How to decide on a mortgage and whether to take it

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Assessing the advantages and disadvantages of mortgage lending is the most important step towards making a decision - to take or not to take a mortgage loan. Unfortunately, along with the obvious advantages, there are also disadvantages of a mortgage that should not be forgotten. Having the most complete picture of the positive and negative aspects of purchasing real estate with a mortgage loan allows the potential borrower to make the right decision for himself.

Differences between a loan and a mortgage

For almost every family, there comes a time when they simply need to think about buying a home. Of course, the majority prefer targeted lending - mortgages. However, this option is not always the most profitable. So, let's figure it out.

Mortgage is a type of targeted lending, the subject of which is the purchase of residential real estate both in new buildings and on the secondary market. An important distinguishing feature is that money is issued strictly for a specific apartment or house.

A consumer loan is a type of loan that has a non-targeted nature, issued without justification and in monetary terms. When applying for such a loan, the client is not required to provide evidence of how the money received was spent.

Clear differences are immediately noticeable:

Pros and cons of a mortgage

Each type of loan has its own advantages and disadvantages. First, let's define a mortgage: what advantages does it provide and what problems can you encounter?

Of course, these are not all the pros and cons, but the most significant ones.

For what period is it more profitable to take out a mortgage?

Almost all borrowers approach applying for a mortgage loan very carefully, because this is a long-term deal with the bank and the highest dangers for the borrower if he incorrectly estimates his financial abilities. Apart from everything else, most borrowers take out a mortgage planning in advance to pay it off early so as not to overpay interest.

The main task of a potential borrower is to choose the right long-term lending, so that the repayment of the mortgage loan is affordable for the household budget, and at the same time save on overpayments. In general, let’s look at the question of how long it is more profitable to take out a mortgage.

Mortgage is the longest type of lending; its longest term can reach 50 years, although Russian banks issue loans for a maximum of 30 years. If we talk about the shortest loan period, you can take out a loan for a period of at least 1 year.

It is also worth considering one fundamental point - for each borrower, the financial institution calculates the highest loan amount based on his earnings; if you choose a short loan period, the bank may refuse the loan or reduce the highest amount.

Also, do not forget that the bank limits the maximum age of the borrower, so when determining the duration of the loan, this must be taken into account. By the way, it is much better to calculate the term in such a way that the full repayment of the housing loan will be before retirement age.

The best loan term is from 5 to 20 years, but you should still choose it based on your own solvency.

By the way, as for the largest loan amount, it is calculated in such a way that each monthly payment is no more than 70% of the borrower’s net income.

How to calculate the duration of a mortgage loan without the help of others

In fact, when making calculations it is necessary to take into account certain individualities:

1. The interest rate depends on the loan term; the shorter the term, the lower the annual interest.
2. Each monthly mortgage payment must correspond to the decrease in income, because the shorter the term, the larger the size of each monthly payment.
3. A larger percentage of the down payment allows you to lower the annual interest rate on the mortgage.

However, there is still one aspect that is probably familiar to almost all borrowers - the longer the loan term, the more you overpay the bank in remuneration. That is why extending the loan over many years is also inappropriate. In any case, most borrowers, even at the stage of designing a mortgage loan, plan to pay it off ahead of schedule.

The question of how long it is better to take out a mortgage in case of early repayment is strictly personal; in other words, it is unrealistic to name the duration directly because it depends entirely on the financial situation of the borrower himself. In any case, you need to make a calculation to find the maximum you can pay per month.

How to calculate the duration of a mortgage for each monthly payment

Nowadays, problems arise when calculating a mortgage because almost every bank has a loan calculator on its website that will allow you to calculate the amount of each monthly payment, show the amount of the overpayment and draw up a preparatory payment schedule. For example, if you are planning to get a mortgage loan from Sberbank, then you need to go to its official website and use the loan calculator on the mortgage loans page.

So, we read a very convenient mortgage lending term. Let's give an example, if you want to borrow two million rubles at 9.5% per year, if you take out a mortgage for 5 years, each monthly payment will be 35,620 rubles per month, if for 10 years, then 21,905 rubles, and if for 20 years , then 15,736 rubles, and if for 30 years, then 14,171 rubles.

With all this, in 5 years you will overpay only 115 thousand rubles, in 10 years - 628 thousand rubles, in 20 years - 1.776 million rubles, and in 30 years - more than 3 million rubles.

Please note that the calculator can only make preliminary calculations; the final amount of each monthly payment can be found out specifically at the bank.

From this example it follows that the longer the loan term, the more you overpay to the bank. With all this, as you can see, the size of each monthly payment does not change significantly, which means there is no point in taking out a loan for 20 and 30 years.

And if you pay off your mortgage early, you can save even more on interest payments.

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So, let’s summarize the ideal period for how many years to take out a home loan. According to preparatory calculations, it is clear that the shorter the term, the less interest you will overpay to the bank.

The most important thing!

And to find out what duration of mortgage lending it will be very convenient for you, just use a loan calculator and make a preparatory calculation.

Source: https://neplatno.com/ipoteka/na-kakoj-srok-vygodnee-brat-ipoteku

Advantages and disadvantages of loans

Consumer lending also has its positive and negative sides. And if you consider that the purpose of lending is investing in real estate, then you should think carefully about such a loan.

For what period is it profitable to take out a mortgage?

The term for which you can take out a mortgage is the same in virtually all financial institutions: 5-25 years. At first glance, it seems that the longest loan period is more profitable due to the lowest monthly payments.

But now unique conditions have arisen for dollar borrowers: the exchange rate has fallen, and so have apartment prices.

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At the moment, it is better to take out a loan in dollars and, until the currency takes revenge, for an average term (10-15 years).

What's in rubles?

A loan in rubles is also profitable, because the value of real estate, according to an old habit, is recalculated at the dollar rate.

Even if we take into account that life has become more expensive, the cost per square meter still drops due to the lack of buyers. For example, buying an apartment in Saratov has now become much easier than last year.

In rubles, the average cost of 1 m2 fell to 36,700 rubles, which is 4% less than last year’s figures. These numbers refer to the secondary market.

On the primary market, the situation froze against the backdrop of certain statements by officials. According to the head of the Ministry of Construction, the program on mortgage subsidies, which was used by a third of all borrowers over the last 2 years, will be closed.

The head of Sberbank promised to lower the rate to 11% in 2020. Experts believe that the termination of preferential mortgages will lead to a smaller size of construction, and a reduction in the rate will lead to an increase in the price of square meters by up to 5%.

Here are the calculations

For an apartment with an area of ​​50 m2, a mortgage of about 2 million rubles will be useful. If you take it from Sberbank for 10 years at an interest rate of 12%, the payments will look like this:

• 28,700 rubles - every month,
• 3,444,000 rubles - the entire amount paid,
• 1,440,000 - overpayment on the mortgage.

Analyzing payments

The shortest loan term will entail the largest monthly payments, regardless of the fact that the overall rate will be lower. It is clear that the longer the period, the higher the percentage for using the funds. It should be said that psychologists do not recommend taking on debt for more than 15 years.

This is due to the fact that the loan places a heavy burden on the family, creating the memory that the payments will never end. This psychological state leads to prolonged nervous stress (a nonspecific (general) reaction of the body to an impact (physical or psychological) that disrupts its homeostasis)

, which may affect the quality of life of the borrower and his family. Then, as in a chain reaction: health worsens, enthusiasm for life is lost, and there is a risk of losing work and income.

Why is a short mortgage term unsafe?

A term of 10-15 years is also considered good by bankers: it doesn’t seem to last long, and there is plenty in reserve. The payment amounts seem to be quite large, but not the most huge. If the client decides to significantly reduce the time interval, he exposes himself to the following risks:

• the bank may refuse a mortgage if it considers that it will be difficult for the family to pay the bills;
• Every monthly payments turned into a large amount with a loan term of 5-10 years (especially with an insignificant entrance fee).

Conclusion

The lowest rate will essentially save approximately 1% of your total payout. Here you should decide: is it worth saving the risk if the borrower loses a source of income or an unexpected force majeure event occurs.

Source: https://osnovam.ru/sovety/na-kakoy-srok-vygodno-vzyat-ipoteku

What's the best way to buy a home?

After considering the pros and cons of each loan product, the question of course arises, what is better to choose for buying a home? And there is no definite answer here; everything depends only on the financial solvency of the borrower. It is possible to quickly repay the loan, but you need a relatively small loan amount, then you should think about non-targeted lending.

But if the family budget is already limited, and the need to leave an apartment as collateral to the bank does not frighten you, it is possible to apply for government assistance, then it is better to give preference to a loan specifically designed for the purchase of housing. After all, you can choose a loan repayment period of less than 30 years, the main thing is that your income allows it. An alternative is to find a bank that allows early repayment of the loan.

What are the differences between bank requirements?

When choosing a particular type of lending, you should carefully consider the bank’s requirements. In the case of simple consumer lending, the bank carefully examines the client himself and his solvency, and also pays special attention to the credit history and amount of income. In general, that's all. The requirements directly to the client are more loyal; in some banks even pensioners can get loans.

But with a mortgage everything is more complicated. Not only does the bank check the client himself, but with a large loan the second spouse acts as a partner, and here the total family income is already considered. In addition to the client’s dossier, the bank carefully studies the housing that it plans to buy. Consequently, the borrower needs to provide an even larger package of documents to the bank, which is more costly in terms of time and money.

Another serious nuance is the age of the borrower: the bank limits the issuance of mortgages to people near retirement age, and if you also apply for government subsidies, then the bank will have even more requirements and a more meticulous check.

Bankers' requirements for borrowers

The loan amount for the purchase of residential real estate is quite large, so banks do not want to take risks and put forward the following requirements to their potential borrowers:

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1. Having a constant confirmed income for the last 6 months. If your salary is not enough to obtain a loan, you will need financial guarantee from third parties.
2. Positive credit history.
3. No overdue loan debts.
4. Work experience in the last place of work must be at least 1 year.

Additional costs for mortgages and loans

Unlike a mortgage, a consumer loan most often does not require additional costs, with the exception of voluntary life insurance, but you can always refuse it. But this will not work with a mortgage. Before choosing a mortgage, citing lower interest rates, calculate all additional costs; it may turn out that an overpayment of 2-3% for consumer lending will be incomparable in relation to the costs of an issued mortgage.

Get ready to spend money on services such as:

• mandatory insurance of collateral property, one’s health and life;
• when purchasing housing on the secondary market, title insurance is required (against possible loss of ownership of the apartment);
• an independent assessment of the acquired property becomes mandatory;
• preparing a package of documents for an apartment, as well as registering it in all registers, is also quite an expensive matter;
• if you cannot collect the documents yourself, you will have to spend money on a notary and a mortgage broker;
• In addition to interest, some banks charge a commission for considering your application and issuing a loan, which will also not be so small.

As a result, we strongly recommend that you consider all possible options when purchasing a home. You shouldn’t rush headlong into the pool if the bank promises low interest rates and no overpayments. Buying a home is a very important decision and a very expensive undertaking. To prevent it from becoming a lifelong problem, carefully consider every decision you make.