Loan secured by real estate in 2022

In our material, we will talk about a popular type of loan – a loan secured by real estate. Let’s talk about the conditions in 2022, the banks that issue it and discuss this product with experts.

What is a real estate loan

A real estate loan is a loan that the lender gives to the borrower at interest, and takes real estate as collateral.

Useful information about real estate loans

*The average rates for the II quarter of 2022 are indicated

You can ask the bank for a loan with different arguments of your solvency. For example, bring a salary certificate from the employer (2-NDFL) or find a guarantor – a person who, in case of your insolvency, agrees to pay the debt. These are normal financial relationships: a bank or other financial institution trusts you with its money. In return, they want to be sure that they will be paid off.

Real estate can be an argument in favor of giving a loan. Such a financial product is called a “loan secured by real estate”.

Pledge is a special way of securing obligations. The obligation in this case is the repayment of the loan. The client who takes out such a loan agrees to pledge his property to the lender.

At the same time, you can live in the apartment yourself or rent it out to tenants, if this is not prohibited by the contract. Similarly, with other real estate – apartments, residential buildings, townhouses, commercial facilities.

A pledge does not mean that a bank or financial institution can sell your object at any time or take it for themselves. Provided that we are talking about legal companies, not scammers. Stories like this happen when people recklessly borrow ads and don’t look at the papers they sign.

Only if the client cannot repay the loan, the bank or other financial institution has the right to sell, that is, to sell the property. The money will go to pay off the debt. If any amount remains after the sale, it will be given to the former owner of the property.

Benefits of getting a mortgage loan

You can get a large loan. For example, 15-30 million rubles for the capital is quite realistic. In the regions, of course, everything is more modest. However, the willingness to pledge property is a powerful argument for lenders.

Be more loyal to the credit history of the borrower. As you know, all banks and financial institutions study the reliability of the client. To do this, they use credit history bureaus, where information is stored about where, when and how much a person borrowed from financial institutions. Delays in payments are also reflected there. But since the client is ready to pledge real estate, it means that the lender has secured himself more strongly.

Credit can be issued for a longer period. Compared to conventional loans. Some financial institutions allow you to pay up to 25 years.

Mortgage alternative. It requires a down payment, which may not be. A home loan can be used to buy a new home.

For any purpose. Lenders don’t ask what you need a loan for. This is important, for example, for individual entrepreneurs who need money to develop their business. If they ask for a loan as a legal entity, then the probability of refusal will be higher, because this is a risk for the bank.

Risk only with your property. The borrower does not “set up” anyone – this is if we talk about loan guarantors. When you need a large amount, then in the case of conventional loans, you can get loans from different organizations, and as a result, you can end up in debt, fight off collectors, and lose your reputation among colleagues. By mortgaging an apartment, you risk only your property. With the proviso that if you have a family, then such decisions must be made carefully.

The pledger and the borrower can be two different people. For example, one person owns real estate, and the other wants to take out a loan. They can make a deal together.

The property remains your property. It can be used, rented out (if it does not contradict the loan agreement).

Appropriate objects that are under arrest. For example, the borrower has accumulated a large debt for housing and communal services or he has overdue the payment of other debts. In this case, at the request of the creditors, the court has the right to seize the property. Some credit organizations accept such real estate as collateral, but with a certain reservation. Part of the client’s loan will be used to repay the debt to remove the arrest.

Cons of getting a loan secured by real estate

Insurance spending. The property you offer as collateral must be insured. Insurance payments are made once a year. On average, this is 10-50 thousand rubles – the price depends heavily on the specific house, location, price of the object. The lender may also ask to insure the life and health of the payer – otherwise they will offer a higher percentage.

You will need to pay for the work of appraisers. Neither you nor the lender can objectively judge how much a property is worth. But in the case of a loan, the liquidity of the object is important – in other words, its value and the ability to sell. Suppose a client wanted to lay an apartment in an emergency building for demolition. Of course, the lender is unlikely to be able to sell such an object if something happens. So you have to pay for the appraisal. It costs 5-15 thousand rubles.

Inability to freely dispose of their property. Another disadvantage is the terms of the loan. If you want to sell an apartment or other object yourself, you will need to ask permission from the lender who accepted the property as collateral. Most likely he will refuse. After all, how in this case to reinforce the reliability of the borrower? They can allow the sale if the client repays the debt to the bank with the proceeds.

More time is running out. To obtain such a loan, lay at least one to two weeks, as the documents and procedures are much longer than usual. You can’t get money right away.

– The disadvantages include the fact that the mortgage is an apartment. But problems can only be if the client does not pay. Or, if he cannot pay, then he does nothing to resolve the situation. Even when you go into “delay” on such a loan, you can always resolve the issue without losing your property, find a compromise with the lender, – says Almagul Burgusheva, head of the secured lending department at Finans.

Conditions for obtaining a loan secured by real estate

Borrower requirements

• The age of the borrower is from 21 to 65 years. For younger people, an exception is rarely made. For retirees more often.
• Employment. You don’t have to work formally. And it doesn’t have to be informal either. But if the client is working, then the chance of loan approval is higher. You need to work in one place for at least the last 3-6 months.
• Citizenship of the Federation. They work with foreigners, but less willingly.
• Co-borrowers. If the property has several owners, they are required to become co-borrowers and give approval for the pledge. Also, if you are married, your spouse must also be co-borrowers. This can be waived if you sign papers at a notary public (or a marriage contract was previously concluded), but this is at the discretion of the creditor.

Property Requirements

— The main requirement is that the property be registered as a property. Otherwise, each lender has individual criteria for real estate. Someone considers the distance from the Moscow Ring Road no more than 50 km, others look at all regions. One bank can issue a loan only for an apartment, another for an apartment and houses, and so on, – comments Almagul Burgusheva.

We have already said that a loan secured by real estate is not given for any object. Therefore, you need to order an evaluation album from an accredited company. Let’s talk about requirements.

Квартира

The most popular type of collateral. Moreover, some lenders even agree to accept apartments that do not belong to the borrower, but to third parties. Of course, if they voluntarily go on bail. Let’s take an example. A young family lives with their parents and wants their own apartment. Parents do not want to take a loan or they are not given it due to their advanced age. But they agree if the newlyweds will mortgage their apartment.

The apartment must be liquid, that is, it can be sold at the market price at any time. This is very important for a bank. Of course, it should not be placed elsewhere. They take only objects in non-emergency houses, not for demolition. No illegal redevelopment. They are wary of apartments in houses with wooden floors and having the status of an architectural monument.

The loan amount often does not exceed 60-80% of the value of the mortgaged apartment. A little more will be given only in the case of a guarantee and official employment.

By the way, you can also lay a room in a communal apartment. 

Apartments

A new type of real estate in Our Country, which is actively developing in big cities. Formally, this is non-residential property, but no one forbids living in it. You can’t get a residence permit there, they don’t give preferential mortgages, you can’t make a tax deduction from a purchase. But if you are the owner of the apartments, you can offer them as collateral for a loan.

Apartments are cheaper than apartments in the same area in similar houses. But their advantage is that they are new, which means they are liquid and have their own financial value.

Townhouses

As a rule, townhouses are a prestigious type of urban real estate. They are willingly accepted as collateral, but provided that the building is legal, there are all the documents – negative precedents with unauthorized buildings happen.

Requirements for a townhouse: the apartment is allocated in a separate block with a private entrance. The land in front of him belongs to the owner.

Residential buildings

If we are talking about a cottage and other suburban real estate, as well as private houses in the city, they are also taken as collateral as an interim measure. It is more difficult with garden houses in SNT, since the lender will not always be able to sell them quickly, and they are cheaper. Otherwise, all the same rules apply as for apartments, plus a number of additional criteria.

• You can live in the house all year round. And you can get to it in any season.
• Not in emergency condition.
• Electricity is connected to it, there is heating (gas or electric), water supply.
• The house is not located on the territory of specially protected natural areas or reserves.

How to get a loan secured by real estate

1. Choose a bank or financial institution

The application can be sent online – through the company’s website, left in the call center to the operator or personally come to the office. The first step will require your name, date of birth, contact details. Plus, you will be asked to state the amount you are applying for. They will also ask about your type of property.

After that, the bank or financial institution will take a short pause: literally from ten minutes to a couple of hours. As a result, a verdict will be issued – the application is pre-approved or rejected.

2. Prepare documents

If you come to the office, you can immediately collect a set of necessary papers. Did you apply remotely? Perhaps the lender will agree to consider scans of documents in electronic format. You will need:

• passport with a residence permit (registration mark);
• the second document (rarely asked) – SNILS, TIN, passport, pension, driver’s license;
• a certificate of income, a certified copy of a work book, a notice of the state of a personal account in a pension fund – here each creditor has his own requirements. Some give loans without confirmation of income and employment, but at a higher percentage;
• a document that confirms the ownership of real estate. This can be a contract of sale, an extract from the USRN for an apartment or land, a certificate of inheritance, a donation agreement or a court decision – everything that confirms: you are the owner and can dispose of the object;
• for residential premises, they will ask for an extract from the house book or a single housing document – they show how many people are registered in the apartment;
• if you are married and your spouse does not want to be a co-borrower, but does not object to pledging the apartment, you need a notarized consent. A prenuptial agreement is also suitable, which states that the spouse (a) cannot dispose of this property. The lender may also ask the owner to sign a notary’s certificate that the owner of the property was unmarried when he bought it. In the latter case, sometimes it is possible without a notary – at the discretion of the creditor.

Find an appraisal company that will make an appraisal album. You can do this in advance if you are in a hurry to hand over all the documents in one day. But be careful: most often banks and financial institutions work only with firms accredited by them.

Another important document is property insurance. You can also get an opinion from the insurance company in advance that it agrees to take your object and bill for the service. And again, be careful – in working with insurance lenders are also selective.

3. Wait for the approval of the application

Or refusal. Remember that you can try with another lender or re-negotiate with this one. For example, the borrower counted on one amount secured by real estate, but the lender agrees to a smaller one, or it does not seem to him at all that the person will not pull the monthly payments. But if you find guarantors, take income certificates, connect co-borrowers, then the loan can be approved.

The term of validity of the approved application is determined by the creditor himself. Usually it is one to three months. After the whole procedure will have to go through again. However, if you are looking for the best loan conditions secured by real estate, you will already have all the necessary documents on hand and you can apply to other financial institutions.

4. Register a pledge

In Rosreestr – this department is responsible for accounting for real estate in the country – there should be a record that an encumbrance has been imposed on real estate. From now on, the owner will not be able to freely sell the object and deceive the creditor.

To register a pledge, you need to go to the MFC or Rosreestr. Sometimes you can do without face-to-face visits. Financial institutions actively use electronic signatures and practice remote filing of documents. You can issue an electronic signature yourself, and if you don’t know where and how, the lender will tell you. The signature is paid, on average 3-000 rubles. Some lenders give it to their borrowers.

5. Get money

After signing the contract, you can ask for money in cash or by transfer to a bank account. The bank will also issue a payment schedule. Perhaps the first payment will have to be made already in the current month.

Where is the best place to get a mortgage loan?

Banks

The most popular option. Loans secured by apartments, residential buildings, apartments and even garages are issued both by organizations from the top of the Central Bank (the largest organizations in terms of the number of clients and assets) and more “modest” colleagues. For example, regional banks.

Banks are very scrupulous in assessing the portrait of the borrower. They carefully check the documents, and the application approval process can take a week or longer. Banks are also less accommodating in determining the maximum loan amount. This is a big business that wants to insure itself if the borrower suddenly fails to pay.

Be prepared that in advertising the bank will lure you with one rate on a loan secured by real estate, and when it looks at your documents, it will offer a higher one. To reduce it by a few points, they will offer to become their payroll client or purchase additional insurance from partners.

Investors

There are companies and private investors who provide loans. We are forced to state that for 2022 this is a “grey” zone in terms of the legality of such loans. In Our Country, it is forbidden for private investors to issue loans to individuals secured by real estate. Only business (IP or LLC).

However, loopholes in the law are found. Moreover, on the verge of fraud with the registration of fictitious legal entities. Or they directly rewrite the borrower’s property on themselves, misleading him.

If you decide to take a loan from an investor secured by real estate, be sure to consult with an independent lawyer so that he can read the contract for “hidden meanings” and help you with the transaction. 

Additional ways

In Our Country, there are CPCs – credit and consumer cooperatives. He has shareholders – roughly speaking, people who have invested their money in a common pool so that other shareholders, if necessary, can use them. Of course, not for “thank you”, but on mutually beneficial terms. Please note that legal CCPs are in the register of the Central Bank.

A loan secured by real estate in the CPC works like this. The client becomes its shareholder. He asks for a loan. The cooperative agrees or refuses. Everything is like in a bank, but CCPs are less demanding on the personality of the borrower and approve the loan faster. Instead, a higher percentage is set (it cannot be higher than the Central Bank determines). Some “aggressive” banks refer to late payments.

Previously, MFIs (microfinance organizations, in everyday conversations they are called “quick money”) and pawnshops could also give loans secured by real estate. Now they are not allowed to do so.

Reviews of experts about a loan secured by real estate

We asked Almagul Burgushev, head of the secured lending department of the Finance company share your opinion about the service.

“Loans secured by real estate are only gaining momentum every year. People began to understand that this is really profitable: the rates are much lower than with consumer lending, the term has also been increased up to 25 years. There is no misconception about the dangers of such lending. Clients take out such a loan to, for example, close their five to ten other loans. After all, it is more profitable to pay in one bank. The maximum loan amount secured by real estate is possible up to 80% of the value of the object.

They resort to such loans to open their own business or support a personal business. There are also more tragic situations when an impressive amount is needed for an operation by relatives.

Of course, you can sell an apartment, but if a person is sure that he can pay, then why not use a loan? You can always sell, even if you took out a secured loan and suddenly could not pay. This type of loan is suitable for anyone who knows exactly from which sources they will repay the loan.

As for creditors. Banks are always a longer loan term and a lower rate. But the consideration of the application is longer and they are more demanding on the borrower, credit history, employment. Often a client thinks that if he pledges his apartment, then the bank should not ask him unnecessary questions. Nevertheless, the bank keeps a close eye on the borrower, no matter how much his apartment costs.

Credit cooperatives (CPCs) are already more loyal to customers, but the rates may be slightly higher than the bank ones. Private investors are just as loyal. But that doesn’t mean they’re handing out money to everyone. Income certificates are not required, but they assess the reliability of a potential borrower at an interview. An investor can get money on the day of treatment and this is certainly an advantage.

In theory, if a client needs to find money quickly, he can ask for it from an investor or a CPC, and then refinance with a bank.” 

Popular questions and answers