Due to the unstable economic situation, the only option to become the owner of your own apartment or house in the near future is to get a mortgage. Should I take a mortgage in 2018, when there is practically no hope of buying a home for my own money, it’s up to the borrower to decide. To make an informed decision, it is necessary to analyze the situation and evaluate all the possible consequences of this step.
Features of the mortgage, its pros and cons
On the one hand, issuing a loan for a long period of time is a rather risky event that requires the most careful attitude. On the other hand, the fall in real estate prices and lower rates by most banks create optimal conditions for positively deciding whether a borrower should take a mortgage. With the help of various measures, a thorough assessment of one’s own solvency, financial stability, one can ensure greater security by reducing the risk of debt formation to the bank to a minimum.
Before you decide on a mortgage, you need to thoroughly examine the issue and find out all the features of this type of lending.
Mortgage is a targeted type of loan, the funds for which are taken exclusively for the purchase of housing.
Mortgage as a loan has its own characteristics:
- Mortgage different large loan amounts.
- Purchased property is issued as a pledge of the lender until the full payment and closing of the credit line.
- Additional registration of collateral for other real estate of the client is allowed.
- Insurance is issued on the collateral during the entire term of the contract.
- The interest rate, due to the lower risk of default, is much lower than other credit programs.
- Duration of repayment can reach 25-30 years, during which the borrower will not be able to fully dispose of the property (while the object is pledged, any transactions with this property are subject to agreement with the bank, which is not interested in losing the object of pledge).
There is no consensus regarding the rationale for attracting loans to buy housing. On the one hand, an apartment in a mortgage or a house is purchased with a percentage overpayment, which over the years of repayment may exceed the principal amount of the loan. On the other hand, for some families, borrowing is almost the only chance to buy their first home. In this case, the mortgage is a blessing, especially since at the current time interest rates are record low, and real estate itself has fallen in price.
The advantages of a mortgage also include:
- Getting the property when the amount of savings to take an apartment is not enough.
- Buying a first home mortgage is an excellent alternative to rental housing.
- Tax legislation allows you to return some of the funds paid to repay the main mortgage debt and interest, subject to the availability of income tax deductions, that is, the borrower can take up to 13% of the funds that the buyer has transferred to the seller.
- Appealing for help to government programs of financial support, including maternity capital, will also allow you to receive compensation for part of the funds paid or use them for the first installment.
The following characteristics are considered to be among the drawbacks of a mortgage loan:
- For 30 years, the amount of overpayment for the purchased housing will repeatedly exceed the amount of the loan. Money could be spent by the client for other purposes.
- For a long period of life, the entire family budget will be subject to the need to make regular payments on the loan, payment of insurance.
- Restriction of the rights of the owner during the period of validity of the contract with the creditor, which will not allow either to exchange, sell, or donate the received housing.
- The rather high requirements for the borrower, his status, solvency, age, are significantly limited by the availability of the service.
For each person, the value of advantages and disadvantages has a different significance. Therefore, only a personal analysis of the situation, taking into account the specific circumstances, will allow you to make the right choice whether to take a mortgage now.
Parameters affecting the decision
Helping to deal with the question will help assess the parameters in two different categories: the current situation in the market and personal financial situation.
Market indicators affecting the justification of the mortgage
The profit of the transaction depends primarily on the percentage overpayment: the higher the percentage, the greater the overpayment, and vice versa. If the percentage is less than 11%, the mortgage is considered to be profitable.
However, it is necessary to assess the market situation more diversely. To increase the rate can have a value for many reasons:
- reducing the inflow of foreign funds due to international sanctions;
- lowering oil export tariffs and ruble depreciation;
- the lack of opportunities to attract investment leads to an increase in lending rates.
The exchange rate, the ratio of the dollar to the ruble, the trends in the currency market affect the refinancing rate, which can lead to changes in interest rates on loans, including housing purpose loans.
Many people remember when in 2014 there was a sharp increase in the dollar rate, mortgage rates rose to 18%. Such overpayment on ruble loans was unprofitable.
If the mortgage rate is low, and the exchange rate is calm, you can plan spending and payments with a greater degree of confidence, and therefore the question of whether it is profitable to take a mortgage in 2018 can be answered positively from the point of view of objective factors.
Personal factors affecting the validity of the loan
Equally important, and in some cases, taking into account the financial situation and the solvency of the borrower will become a priority.
The following criteria should be evaluated:
- monthly income;
- loan amount;
- optimal duration of the contract.
These indicators refer to the main ones used in calculating the monthly payments, as well as the possibility of incurring this financial burden.
In addition to labor income, it is necessary to take into account additional sources of financing (interest on deposits, investments, income from securities). In addition to income, current expenses per month and financial liabilities are estimated.
Before you send a request to the banks, you must be absolutely sure that the payment calculated by the mortgage calculator can be paid regardless of any risks (loss of work, loss of health). It is only possible to sign an agreement with the lender in full confidence that the funds will be returned to the bank in any case.
Analysis of the current situation
After the assessment of payment abilities has been made and work has been done to collect information on the credit market and the real estate market, it’s time to choose the optimal program that takes into account the needs and capabilities of the payer:
- Analysis of information on interest rates.
- Analysis of requirements for borrowers.
- Collection of information on other loan conditions – compulsory insurance, penalties, requirements for registration.
Currently, there is a general decline in interest on mortgages, however, the level of income in recent years has not increased. Therefore, the choice of mortgage should be influenced by the total overpayment, taking into account all factors and requirements of banks.
At the same time, the real estate market is also experiencing a significant drop in prices, due to which the amount required from the bank decreases. Currently, the most favorable external conditions for mortgage registration.
You should also consider the possibility of sending funds from the budget under the state program, which are issued for improving the housing situation of Russian families (for example, a mortgage without a down payment, for large families or young families in need of improvement). In addition to government programs, there are numerous promotional offers from the lenders themselves.
The state aid program may consist not only in the allocation of tranches allocated for purchase, but also the repayment of a part of interest.
In the banking sector, there is a gradual decrease in the mortgage rate, reaching a record 8% per annum, which makes the mortgage attractive to many borrowers. In the near future, a rise in real estate prices and an increase in interest rates are not expected, which allows us to hope that the situation in the market will stabilize. Favorable offer of banks and low housing prices for the borrower mean the creation of favorable conditions for loans.
Tips on how to get a mortgage on the most favorable terms
If the decision of the borrower is in favor of the mortgage, it’s time to make sure that the bank offer meets all the requirements and possibilities.
Acting on a specific algorithm, you can arrange a mortgage with minimal risk and maximum benefit for yourself:
- Working with mortgage calculators will allow you to pre-calculate the allowable financial burden in the form of a mortgage payment, as well as calculate the optimal amount that will be feasible to return to the bank. Also, using a calculator, they select the optimal loan period.
- The presence of additional security as collateral will increase the chances of a positive consideration of the request by the lender. It is necessary to consider how much the interest on the loan will decrease if the client provides additional collateral. This will provide a minimum percentage and minimum total overpayment, which means it will increase the benefits of the future homeowner.
- The study of information about banks, providing the best conditions for rates, the reliability of the organization, the policy in relation to borrowers, any other information that will allow to assess the risks to a potential client.
- Among the programs that are in the portfolios of banks of interest, pay attention to various promotions and special offers (for payroll clients, public sector employees, young families, etc.)
- When choosing between a currency and a ruble loan, in conditions of serious exchange rate fluctuations, it is recommended to take the program in the domestic currency.
If the client faces financial difficulties in the process of paying the debt to the bank, it is recommended to promptly inform the credit organization about the difficulties that have arisen, because now there are many tools that will help to cope with temporary difficulties (restructuring, credit holidays, refinancing, etc.)
After the loan is issued, and the apartment is purchased, it is best to consider ways of early repayment of the loan, which will lead to a reduction in overpayment. With the help of early repayment, you can bring the time when the property will go into full disposal of the client, who can later sell, donate, bequeath housing, without agreeing more on their steps with the bank.