The essence of the program for preferential lending to military personnel
In 2005, the Russian government launched a housing program on preferential terms for military personnel serving under contract. After joining the ranks of the Russian Armed Forces, an employee must write an application for inclusion in the NIS program (savings and mortgage system).
The serviceman's personal account receives funds from the state budget on a monthly basis. 3 years after joining the program, the participant can apply for a mortgage to purchase housing on preferential terms. The first installment on such a loan is paid from military funds accumulated during participation in the NIS. Repayment of the targeted housing loan is made from the funds of the Ministry of Defense of the Russian Federation.
The military mortgage program is regulated by the following regulations:
- No. 117 – Federal Law;
- No. 102 – Federal Law;
- Order of the Russian Guard No. 79.
The purchased living space is pledged to the bank and the Russian Ministry of Defense until the debt is fully repaid. If the participant leaves the service before the loan is repaid, he will have to pay the remaining debt from his own funds.
The calculation of the maximum subsidy amount allocated for the purchase of housing on a military mortgage occurs regardless of position, rank, length of service and other factors. The amount of funding is the same for all military personnel. In 2020, the NIS savings contribution is about 280,000 rubles per year. The value of the Central Life Insurance for military personnel in 2020 is 2.4 million rubles.
The time for participation in the NIS program is not limited. A serviceman can use the funds after any period of service. If savings and funds received under a preferential mortgage are not enough to purchase the chosen home, the borrower can add personal funds.
Government subsidies
Maternal capital
Family capital allocated by the state after the birth of the second child can be used for the first payment (after 3 years) or to repay part of the debt. It is not allowed to spend funds on the acquisition of land or the construction of a summer house.
Initially, it is required to provide documentation to the Pension Fund to obtain permission to use capital. You must send a certificate of ownership of the land, a permit for construction work and a contract with the construction company. Upon completion of the work, housing is registered in the name of all family members.
Maternity capital is transferred to the account of the contractors or the borrower if he plans to carry out construction on his own. In the second case, the bank transfers only half the amount, and after six months the remaining part, if the client confirms the work.
Young families
When applying for a loan to young families (aged 21-35 years), many banks provide additional benefits in the form of reduced interest and down payments. Childless families can count on compensation of up to 30%. Having 1-2 children allows you to receive a subsidy of 35%. Government payments are used to pay off the down payment or the balance of the debt.
At the birth of a child, a delay of up to 3 years is given. As the second child appears and a loan is received before his birth, the family capital cannot be spent to repay the loan immediately, but after receiving the certificate in hand.
State employees
Borrowers can reimburse the costs of building premises up to 35% if they have at least 3 years of experience in budget organizations. Teachers and health workers aged 21 to 35 years living in rural areas are given the opportunity to obtain a loan using additional subsidies. When applying for a social mortgage, the client undertakes to work in the budgetary direction until full payment of loan obligations.
Large families
Compensation from the state reaches up to 40-45%. Having 5 children allows you to increase the subsidy to 50%. Spouses are required to have a regular income. Single-parent families in need receive additional subsidies from government agencies and low interest rates on mortgage loans.
Summation of benefits is allowed. This allows large and young families to combine compensation, for example, for maternity capital.
To receive benefits, borrowers must be registered as needing improved housing conditions. Subsidies are distributed on a first-come, first-served basis. If the borrower has housing, obtaining a social mortgage to build a private house is associated with a number of difficulties.
Based on legislative act No. 117, the Military Mortgage program is not used for the construction of a private house.
What can you buy
Initially, a military mortgage could only buy an apartment in an apartment building. During its existence, this program has been expanded and in 2020, an NIS participant can purchase not only an apartment, but also a private house with a plot, a cottage or a townhouse.
Federal Law No. 117 - Federal Law allows the purchase of such real estate:
- Secondary housing in multi-apartment buildings;
- House with land;
- Primary living space under a shared construction agreement.
If a serviceman decides to spend military mortgage funds to participate in shared construction for subsequent ownership of an apartment in a new building, he must choose a development company accredited by the selected bank. This is necessary in order to minimize the risk of construction “freezing”. Financial institutions prefer to issue mortgage loans for the purchase of new buildings from those companies with which they have been cooperating for a long time.
How to get a mortgage to build a residential building?
You can take out a mortgage to build a house, but not all banks have such lending programs. Any bank will always insure possible risks with additional requirements and conditions. For example, when issuing a mortgage for a construction site, Sberbank will oblige the borrower to bring guarantors or provide existing real estate as collateral.
Expert opinion
Alexander Nikolaevich Grigoriev
Mortgage expert with 10 years of experience. He is the head of the mortgage department in a large bank, with more than 500 successfully approved mortgage loans.
Having analyzed mortgage programs for housing construction in various banks, we can conclude that almost everywhere interest rates are inflated by 1-2 points. The down payment fluctuates around 25%. This is again related to the risks of the lender. But after comparing the prices of apartments in a new building and the cost of building their own large house, the choice of borrowers often falls on the latter option.
Pros and cons of a mortgage to build your own home
A large house with its own plot has an advantage over an apartment with a bunch of neighbors. But what is more profitable: taking out a mortgage for construction or buying a ready-made house? The answer to this question depends on many factors.
It is necessary to compare objectively, and initially compare the same criteria with each other:
- Status of the land on which the house is located (rent, use, ownership, etc.).
- Square meters.
- Territorial location.
- Availability of communications.
Buying a ready-made house will be an advantage if it has already been built, the documents for it are in order, communications are in place - you can immediately move in and live. But it’s not always possible to find housing that’s right for you. This is where building your own home will come to the rescue. You can calculate the cost estimate based on the available budget, and draw up a house project that you want.
Comparison of mortgage terms for construction and purchase of a finished house from Sberbank and Rosselkhozbank
It is more profitable to take out a mortgage loan for construction from Sberbank. There is no special program for purchasing a finished residential building; you will have to take out a non-targeted loan secured by other existing real estate. It is inferior to a mortgage on 3 points - the interest rate is 2% higher, the loan terms are 10 years shorter, the minimum loan amount is from 500 thousand rubles.
At Rosselkhozbank, the conditions are almost equal. The only major difference is the down payment. When applying for a targeted loan for the purchase of land and construction of a residential building, a down payment is not required.
Requirements of banks when issuing mortgages for construction
All banks have common requirements that cannot be avoided:
- Securing loan payments. Usually, before the completion of construction, the lender asks the borrower to provide him with other property as collateral. Sometimes the bank offers to attract guarantors.
- The land on which construction is planned is pledged to the bank.
- Mandatory insurance of the collateral against the risks of loss/destruction.
- If another home owned by the borrower is provided as collateral, the bank will ask for documents for it.
Real estate requirements
Banks put forward certain requirements for a house or other living space purchased with a military mortgage. These include:
- Location in Russia.
- The property is suitable for year-round use.
- The building is recognized as “capital”.
- The apartment is not on the list of emergency or dilapidated housing.
- All communications are connected to the house: electricity, water, gas.
- Location nearby other residential buildings.
- Availability of a road along which you can drive to the house.
- The living space is equipped with a separate kitchen and bathroom.
- No encumbrances such as arrest or lien.
- The building was erected no later than 1970.
Information: banks are reluctant to agree to purchase a house with a military mortgage from the borrower’s relatives. This is due to the increased likelihood of fraud on the part of the military personnel.
Is it possible to build a house with a military mortgage?
According to Federal Law No. 117, NIS funds cannot be used to purchase a plot of land for the construction of a private house.
Refusal to finance the purchase of land plots for subsequent construction is justified by the following reasons:
- It is almost impossible to track where allocated funds are used;
- Construction may be stopped and the borrower will not be able to cover the risks of the financial institution;
- It is impossible to register a house that is being built individually as collateral, since such real estate is not registered until the completion of the work;
- It is impossible to insure unfinished property, as well as the risks of suspension or termination of construction.
Information: it is possible to use military mortgage funds to purchase land and build a private house after 20 years of participation in the NIS program. After the specified period, the serviceman acquires the right to dispose of savings at his own discretion.
Conditions for obtaining a mortgage using maternity capital for building a house
You can apply for a targeted loan using state aid funds, provided that:
- the certificate holder is a citizen of the Russian Federation and permanently resides on the territory of the Russian Federation;
- the age of the potential borrower is not less than 21 years and not more than 75 years at the time of making the last payment;
- the official work experience at the last place of employment is at least 6 months, and the total length of work is at least a year;
- the borrower is the owner of the property provided as collateral;
- In addition, an insurance contract is concluded for the collateral, except for the land plot.
Important! At the request of the lender, extended conditions for issuing a loan may be put forward.
How to buy housing with a military mortgage
To purchase real estate using a targeted housing loan for military personnel, you must follow the following algorithm:
- Write an application to include the military in the savings-mortgage system. After this, funds from the state budget will be transferred to the employee’s individual account.
- 36 months after inclusion in the program, you will need to submit a report to the unit commander about receiving a NIS participant certificate. You can also order this document online on the official website of Rosvoenipoteka.
- Prepare a package of documents for submitting a mortgage application to the bank.
- After a positive decision is made by the financial institution, prepare documents for the property and submit them to the lender.
- After approval of the selected living space, sign a loan agreement.
After concluding a transaction with the bank, the borrower becomes the owner of the property. He will become the full owner only after the loan is fully repaid. Until this moment, the housing will be in double collateral: with the bank and the Ministry of Defense of the Russian Federation. Before the loan is repaid, the military man has the right to register for the purchased living space himself and register his family members there or make repairs to the premises.
Important: after receiving the NIS participant certificate, it is valid for 6 months. During this time, the serviceman must have time to select real estate options and submit an application to the bank.
What documents will be required
To obtain a mortgage loan on preferential terms, you must provide the bank with the following set of documents:
- Passport.
- Serviceman's ID.
- NIS participant certificate.
- Application – questionnaire.
Upon approval of the application, you will need to prepare a package of documents for the purchased housing, which includes:
- Result of real estate valuation;
- A document confirming ownership (sale and purchase agreement, gift, exchange, etc.);
- Cadastral and technical passport;
- Extract from the house register.
Important: the property must be registered with Rosreestr, and the seller must have the appropriate certificate.
