LovesTheTeam.com

What is a mortgage?

The main meaning of a mortgage loan isproviding the borrower with collateral real estate as a guarantee for the performance of the assumed loan obligations. The bank represents a loan for the purchase of residential property, and the borrower undertakes to pay the principal amount, interest and other related payments. Although almost any valuable property (residential and non-residential real estate, land, etc.) can act as collateral, borrowers often prefer to issue property acquired through credit funds in this capacity.

Despite the fact that each bank establishesown lending conditions and requirements to the borrower when registering a mortgage, this procedure is strictly regulated by Russian law and is controlled by the work of specially created mortgage agencies.

Making a mortgage loan is very complicated anda multi-stage process, which includes the collection of a large number of documents, the search for a suitable apartment, property valuation, insurance and long-term bank verification of the borrower for its reliability. To facilitate this process, many borrowers seek help from real estate agencies and mortgage brokers.

After signing a loan agreement for the borrowercredit "work-days" begin, namely repayment of the loan. Depending on the conditions of the creditor bank, the borrower will be able to deposit funds into the account in cash or repay the loan by a non-cash way, to do it at any particular date or simply on any day of the month, etc.

Advantages of a mortgage loan

The main advantage of a mortgage isthe opportunity to immediately enter your own apartment, and not to save money on it for many years, while paying a substantial part of the family budget for renting a rental apartment. Real estate, acquired on credit, immediately becomes the property of the borrower and he can register for himself and his family.

Security of such long-term crediting (usually mortgage is formalized for 15-20 years) is provided by insurance of real estate, life and ability to work of the borrower.

Another undoubted plus is the opportunityget a tax deduction in the amount of 13% of the cost of the purchased apartment. This discount actually lowers the cost of the mortgage, as the funds received can be directed to partial early repayment of the loan. In addition, some categories of citizens have the opportunity to take housing on credit on special preferential terms. Today, young families, budget workers and the military can apply for a mortgage under a special program.

Disadvantages of mortgage lending

As in any other form of bankinglending, the main disadvantage of a mortgage is the large amount of overpayment. So, in some cases, the total amount of payments on a loan may exceed the original cost of an apartment by 100%. The amount of overpayment consists of interest for using the loan and annual premiums. In addition, when registering a mortgage loan, the borrower will have to pay out of its own funds the costs of paying for notary services, assessing the acquired real estate and additional commissions of the bank. All these costs are quite impressive.

As the acquired property will beto be at the bank in a mortgage, then it will be imposed restrictions, that is, the owner of the housing can not sell it, exchange it, rent it out, make a redevelopment, etc. until the loan is fully repaid.

The shortcomings of mortgage lending can also include overstated requirements of banks in relation to the acquired housing, work experience and income level of a potential borrower.