How to mortgage an apartment and get money in 2022: step-by-step instructions with expert advice

Following the situation in the economy, banks soften or tighten their credit policy. 20 years ago, loans were issued carefully: secured or guaranteed. Over time, more microfinance institutions appeared, and the number of loans and credit cards issued also increased. The level of requirements for borrowers has decreased.

But the economic turmoil of recent years is forcing banks and other lenders to become more selective again. In 2022, the only sure way to get a loan is to mortgage an apartment and get money quickly.

We prepared step-by-step instructions and talked to an expert about how to do everything right.

The main thing about the pledge of an apartment

Apartment mortgage requirements

In Our Country, there are no uniform requirements for the mortgage of an apartment – neither for the property itself, nor for the person who wants to receive money. Lenders are guided solely by their financial interests and risk assessment.

For example, one bank would never take an apartment in ZATOs as collateral, because these are closed cities. If the borrower cannot return the money, the apartment will have to be sold and it will be difficult to do so. And it is important for the lender to get their money back as soon as possible. Another bank may accept such an apartment, but offer a slightly higher rate and give money less than the housing actually costs.

Permissible portrait of the borrower is also different for each lender. Large banks may refuse if a person does not have a permanent job and income. Or offer less favorable terms. Credit and consumer cooperatives and private investors, on the contrary, are not so critical in assessing the applicant for money.

We analyzed the offers of creditors in 2022 and derived the “arithmetic average” requirements for collateral for an apartment in Our Country.

The apartment is located in a city where there is a representative office of the lender. If the bank (although not only it can accept housing as collateral) does not have branches and branches in your locality, such an apartment is unlikely to be considered. The reason is simple: if the borrower cannot repay the debt, then he will have to be evicted, sued, and sold. These are costs for the lender, especially if he is based in another city.

Condition of the apartment. The lender will not look at new wallpapers and double-glazed windows. Of course, if the apartment is after a fire, then it is illiquid. But in general, beautiful furniture and a new kitchen set do not affect the cost. After all, it is an apartment that is being mortgaged, which can potentially be quickly sold.

It is important for creditors that the house is not emergency, dilapidated. There are requirements for the number of storeys and the number of apartments. For example, two-story houses with six apartments – such were built in the early Soviet years – do not fall under the criteria of most creditors. If the house has wooden floors – also, most likely, bail is not an option.

All communications must be working: gas, electricity, heating and water supply. Illegal redevelopment is most often not allowed. For example, if the wall between the kitchen and the room was demolished in an apartment with a gas stove, this is critical. But if only the pantry was redone, then it is at the discretion of the bank. Redevelopments legalized in the BTI are acceptable.

How does the lender know that the apartment is liquid? It’s simple: you will need to order an assessment. This is a paid service. In Our Country, the average cost is 5-15 thousand rubles. The specialist will come, take pictures, write a conclusion – an evaluation album. The inspector will indicate the average cost of selling an apartment, on the basis of which the bank will draw conclusions about the size of the loan.

The basis of ownership. Simply put, how did you get this apartment. An ideal basis for a lender is a contract of sale. That is, you once bought a house yourself, and now you want to mortgage it. Or you have privatized an apartment. Recall that privatization began in 1991.

They are wary of apartments received under a donation agreement and as an inheritance. Especially if the apartment has recently moved to you. Suddenly, in a couple of months, a criminal or judicial background will be revealed? For example, there will be heirs whose interests were not taken into account when dividing property.

At the same time, such apartments are still accepted, but they are asked to issue title insurance. Under such a policy, the insurance company undertakes to pay money for an apartment if suddenly a donation agreement or inheritance is appealed in court.

Apartments under arrest and those for which a donation agreement is signed are not suitable. The court can seize the apartment. This happens when its owner, for example, is involved in a criminal case. Or they collect debts from him. The lender will not take an apartment for which a donation agreement has already been drawn up.

Most often they do not accept apartments that are rented out. But the lender cannot find out about this – just take your word for it. Another thing is that in the event of an emergency, this may not play in your favor. Imagine that you have mortgaged an apartment and insured it, but at the same time you are renting it out to tenants. They had a gas leak and the housing was damaged. The apartment was used by other people and the insurance company will refuse to pay compensation.

Requirements for borrowers

When you want to get money secured by an apartment, the lender will also evaluate you as a borrower. Banks have the strictest criteria.

Age. In most cases, a citizen can dispose of his property from the age of 18. There are exceptions for people over the age of 16, if emancipation is recognized through the court – that is, a person is considered fully capable, which means that he can dispose of property, including pledging it.

However, when issuing loans, banks increase the minimum age of the borrower. The lower bar is most often 20-21 years old. The upper bar is quite wide – from 65 to 85 years. At the time of this age, the loan should already be completely closed.

Example. A 50-year-old city dweller wants to mortgage an apartment and return the money to the bank for 20 years. However, the bank only lends to borrowers under 65 years of age. That is, you will have to take a loan only for 15 years or look for another bank.

Work experience and income.  Credit consumer cooperatives (CPC) and private investors are as loyal as possible to those who want to mortgage an apartment and get money. Banks are again the most critical to this aspect. Prepare a 2-NDFL certificate (on income), you need to be employed in the last place for at least 3-6 months. At the same time, banks understand that not all work officially. Therefore, they may agree to accept your bank statement as an alternative. The statement should show that the borrower receives money with a certain regularity and that he has funds in his accounts.

Credit history. First of all, banks are paying attention to it – the CPC is also looking at it. Credit history is kept in special bureaus. They transmit information about what loans are registered for this person, whether payments are made on time. 

Step-by-step instructions for mortgaging an apartment

1. Choose a lender

The choice is between banks, a credit consumer cooperative (CPC) or a private investor. Each has its own advantages and disadvantages, which we will discuss below.

2. Prepare documents

To mortgage an apartment you will need:

• fill out an application form (each lender has its own form);
• original passport with registration;
• the second document (SNILS, driver’s license, TIN, military ID, passport, and sometimes all at once – each creditor has his own requirements);
• 2-NDFL certificate of income (you can ask for it in the accounting department or download it in your personal account on the website of the tax service – first of all, it is banks who ask for it);
• a copy of the work book or an extract from it (banks also ask);
• if you are married and have not entered into a marriage contract, according to which the spouse (a) does not own an apartment and does not act as a co-borrower for loans, then you need a certificate from the registry office;
• confirmation of ownership of the apartment: a contract of sale, an extract from the USRN, a certificate of inheritance, a donation agreement or a court decision.

3. Understand insurance and valuation

First of all, the lender will ask for an appraisal of the apartment. The law does not oblige to do this, but in practice this procedure is almost always carried out. It is impossible to believe the borrower’s word that his apartment costs a certain amount. Appraisal companies work fast. Before that, check whether any appraisal company is suitable or only from among those accredited by a bank or CPC. The specialist will come, make an assessment album (on average in 1-3 days) and write a conclusion on the cost of housing.

After that, the lender will be able to announce the amount that he is ready to give on security. Please note that no one will give 100% of the price of an apartment on credit. Well, if they give 80-90% of the market value. For example, the appraiser wrote that the property is worth 10 million rubles. The lender agrees to give 75% of this amount, that is, 7,5 million rubles. Remember that the lender is not the buyer of the apartment. He has a different task: to give money, earn money, and if something went wrong, quickly sell the pledge and return his own.

Before the transaction, you will have to agree on the insurance of the apartment. The insurance company must confirm that it is ready to insure the object and the life of the borrower. Formally, any company is suitable. However, lenders often indicate the pool of insurers they work with. If you choose another company, then the application may be considered longer or even refused without explanation.

The borrower is not required to insure the title (we talked about this service above). But the lender, again, in this case, may refuse or raise the rate.

4. Register a pledge

At this stage, the state, represented by Rosreestr, is involved in the case. This department is responsible for accounting for land and real estate in the country. It does not matter to him what you take out a loan for and under what conditions. He acts as a kind of guarantor of the purity of the transaction. In that part of it that from now on in the USRN next to your apartment there will be an encumbrance. The statement will indicate that the apartment is pledged. This is necessary to avoid disputes in the future.

5. Terms of loan approval and receipt of money

On average, the entire process takes 14 days. This is if you do not rush anywhere, but do not delay the collection of documents. Let’s take a look at what this time period is made up of:

• pre-approval of the application by the lender – in 2022 it takes a few hours and even minutes;
• approval of the application – up to five days, the longest procedure is with banks, at this stage you need to provide all the documents;
• insurance and valuation — companies work quickly, but not instantly, we will take up to five days for these procedures;
• registration of a pledge in Rosreestr – five working days from the date of receipt of the application and the documents attached to it, when registering through the MFC – seven working days, although everyone can spend it faster;
• receiving money – immediately after the registration of the pledge.

Where is the best place to rent an apartment?

1. Banks

The most profitable option in terms of rates. It will be less than in CPC and investors. But mortgaging an apartment and getting money is the hardest thing. Because they consider the borrower carefully: income statement, work book, credit history. You can do without it, but then the rate will be higher. In addition, the speed of approval by banks is the lowest possible. You won’t get money quickly.

2. Private investors

In 2022, investors can issue money on bail only to individual entrepreneurs and legal entities for business development. They are prohibited from lending to ordinary citizens.

If you have an individual entrepreneur or LLC and an apartment that is suitable for bail, then you can get a loan from an investor. This is an ordinary person who is interested in making an income. At the same time, he can act through a broker, a management company that accompanies the legal side of the transaction.

Investors have a higher interest rate on loans than banks and CPCs. But you can get money as quickly as possible.

3. Other options

Microfinance organizations, they are also MFIs or “quick money” cannot accept apartments as collateral. The law forbids. Pawnshops do not take housing either. Only CPCs remained – credit consumer cooperatives. Their register is on the website of the Central Bank¹. If a company is not on the list, do not work with it.

The CPC lends only to its shareholders. By modern standards, the format looks archaic. After all, initially, cooperatives were invented as “mutual aid funds”. That is, a group of people unites and decides: let’s add money to a common fund, and if one of the shareholders needs the funds, we will give him a loan. And we will help out a person, and we will earn money ourselves.

Modern PDAs work the same way, only they accept almost everyone as a shareholder, and you don’t need to pay money for joining. That is, the borrower is accepted into the cooperative, they give a loan secured, and he pays the money to the CCP. As soon as he pays off the debt, he can leave. 

Cooperatives are as loyal as possible to the portrait of the borrower and give approval faster than banks. But their percentage is higher.

Conditions for repayment of the mortgage of the apartment

All conditions are specified in the loan agreement. They are not much different from regular loans. Payments must be made every month on certain dates. You can repay the loan early without any penalty. When the debt is paid, the security deposit is removed from the apartment.

The bank has the right to take the property if the borrower is late in payments by at least a day three times in a year. A real threat to be left homeless for all family members, including a child under 18 years old.

While you are paying off the debt, you cannot do anything with the apartment without the consent of the creditor. You can live, make cosmetic repairs too. But redevelopment, sale and rental – only with the permission of the owner of the pledge.

Popular questions and answers

Answers questions Lawyer of GLS Invest Management Company (GLS INVEST) Alexander Morev.

Sources of:

1. Central Bank website. https://www.cbr.ru/hd_base/KeyRate/
2. Federal Law No. 16.07.1998-FZ of July 102, 26.03.2022 (as amended on March 01.05.2022, 19396) “On Mortgage (Pledge of Real Estate)” (as amended and supplemented, effective from May 8, 3). http://www.consultant.ru/document/cons_doc_LAW_17125/b9eebfdbd17ea0ea7b0420dc375c19dXNUMXfXNUMXfXNUMX/.