Not all people have the opportunity to buy an apartment. Everyone wants to become the owners of a house or a flat but this may not be possible for the average resident of a large city. Financial conditions often do not correspond to what is desired, and only a few people can buy an apartment immediately.
In order not to wait and save money for several decades, you can apply for a mortgage. People with insufficient income can request home mortgage, so this is a fairly convenient option.
What is a mortgage?
In simple words, a mortgage is a loan secured by real estate.
A mortgage differs from other loans:
- A bank can provide about 80% of the apartment cost. That is, you need a down payment;
- You do not get money right in your hand. The funds are transferred to the seller of the apartment by bank transfer. This protects the bank from misuse of money by the borrower, for example, to buy a car or for other needs;
- On average, such a loan is issued for 15-20 years. At the same time, you have to pay for it every month;
- The bank keeps an apartment on bail so that in case of non-payment it becomes the property of the bank.
Pros and cons of a mortgage loan
Before you go to the bank and request a mortgage, you should consider its pros and cons.
- Own housing — you have a place to live. You won’t have to live with relatives or wait for an apartment to be presented as a gift. Personal savings are collected for too long, renting an apartment makes you eventually overpay;
- Partial savings – compared to renting someone else’s housing, you will not end up with nothing. In addition, you can save using subsidies, maternity capital, and benefits provided by banks;
- Timeliness – while you are collecting the money for the apartment, its cost may increase twice;
- Real estate investment – investing in apartments is the most profitable type of investment. Housing can always be rented or sold. It also saves money that could be spent on renting someone else’s housing;
- Insurance – the bank insures cases of borrower disability;
- Registration – you can immediately register in the new apartment.
- Cost – due to the high cost and the crisis, less than 10% of the population can afford a mortgage. In such cases, the bank may extend the payment term to 50 years;
- Overpayments can reach up to 100%. These are loan payments, compulsory insurance and notary fees;
- The complexity of registration – a number of requirements for a borrower: the availability of proof of income, availability of registration, provision of guarantors for the loan. The whole procedure for collecting documents takes a lot of time and effort;
- Long term – a mortgage is issued as a long-term loan for up to 30-50 years. In this case, you will have to tie a belt for a long time since loan amounts must be paid monthly. Sometimes it stretches for a lifetime;
- The risk of housing loss – you must make a monthly payment on time. If this does not happen, the bank may take away an apartment. Anything can happen during a mortgage term: the death of relatives, illness, crisis. Therefore, you need to clearly calculate all the possibilities before applying for a mortgage.
Mortgage: yes or no?
When it comes to such long-term loans, you need to calculate all the risks. Firstly, the amount of regular payments should not exceed 40% of your monthly income. Second, be sure to think over the plan B in case of loss of income source.
You should also insure yourself against the risk of losing your job.
Everyone decides for himself whether it is worth taking a mortgage. Today there are many banks and insurance plans with different programs and conditions that will help facilitate the loan repayment process.
Make sure you are choosing the optimal and most favorable mortgage terms, based on your capabilities and wishes!