- It is recommended to file a petition to change the terms of the contract. The main motive should be the fact that without renting out real estate you will not be able to fulfill your debt obligations in a timely manner. Most lenders are cooperative and allow the apartment to be rented out; this helps them minimize their own risks.
- Renting out an apartment without drawing up a lease agreement. This is an illegal activity. In addition, the borrower undertakes a number of obligations to restore the property if damage occurs during the delivery period.
What real estate can act as collateral?
Anyone who wants to take out a mortgage against property must first assess whether their property is suitable for such purposes. Before providing such lending services, banks carefully consider each specific case. Their main requirement is the absence of encumbrances and obligations on the apartment offered as collateral, which could act as an obstacle to possible collection. Russian banks are reluctant to enter into agreements in the presence of property, the rights to which have been inherited or as a result of a gift.
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The bank's requirements for potential collateral do not end there. These also include the following:
- The location of the property must coincide with the location of the bank branch where the mortgage agreement is drawn up. The owner himself must live and work near his home.
- The condition of the house should be satisfactory, with little wear and tear.
- Real estate must be liquid, that is, the bank assesses whether it can sell it at the right time quickly and profitably. Housing that is being prepared for demolition, reconstruction or major repairs is not considered.
- Persons registered in the apartment should not belong to a number of categories (such as military personnel, disabled people, prisoners). Their number should not be more than five. Moreover, everyone will be asked to certify their consent to the transaction with a personal signature.
What difficulties may arise when renting out an apartment without the consent of the lender?
If the borrower nevertheless decides to ignore the lender’s requirements and rent out the apartment on illegal grounds, you should think about the consequences of such actions. If the bank discovers such a fact, the violator faces punishment:
- Imposition of large fines.
- Immediate cancellation of the mortgage agreement, after which the property becomes the property of the bank.
The likelihood of such risks occurring is not very high. The owner and the borrower are one person, so he can freely dispose of his own property.
It should be noted that the rental of an apartment must be registered as an individual entrepreneurship. When government agencies do not have such information, it is quite problematic to prove the fact of delivery.
A citizen who rents real estate bears minimal risks. The most unpleasant thing that can happen to him if a dispute arises between the bank and the borrower is eviction from the occupied living space. However, such force majeure can happen to any apartment that is rented.
Important! The guarantor for the tenant can be an agreement. After signing it, the person is given 30 days to vacate the apartment and find a new place of residence.
From a legal point of view
Despite the fact that the law does not prohibit renting real estate, difficulties may arise with the bank. By independently concluding an agreement with the tenant, the borrower acts on his own behalf, without coordinating this act with the lender. Further problems with payments and the need for a forced sale of housing may lead to the creation of a situation where a rented apartment is put up for sale, and tenants live in it on the basis of a lease agreement that will be valid for several more months.
Sometimes borrowers entered into long-term rental agreements for several years, and the bank could not dispose of the property due to the validity of the lease agreement even after the apartment became the property of the institution. To avoid such risks, a clause has appeared in loan agreements that prohibits the use of collateral housing.
