How To Choose A Mortgage Program

2023 Author: Douglas Hoggarth | [email protected]. Last modified: 2023-05-24 11:23

Currently, there are several dozen credit institutions in Moscow that issue mortgage loans (there are more than 180 of them in Russia). How to choose a bank offering optimal lending conditions for home purchases? Let's start with what is available to the consumer even before contacting the bank, because most banks do not spare funds to advertise their mortgage programs.

For the convenience of analysis, mortgage programs can be broken down into the following main components: target market, loan currency, down payment, annual interest rate, loan size, loan term, time for consideration of the application, the amount of additional costs for obtaining a loan.

Target market

The overwhelming majority of banks that issue mortgage loans operate only in the secondary apartment market (it is estimated that about 70% of mortgage programs are provided for clients purchasing ready-made housing). Among the active players offering programs for buyers of new buildings are Sberbank, DeltaCredit Bank, Raiffeisenbank, Vneshtorgbank, Gazprombank, MDM-Bank and some others. However, it should be noted that, according to experts, Sberbank accounts for up to 90% of loans issued in the primary market. At the same time, not all houses are considered for lending in the primary market, but only new buildings approved by the lending bank. Basically, these are buildings already built and handed over to the state commission. If the house is not ready, then the bank reserves the right to check the developer and refuse to issue a loan without explaining the reasons. The unpopularity of the purchase of apartments in new buildings among mortgage lending institutions is mainly due to such factors as the prolonged construction time and the absence of a collateral until the moment of registration of the apartment in ownership.

Loan currency

Most banks offer mortgage loans in US dollars (over 70% of the programs). Some banks (Sberbank, DeltaCredit Bank, Vneshtorgbank, International Moscow Bank, etc.) offer loans in dollars and rubles. Banks Societe Generale Vostok, MDM-Bank, Gazprombank and some others add euros to the rubles and dollars. The Moscow Mortgage Agency and the Agency for Housing Mortgage Lending (AHML) work only with ruble loans.

An initial fee

Basically, they practice the classic, accepted all over the world, an initial payment of 30% of the cost of housing. Some banks (DeltaCredit, City Mortgage Bank, MDM-Bank, Soyuz, etc.) have mortgage programs with a 20% down payment. Sometimes there are offers with a 10% or even 0% down payment (for example, from FORA-bank), but such offers are usually accompanied by higher interest rates (and during the first 18 months they are usually higher than in subsequent maturity period). Practice shows that it is extremely difficult to get a loan exceeding 75-80% of the cost of housing in reality, and in the primary market, the down payment is usually about 40% of the cost of housing.

Annual interest rate

At present, the average base interest rate is 11% in foreign currency and 15% in rubles, which is two to three times higher than similar rates in economically developed countries. Currently, the rate of interest rate reduction in our country has slowed down and, according to the forecasts of the Association of Russian Banks, by 2008 it will amount to 8–8.5%, which is also too much for a civilized market.

The minimum foreign exchange interest rates can now be noted at the VIP-bank and the Pervoe OVK bank. (Rosbank) - 10%, but they do not belong to the leaders of the market in question. Such large mortgage players as Vneshtorgbank, City Mortgage Bank, Raiffeisenbank, DeltaCredit and International Moscow Bank practice interest rates from 10.5% for most of the loans issued. The maximum foreign exchange interest rates (18%) can now be noted at Lokobank, FORA-bank and the European Trust Bank.

Banks DeltaCredit, Raiffeisenbank and Gazprombank also use the so-called floating interest rates LIBOR, which can change depending on fluctuations in the financial indicators of the world market. For this reason, the conclusion of an agreement at such a rate has increased risks for the consumer, since over a long period of lending, they can change both upward and downward in interest rates.

Loan amount

The size of the mortgage loans provided is very diverse. Minimum loans can be $ 2 thousand (DeltaCredit Bank), maximum - $ 400 thousand (City Mortgage Bank and International Moscow Bank) and even $ 500 thousand (National Mortgage Company and First OVK). On average, loans are issued in the amount of $ 10 thousand to $ 200-300 thousand.

Credit term

The terms for which mortgage loans are provided can range from six months to 27 years. The maximum term is quite rare (such programs are available at FORA-Bank, the European Trust Bank and AHML) and is practiced only for ruble loans. In general, the attitude towards such long-term loans in our country is negative, both among banks and among consumers, who are morally not ready to bear the credit burden for so long. Basically, the term is from 10 to 15 years. As a rule, the loan term depends on the age of the borrower, since the loan must be repaid before reaching retirement age.

Application consideration time

Basically, the application review period is 14 days. Credit committees work the fastest in Absolutbank (from 1 day), MDM-Bank (3-5 days), Union (5 days) and European Trust Bank (up to 7 days); the slowest - in the bank First O. V. K. (2-3 weeks) and the International Industrial Bank (1 month).

Additional costs for obtaining a loan

Most often, the additional costs of obtaining a loan amount to up to 1.5% of the loan volume, but for some this may be a more significant amount. Additional costs include: application processing fee (RUB 1–2.6 thousand), cash withdrawal fee, one-time bank commission, loan service fee, cell rental fee, account opening fee, etc.

In addition, the borrower should remember that in order to obtain and maintain a mortgage loan, it is necessary to annually pay bills for insurance of their life and property, make one-time payments for the appraisal of the purchased apartment and pay registration fees for the sale and purchase of the real estate object. Moreover, banks, as a rule, offer to pay for the same insurance not where it is convenient for the borrower, but only in those companies with which the bank cooperates.