Greetings dear reader!
Today I want to talk about one of the varieties of conditionally good credit – mortgage.
Loans are “good” and “bad.” In more detail, what it is, you can watch the video below, where I talk about “bad” and “good” loans .
I personally consider mortgage a good loan if you follow the rules below.
Mortgage will allow you to become the owner of your home and fix the cost of the notorious square meter. This is especially true when the growth in property prices seriously overtakes the rate of growth of your income.
1. Borrow funds in the currency in which you earn.
This is the “golden rule” of any loans. If you earn in rubles, then borrow only in rubles.
In order to service a loan in foreign currency, it will be necessary to purchase currency from its ruble earnings. Accordingly, if the exchange rate rises, your payments in rubles will also increase automatically.
At one time, personally, I pretty well “flew” on the currency credit of my car, overpaying in the end more than a hundred thousand rubles. But it was a relatively small loan, and I was able to refinance it into a ruble loan, in the case of a mortgage in times of crisis in the economy it is hardly possible. The crisis of 2008–2009 has knocked down many currency borrowers.
2. Take in moderation.
Monthly payments should not exceed 30% of family income – the generally accepted rule, 50% is already a critical threshold. In Russia, this rule practically does not work. The Russians bravely charge themselves with the debt burden in 70% of the budget. Hoping for Russian chance: they will increase their positions and of course they will add salary.
As a rule, it ends in failure. Any abnormal situation with expenditures and incomes is ignored by non-payment, hassle, communication with collectors, payment of fines for penalties, entering a “bad mark” in the credit history bureau, etc.
You just can not imagine how many people turn to me for help. Like, what to do in this situation? Well, if there is more, somewhere to live, then you can sell an apartment (as a rule, it costs more than when buying and more loan amount). But many people are starting up the situation so much that it is difficult to advise something, and even people who are already under severe stress lose their adequacy.
3. According to Senka and hat. Improve living conditions in stages.
Suppose you live with your parents or in odnushku, moving immediately into a 200-meter apartment is not worth it.
It would be wiser to first move into a two-room apartment. Having successfully paid the mortgage, earning a positive credit history, get a new loan, on more favorable terms.
Moreover, it is possible that the conditions of these loans will improve by the time a new mortgage is issued.
In this case, you will not be on your own to drag the notorious “mortgage for half a century.” With the current mortgage rates, you will pay every 7-10 years only with interest on the cost of another apartment of the same type you purchased. Do you really want this?
4. Be sure to read the terms of the contract.
Pay special attention to all additional costs.
They are able to “pour out” in the annual several percent of the loan amount (in addition to the interest rate).
Such overpayments can easily lead you to a difficult situation. This may be, for example, insurance of the life of the borrower and the apartment in favor of the Bank in a strictly defined insurance company. In the contract about the rates, nothing can be. But if you make a visit to the insurance company, you can find out, for example, that the cost of insurance costs 0.5-2% of the contract amount, along with interest (!), And you have to pay it forward naturally every year.
5. Assess objectively the value of real estate.
Very often sellers embellish, trying to sell more expensive. It is advisable to consult with a realtor to avoid overpaying for an apartment.
This is unpleasant psychologically. But, worse, if in the event of your bankruptcy you sell the apartment at a loss of up to 30% of the cost. We’ll have to make up the difference at our own expense. Conclusion better pay a few thousand for a consultation and sleep peacefully.
6. Debt payment is beautiful
It is better to make payments in advance – two or three working days before the due date. Other expenses, also plan taking into account payments on a mortgage. This will avoid fines, penalties and entries in the “credit case” – the bank is still 1 day or a month overdue, the fact of delay will immediately be added to the common base. This may make it harder for you to get loans in the future. You then do not explain to anyone that you just accidentally forgot.
7. Have a “financial pillow”
A 3-6 month stock of monthly mortgage payments on a deposit can be considered reasonable and economically viable.
After the accumulation of this amount of funds, make early payments if possible.
It is better to keep your “pillow” on the depositor of the creditor bank, of course, in the currency in which the mortgage loan is issued – this will allow you to avoid currency risks.
Most borrowers believe that if they have made early payments for a year or two, then in a difficult situation the bank will go to meet them. No, do not even think. A reserve of funds will help you smoothly pay a loan in the event of a job loss or reduction in income.
Perhaps, even so, when mortgage rates are lower than the rate on deposits in banks. Then you simply do not pay in advance, add to the deposit and “earn” on the difference in rates. However, see that the amount on the deposit does not exceed the amount of state guarantees on deposits.
8. Fixing is better than variable percent.
Many banks issue loans with floating rates. In a stable time, they look very attractive. Interbank rate + fixed percentage (fixed). And suppose if the mortgage rate with a fixed amount is 12%, then it can be floating at that very moment, say 10.02%.
BUT IT NOW. And can you know what will happen in two or three years on the interbank market !? I am not and no one can. And in 2008-2009, the interbank rate doubled at the time. Want to take a chance !? I would not advise. Even if the situation lasts from six months to a year, the rate of 20% will eat not only. All your savings, but can derail the whole family budget, because especially in the mortgage at the initial stage, the interest on the loan is 2 / 3-3 / 4 of the loan payment.
This approach is acceptable if the term of the mortgage is very short, and you have significant financial reserves and you can quickly pay off the mortgage without any problems.
When you have a choice in the mortgage “Win something” or “Do not lose” – choose the second. Since in this case, you know everything in advance, and it will not be worse, and in the first case you will find uncertainty with hardly predictable consequences – you can remain without money and without an apartment. The risk is noble, but not in this case.
9. Choose the right time to buy
Not so long ago, I heard a wise phrase from a seasoned real estate investor. What a realtor / investor earns on real estate at the time of its purchase, not the sale. Those. he buys what is cheaper than the market.
What happens in the residential real estate market often? Before crises, people rush to save their savings and are looking for something reliable so that they don’t lose their value. The property! Brilliant! Price tags on the squares before the crises are growing before our eyes and then often fall more significantly. That’s when you need to buy.
Another golden rule of investors is buy when everyone sells, sell when everyone buys. I will add to this that the real estate market in different cities may have its own specific specifics, therefore I am sending you to paragraph 5 of this article.
If you still got into a difficult situation
Unfortunately, the advice to those who are in a difficult situation is much less. You have already signed the contract, which cannot be unilaterally changed.
It remains to comply with the obligations assumed by all forces and means.
1. Try to cooperate with the bank.
It is better to notify the creditor about your problems as soon as possible. Thus, you will gain time to analyze the problems encountered.
Contact the bank in writing, make sure that the application has been registered. In this case, the bank will not be able to lose the application or to pretend that you are late to apply.
2. You should not count on forgiveness.
You will not lower the interest rate, just as you will not be exempted from compulsory home insurance.
The bank can transfer you to quarterly payments or extend the loan term.
In extremely exceptional cases, it is possible to expect a delay of 3-6 months.
3. Reduce appetites.
Reduce your running costs – as much as possible. From entertainment to more modest meals, there are plenty of ways to save the family budget .
4. Agree to a voluntary sale.
If all the above measures taken did not give the desired result. All you have to do is to sell the property in good faith.
On your own you can sell an apartment at the market price, or with a minimum discount of 5 – 7%. In the worst case, if the court decision is not in your favor, the bank will sell the apartment at auction. In this case, the difference between buying and selling can reach 30%, and you are legally obligated as a borrower to compensate the bank for it.
Try to properly assess the cost of the loan before registration.
In addition to interest, you will have to pay insurance premiums, commissions, safe rental, property valuation and many other things, all of which will result in a monthly payment.
Ask the bank to calculate the full cost of the loan before signing the contract. The form can be downloaded on the website of the Agency for Housing Mortgage Lending.
The table separately made the planned costs.
You are not obliged to take a loan:
– preliminary approval of your application by the bank
– filling in such a table.
You can compare the conditions of mortgage programs and choose the most profitable for you.
It is worth turning your attention to the fact that an attractive parameter may lose its attractiveness due to additional conditions. Reduction of requirements for income confirmation, insurance of transaction risks or the size of the down payment is often accompanied by a significant increase in interest on the loan. Or vice versa.
These simple and simple rules will save you, dear reader, from the majority of the pitfalls of the mortgage.
Below is the promised video “10 reasons why we are not rich enough” where I tell, among other things, about good and bad loans.
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