How to Mortgage a House and Get Money in 2022

Loan programs secured by a house in 2022 are quite common and are available in almost every bank. Their essence is that the credit institution issues money to the client, and accepts his property as collateral until he fully repays the debt. At the same time, you can live in the house, but it is impossible to sell or exchange it until the bank removes the burden. We tell you how to mortgage a house and stage a deal step by step – from the nuances of the procedure to receiving money. 

Key points about mortgaging a home 

Mortgage home requirements

Each bank has its own requirements for collateral. Some are ready to accept only apartments. Others consider shares in residential real estate, dorm rooms, houses, townhouses, sometimes even summer cottages and garages. Requirements for the object will depend on its type.  

House

Most often, banks require that construction work be fully completed, and the building is ready for living. Sometimes construction in progress can be approved as collateral if communications have already been carried out in it and there is a project. In this case, the presence of gas is not necessary. The building itself must be documented as a residential building. Again, some banks are willing to consider a “residential building without the right to register residence.” 

If the house is wooden, some banks will take it as collateral only on the condition that the building is not older than 1985. In some banks – no older than 2000. For houses built from other materials, there are no strict requirements for the year of construction. 

The degree of wear is also important. For wooden houses, it should not exceed 40%, and the average value for houses made of other materials is 50%. There are requirements for the foundation of the building. It must be solid and made of concrete, brick or stone. Laying a house that stands on a pile foundation will not work in most banks. 

The financial institution also looks at the location of the building. In most cases, this should be a settlement where, in addition to the mortgaged house, there are at least three more residential buildings. In addition, in order to mortgage a house in 2022, it must have year-round access, as well as a permanent sewer system, electricity from the power company, heating, water, a toilet and a bathroom. 

Townhouse

An isolated part of a residential building will be taken as collateral if it has a separate entrance, its own postal address and a common wall with a neighboring block in which there is no door. According to the documents, the premises must be registered as an individual object. Several design options are possible:

• part of a residential building;
• block building house;
• block section;
• part of a semi-detached residential building;
• apartment;
• living quarters;
• part of the dwelling.

The full requirements of a particular bank where you plan to take a loan can be found on its official website. Also, this information can be obtained from a bank manager or a support service specialist by phone or via chat. 

It should be borne in mind that, most likely, they will not take property as collateral that is already encumbered or belongs to the categories of dilapidated or dilapidated housing. In addition, the bank may refuse if the owners of the house made redevelopment and did not legalize it. When considering the object of pledge, the bank pays closer attention to buildings that could potentially be demolished in the coming years. First of all it concerns wooden buildings. 

It is also worth considering that the bank, before issuing a loan, may contact a professional appraiser. If the specialist gives a positive opinion on the condition of the object, the degree of its wear and tear, and also excludes the need for repairs and a possible emergency condition, the object will be approved for collateral. However, the borrower pays for the appraiser’s services, and this amount must be budgeted in advance.

Step-by-step instructions for mortgaging a house

Mortgaging a house and getting money is a little more difficult than taking out a consumer loan. More documents will be required and the process will take a long time. What steps will the borrower have to go through?

1. Apply for a secured loan on the bank’s website or at its branch.
2. With a direct visit to the bank – get clarifying information from a specialist, with an online application – wait for the manager’s call and find out the list of documents. Requirements for the object should also be clarified. 
3. Submit documents to the bank yourself or online. Here it is desirable to do everything as quickly as possible, since some documents have a limited validity period. For example, an extract from the USRN will be ready no earlier than 7 days from the date of its order. If you apply late, and Rosreestr delays the issuance, then the income certificate or a copy of the labor certificate may become invalid (their validity period is only 30 days).
4. Wait for the decision of the bank on collateral and credit. If they are approved, sign the loan agreement and finalize the deal. 
5. To issue a pledge on property in the USRN, imposing an encumbrance on it. In some banks, this step can be skipped, as they independently register the transaction with Rosreestr. In other credit institutions, you will need to come to Rosreestr or the MFC together with a bank employee.
6. Wait until Rosreestr processes the application and returns the documents, putting a mark on the result in them. These documents must be taken to the bank.
7. Wait until the bank checks the submitted documents, and then issues a loan.

Depending on the terms of the contract, the money will either be credited to the account specified in advance, or the bank manager will call and invite you to the office. 

Documents Editing

As for documents, each institution will have its own list, which must be clarified in advance. However, the following documents are most often required:

• the passport of the citizen of the Federation;
• documents confirming the ownership of real estate (an extract from the USRN with the owner indicated in it or a certificate of registration);

The following documents may also be requested:

• income statement;
• a certified copy of the work book;
• SNILS;
• international passport;
• driver’s license;
• marriage contract, if any;
• report of the appraisal commission on the appraisal of the property;
• notarized consent of the spouse to the pledge of real estate, which is jointly owned.

Where is the best place to mortgage a house?

You can mortgage a house not only in banks, but also in other financial institutions. Consider their conditions to determine where it is most profitable to mortgage real estate.

Banks

When considering a loan application, banks pay attention to the collateral only after checking the solvency of the client. Therefore, it is important that the borrower meets the requirements, and his income is not lower than recommended by the bank. At the same time, an indisputable plus of lending in a bank is the transparency of the transaction. After the contract is signed, the payment will not increase, and there should not be additional commissions or write-offs. 

Bank loan rates are among the lowest when compared with other financial institutions. On average, they range from 7 to 15% per annum. In addition, if the borrower stops making payments, banks will collect the debt only in strict accordance with the law. 

However, there are also disadvantages of applying for a secured loan from a bank. First of all, the credit institution makes a decision based on the credit history of the borrower. If it was corrupted or not present at all, the application may not be approved. Verification of the collateral object takes a lot of time, this must be taken into account when applying. On average, it takes about a week from the moment of submitting an application and a complete package of documents to receiving the result of consideration. But the borrower has not yet received the money at this point. This will happen only when he finalizes the encumbrance on the property and submits the relevant documents to the bank. 

It will also take some time to check the object by an appraisal organization. In addition, the borrower pays for the service, and this is an additional 5-10 thousand rubles. It is worth considering the mandatory insurance of the object in most banks. Sometimes you can refuse it, but then the interest rate will increase by 1-2 points. The cost of insurance is 6-10 thousand rubles a year. 

Private investors

Unlike banks, private lenders pay more attention to the liquidity of the collateral. The solvency of the client fades into the background, although not completely written off. Therefore, it is easier to mortgage a house and get money, but much more expensive. The term for consideration of the application by “private traders” is short, usually the decision will be announced on the day of filing the application or the next. The average interest rate is about 7% per month, that is, up to 84% per annum. Therefore, taking a large amount for a long time is simply not profitable. For example, if you take 3 million rubles for 3 years at an interest rate of 5% per month, the overpayment for the entire period will be more than 3,5 million rubles. It should be borne in mind that most private investors enter into a contract for 1 year. Theoretically, in a year it can be extended, but no one guarantees that the conditions will not change for the worse in the future. 

MFIs

According to the current legislation, microcredit and microfinance organizations cannot issue loans secured by security, if it is the residential real estate of individuals. However, they can issue money secured by commercial real estate. 

As in the case of private lenders, when checking an application, MFIs pay more attention not to the credit history and solvency of the borrower, but to the liquidity of the mortgaged object. At the same time, the application itself will be considered fairly quickly, sometimes within a few hours. However, the interest rate will also not be small – up to 50% per annum. In any case, before you sign the documents on the loan and collateral, you should carefully study them. Well, if there is an opportunity to show a lawyer. In this way, the risk can be drastically reduced in the future. 

PDA

CPCs are credit consumer cooperatives. The essence of this organization is that shareholders join it – both individuals and legal entities. They make one-time or periodic contributions. And, if necessary, they can take a loan, and gradually pay it off, taking into account interest. If a person is not a member of the CCP, he cannot take out a loan there. The activities of such organizations are regulated by law. If a decision is made to join the CCP, it is worth making sure that it is reliable. This can be done by checking the membership of the cooperative in the SRO. Information about belonging to a certain self-regulatory organization must be indicated on the CPC website. 

The advantages of this method are that the consideration of the application does not take much time, and the money can be issued without waiting until the encumbrance is imposed on the property. Interest rates are usually lower than other financial institutions. At the same time, a sufficiently large amount can be given on credit, and at the time of making a decision, the presence of a confirmed income of the borrower and his credit history are not taken into account. 

It will be most advantageous to get a loan secured by a home in the KPC, but only if you are already a member or you have time to become one, and only then apply. Otherwise, it is better to contact the bank.

House mortgage terms

The repayment of a loan that was secured by real estate occurs in exactly the same way as the repayment of a consumer loan. These can be annuity or differentiated payments. That is, the same throughout the entire term of the loan or decreasing over the term of the payment. 

It is worth remembering about the actual mandatory insurance of the collateral object. Some banks require life and health insurance for the borrower. Sometimes you can refuse all insurance, but then the bank will raise the interest rate by 1-5%. 

It is also necessary to take into account that after the imposition of an encumbrance on the house, the owner will not be able to dispose of it in full. That is, it will not be possible to give real estate, sell, exchange or provide another pledge. 

First of all, you should contact the bank where you receive your salary. In this case, fewer documents will be required, in addition, most likely the interest rate will be reduced by 0,5-2%. 

How much can a borrower expect? This is usually only a fraction of the amount the property was valued at. In each bank, this part will be different and will range from 50 to 80%. That is, if the house was valued at 5 million rubles, they will give a loan from 2,5 to 4 million rubles. 

Refinancing secured loans is difficult, as few banks will want to deal with the process of reissuing collateral. This should be taken into account when choosing the institution to which the application will be submitted. 

It is also important to avoid fraudulent schemes if you decide to apply for a loan outside the bank. For example, instead of a loan agreement, a borrower can be given a donation agreement or a sale and purchase agreement for signature. They will explain it this way: after the borrower pays the debt in full, this transaction will be canceled. However, if the borrower signs such an agreement, it will mean a complete and voluntary transfer of their rights to real estate. 

To minimize the risk, you should contact well-known large organizations and banks. It is also advisable to show the loan agreement to a lawyer so that he can assess its legality.

Popular questions and answers

Experts answered the most common questions from readers: Alexandra Medvedeva, attorney at the Moscow Bar Association и Svetlana Kireeva, head of the office of the real estate agency MIEL.

Sources of

1. https://www.consultant.ru/document/cons_doc_LAW_19396/36a6e71464db9e35a759ad84fc765d6e5a03a90a/