How to buy an apartment with or without a mortgage

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How to buy an apartment with or without a mortgage

It is not easy to buy an apartment, unless, of course, you are an Arsenal football player. At least Tula. But there are always options: save up, take out a mortgage, or use additional opportunities if they rely on you, for example, subsidies or maternity capital. Consider how to use the possibilities of your budget to buy a home and what to do if you decide on a mortgage.

Save or take out a mortgage?

Which is more profitable – to open a special account, save money and receive interest, or take a mortgage and pay interest to the bank? To answer this question, you need to evaluate all the factors: do you have a down payment and what, do you have a place to live, do you pay rent now, do you agree to invest in construction or are you considering only finished housing.

Let’s say it takes your family 12 years to set aside enough money to buy an apartment. If you decide to save, try to make the savings work for you – overtake inflation and generate income. Accumulating a large amount of money  is also a certain technology.

Pluses of accumulation: you do not overpay interest, but, on the contrary, receive it and do not become a bank debtor for many years.

Cons of savings: a very long time to wait, and with economic shocks (for example, surges in inflation or rising property prices), your savings may depreciate.

Suppose another thing: you need to save up for an apartment for 12 years, but three years will be enough for you to save for a down payment and take a mortgage. Perhaps nine years of living in a new apartment is worth the loan overpayment.

Pros of a mortgage: you fix the price of the apartment and the cost of it for many years to come. Rising real estate prices will not affect you, and inflation will not reduce the savings that you have already made.

Cons of a mortgage: a significant overpayment to the bank and “life on loan” for several years. In case of unforeseen difficulties, you have the right to take a vacation and suspend payments for up to six months. But if during this time your financial situation does not improve and you never manage to return to the original payment schedule, you can lose your mortgage apartment. There is also a possibility that real estate prices will collapse and the amount of the loan with interest will become inadequate to the value of the apartment.

How to buy a house without a mortgage?

Many developers offer interest-free installments for several months or even years. But installments are suitable for people who have large monthly incomes and who are confident in the future. This option is fraught with pitfalls: the price of apartments when buying in installments is often higher than with 100% payment, and you will receive ownership only after all payments are completed.

There are also subsidies for the purchase of housing and the maternity capital program, in the regions these amounts can be a significant help when buying an apartment.

Subsidies

Check to see if you are on the list of those eligible for housing subsidies. General information about this can be found on  the Public Services Portal  in the section “Granting subsidies for paying for housing and utilities”. But there are no uniform conditions for the country, it is better to look for information about regional programs on the website of the local administration. The amounts that the state issues are on average 40%, but can reach up to 100% of the average cost of housing – this also depends on the regions and specific situations.

Maternal capital

Maternal (family) capital is one of the types of state support for families with children. In some regions, maternity capital is able to cover the full cost of housing, but most often it comes in conjunction with a mortgage, and this is quite a down payment.

Where to start if you decide to buy an apartment in a mortgage?

The main thing is to sensibly assess your strengths and make sure that loan payments do not exceed 30% of your income. Remember that a mortgage apartment is a long-term investment: it is possible to sell a property with an encumbrance, but it is not easy to do so. If the decision on the loan has already been made, you need to:

1) Choose a bank and a suitable mortgage offer

Carefully study the offers of different banks, pay attention to the size of the down payment, the age of the borrower, the ability to attract a co-borrower , interest rates. Check to see if you qualify for one of the special programs  – there are state-supported mortgages for families with children, military mortgages, the “young family” program, and even options for pensioners. Study the mortgage offers of the bank where you receive your salary – perhaps there you will find more favorable conditions and a simplified procedure for processing documents.

In some cases, it is better to decide on an apartment first, and only then with a bank. For example, if you want to live in a specific new building, find out which banks offer mortgages for it, and choose from them.

2) Collect a package of documents and submit an application to the bank

Requirements for age, length of service, income and package of documents may change – as a rule, the rate also depends on them. The more reliable a client you are, the more official confirmations of your solvency you can provide, the lower the rate will be for you. Some banks are ready to issue a mortgage on two documents, but in such cases, a large down payment is usually required, for example 50%, and the rate will be quite high.

3) Choose an apartment

After the approval of the bank, you can safely look for an apartment, you usually have 90, and sometimes up to 180 days for this, depending on the conditions of the bank.

What to look for when buying an apartment?

The main question to ask yourself at the very beginning is a new building or a resale? Everyone has different arguments for choosing: someone does not want to live in an apartment “with history”, and someone is not ready to endure the endless repair work of neighbors after moving into a new building. Estimate how much it costs to finish an apartment – sometimes it’s more profitable to take it with it, and sometimes without it.

Everyone selects the infrastructure depending on their needs: for someone, a school within walking distance is relevant, for someone – a shopping center. It is also worth paying close attention to the type of house, layout, neighbors.

Choosing the right area means saving time and often money. See if there are harmful enterprises and noisy roads nearby. If you’re driving, try driving to your house at the time you get home from work and looking for a parking spot.

If you are buying an apartment in a new building

You need to check the two main documents of the new building – the building permit and the project declaration, they must be on the developer’s website. If the facility is accredited by a reliable bank, this gives you certain guarantees. Roughly speaking, the bank has already bought the apartment from the developer, and you are buying it from the bank. Examine the contract that you sign with the developer – his warranty obligations should be listed there. For example, if your apartment has defective windows or non-working batteries, the developer must replace or repair them within a certain period of time.

If you are buying a second home

Before approving a loan for a specific resale property, the bank conducts a check – the owner of the apartment will have to prepare a number of documents and provide them to your mortgage manager. But before you send the apartment you want to buy to the bank for consideration, try to figure out the basic details yourself.

  1. Check the seller’s documents and ownership. If the owner inherited an apartment and immediately sells it, there is a risk that another heir will appear who did not get a share. By law, he has the right to challenge the deal. If the owner is alone and bought an apartment several years ago, find out if he was married at the time of purchase – by law, spouses have equal rights to real estate, and this can also be a reason to challenge the transaction.
  2. There are various options with encumbrance, restriction of the owner’s rights in favor of a third party – make sure that this is not indicated in the documents, consult a lawyer if possible. For example, if there is a minor among the owners, then such an apartment can only be sold with the permission of the guardianship authorities, and this is not the easiest and fastest procedure.
  3. To find out who owned the apartment, who owns it now and how the ownership was transferred, order an extract from the Unified State Register of Real Estate. This can be done in one of the multifunctional centers for the provision of state and municipal services (MFC). The form can be downloaded in advance on the Rosreestr website . In some banks, mortgage managers order it on their own.
    The ideal scenario for buying an apartment: one adult owner, ownership for more than three years and a clear history of the object.
  4. The bank may not approve an object with illegal redevelopment. Compare the condition of the apartment and the plan from the BTI – the owner of the apartment must have it. If, according to the BTI plan, the apartment should be a two-room apartment with a storage room, but in reality it is a one-room apartment without walls, then you have an illegal redevelopment.
  5. If there are fears and doubts about the apartment, you can order an additional analysis of the object’s documents – lawyers at real estate agencies usually provide such services. But even such a check cannot be a 100% guarantee that legal incidents will not arise with the apartment – an heir or a possible applicant for the apartment (for example, who did not participate in privatization) will not appear. Therefore, it makes sense to insure your property rights – to issue a so-called title insurance policy . If the transaction is subsequently declared invalid, this insurance will protect you from losses.

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