Mortgage loan: how to calculate interest correctly

Risks of overstatement for the seller

Such a development of events can lead to adverse consequences. This involves some deception and some benefit for interested parties. In practice, in such a transaction there are the following risks for the seller:

• if the transaction is not approved, then formally the seller of real estate undertakes to return to the buyer funds that he did not receive in practice;
• provided that such a situation is revealed, liability for complicity in a fraudulent scheme is provided;
• such a procedure may delay the sale of real estate for a long period of time;
• Additionally, publicity may be observed, which subsequently will not allow the seller to profitably sell his real estate.

A special point should be made regarding the subsequent withholding of tax from the seller in the amount of 13 percent of the proceeds from the sale of an apartment or other property.

Down payment and why you need it

Let's take a closer look at this issue. The fact is that without a down payment, the borrower will not be approved for a mortgage. Banks provide mortgage lending to buyers only on the condition that they immediately pay the seller approximately 15% of the price for the living space. It is this fact that has given rise to the need to inflate the value of real estate. But first things first. See for yourself, 20% is 1/5 of the amount needed to buy a home. Considering that people are purchasing with a mortgage, they are unlikely to have at least 350,000 rubles of free funds. This is where various tricks come into play. Our article is devoted to one of them. Let's answer the question: overestimation of the cost of an apartment with a mortgage, what is it? In fact, this is an implementation of the following scheme:

1. You find an apartment option that suits you.
2. You agree with the seller to inflate the price of his property.
3. Write a receipt that you paid him 15%.
4. Hand over all the papers to your manager at the bank.
5. Get a mortgage for the amount you need.

Let's look at each stage in a little more detail.

• First of all, it is best to choose an apartment from the secondary market. Since when renting a house there is usually a fixed price, which developers will not change. This means that this option is not suitable for us.
• Next, you should look through the advertisements for urgent sale. Typically, the price of such apartments is reduced due to the need to sell it within a given time frame. Perhaps the difference between the market value and the amount requested by the seller will be able to cover your down payment.
• An important fact is a trusting relationship. This most often happens when both parties are interested in the transaction. For example, the demand for an apartment is not particularly high, but you are ready to start processing documents even tomorrow.
• It is mandatory to write receipts for payment of the contribution and its receipt, in two copies each. This fact can protect both of you.
• Together you must decide where and from whom you will order an assessment of the cost of the apartment in order to be able to inflate the price. Perhaps the seller has any necessary contacts for this.
• Next, you submit all the necessary papers to the bank and wait for its decision. If your deception is not caught, everyone will be happy.

It would seem that everything is very simple. But in practice this is far from the case. Overpricing can lead to very disastrous consequences. And, believe me, denial of a mortgage is the least of them. Because if you prove this fact, you may be held administratively liable for fraud. Let's talk in more detail about what you risk when making such a deal. So let's get started.

Types of payments

Coming to the bank and considering a mortgage for a home, the employee asks the client what type of payment he will choose - annuity or differentiated. Many citizens without a higher legal education rely on the opinion of an employee-consultant, which is not worth doing. What is the key difference between them?

• A graduated payment is one that continually decreases until the maturity of your loan.
• An annuity payment is a payment with equal installments of debt repayment.

For clarity, let’s look at a simple example from the reference book: we take 2,000,000 rubles for 20 years at 12% per annum.

It is clear that with an annuity payment, the amount of monthly contributions is not large, but the overpayment to the bank is significant, and the savings amount to 0 rubles. With a differentiated payment, you should wait for four years before a significant reduction in the monthly payment, minimal overpayment and large savings will begin.

INTERESTING! Many banks are canceling differentiated payments, citing low demand. Although the first loans were issued only according to a differentiated scheme.

Overestimation or underestimation

Despite the fact that bank-accredited companies rarely go against the principles, sometimes this also happens. The risk of losing accreditation, and therefore a constant flow of clients, still affects the integrity of the company, allowing for the most objective assessment of real estate.

To avoid trouble, the bank hires its own appraisers who perform two key tasks.

• Firstly, they improve the quality of the appraisal, minimizing the risks of collusion between the borrower and the appraisal company, and also provide the opportunity to make claims against an independent appraiser if doubts arise about the honesty of the previous appraisal. In this case, the bank has the right to do so, since it is one of the parties to the transaction according to the purchase/sale agreement;
• Secondly, the bank reduces the cost of appraisal services, since it forms a wholesale order, and not a single company will refuse a constant flow of clients.

The transaction can be carried out between a bank and an appraisal firm. This explains the biased assessment of the value of housing by a bank appraiser. If the amount is small, the bank has the right to issue a smaller amount of money to the borrower. But such a scheme is rather rare, and proves that it is better not to take funds from a bank with such an approach to the client.

But attempts by mortgage holders to inflate the value of real estate are common. According to unofficial statistics, approximately 30% of such transactions end successfully. But the remaining 70%, especially if the fraud is discovered, loses the trust of the bank, therefore in the future it will be quite difficult for them to take out any loan or carry out other financial transactions.

It should be noted that in order to secure the transaction, lenders require proof of a person’s solvency. At a minimum, the borrower must have a current account in which there is an amount sufficient for the down payment on the apartment.

We assess the risks of participants in an overpriced mortgage transaction

What are the risks involved in the transaction? As for the buyer, his possible losses are minimal. Moreover, even in a situation of insolvency and the return of the apartment to the owner, he can benefit from a property deduction for expenses on interest paid.

What are the bank’s motives and why the borrower may be refused, the reasons are simple:

• if the loan applicant was unable to collect a sufficient amount for the down payment (deposit), then the risk of his insolvency is high;
• It is unrealistic to sell mortgaged property at an inflated price, since the market is saturated with housing without encumbrances. If the debtor fails to fulfill his obligations, the sale of the expensively priced apartment will be carried out at a discount, which for the bank means an outstanding loan and losses;
• The above scheme is accompanied by the transfer of receipts that are not confirmed by real actions, and this is already fraud.

The seller’s risks when overestimating the cost of an apartment for a mortgage are high. If the property has been owned for less than three years, according to the law, when calculating income tax, the income received from the sale is included in the tax base. A tax deduction cannot always reduce the calculated amount, so the seller will have to pay an inflated tax to the budget. This is the first.

Recommended article: Mortgage without a down payment - how to apply?

Secondly, for objective reasons the deal may be terminated. Reasons for termination may include violations of the property rights of minors or incapacitated persons who previously lived in the apartment. (For more information on the risks that must be included in the purchase and sale agreement, see the article: Sale and purchase agreement with a mortgage - important points for the seller and buyer). In legal language, two-way restitution is possible when the parties return to their original positions. Then, the residential premises are returned to the seller, and the money is returned to the buyer, and in the amount that was specified in the purchase and sale agreement.

The overstatement procedure requires the participation of one more party - an appraisal company, which will perform an unreliable assessment, thereby violating the principles of its work. In addition to reputational damage and loss of accreditation, it faces a lawsuit from the lender to compensate for losses incurred if the borrower turns out to be insolvent.

In any case, the parties to the transaction need to realize that actions according to such a scheme fall under the article of the Criminal Code of the Russian Federation of fraud.

Why does a buyer need an inflated price for an apartment in a purchase and sale agreement?

As we said earlier, the main reason for inflating the cost is the ability to avoid a down payment. However, despite this, the buyer risks no less, and even much more, than the seller. But often people are forced to make this deal because they believe that this is their only chance. Why do banks set such conditions under which the majority of young families will not be able to afford their services? Let's look into this issue.

Well, first of all, in fairness, it is worth noting that everything happens for a reason. And not because bank directors came up with this idea one day. Naturally, there are objective reasons for everything.

1. By making a down payment, banks can protect themselves from a possible decrease in the cost of housing. The real estate market is very unstable. And if for some reason the borrower does not repay the loan, they may be at a loss.
2. Checking the client's payment ability. Like any loan, a mortgage is not available to everyone. Through the first payment, the bank, as it were, checks whether this client is reliable. After all, if he has no savings, then most likely he is not a stable borrower. Also, according to statistics, a mortgage without a down payment is not paid at various stages in almost 89% of cases. With this turn of events, you involuntarily begin to understand why they set such conditions for borrowers. Is not it?

How is a mortgage calculated?

The easiest way to calculate a mortgage loan is to ask a credit institution based on average indicators.

To calculate the amount of monthly payments, as well as the amount of overpayment, you need to take into account several characteristics:

• interest rate;
• the price of the purchased property;
• credit term;
• the amount of the down payment.

To perform an independent calculation, you need to decide on the type of payment: annuity or differentiated payments.

An annuity payment consists of paying off a loan in equal payments once a month.

According to the differentiated type of payment, payments are made in equal installments only in relation to the principal amount of the loan. The interest rate decreases monthly, reducing the amount of the contribution.

Calculating your monthly mortgage payment is fairly simple. Why do you need to divide the cost of housing by the number of months equal to the loan term (minus the down payment).

The resulting amount is paid every month to the bank towards the principal debt.

To calculate the amount of accrued interest, you need to multiply the interest rate by the size of the mortgage, and then divide by 12.

This figure must be added to the amount of the principal debt, as a result you will get the amount of the monthly payment.

Next year, the calculation is carried out with a reduced amount.

How to get a mortgage without a down payment, see the article: mortgage without a down payment.

Pros and cons of selling an apartment with a mortgage for the seller

Pros and cons of selling an apartment with a mortgage for the seller
The main advantage of a seller who is ready to sell an apartment to a mortgage buyer in the modern market is the very opportunity to sell his property. The realities of the market are such that apartments that do not meet the requirements of mortgage banks are not sold for years and, as a result, become less and less liquid.

At the same time, for the seller it makes no significant difference what the origin of the money paid to him is - the buyer earned it himself, received it from the sale of his apartment, or took it from the bank. For him, the sales procedure practically does not become more complicated.

The only downside is that a mortgage sale requires a much larger package of documents. In addition, you will also need proof that the apartment has not undergone illegal redevelopment - these days there are fewer and fewer such apartments.

How mortgage overpricing works

A mortgage without a down payment with an overstatement is usually taken according to the following scheme:

1. The buyer asks the seller to inflate the price of the apartment in the purchase and sale agreement (SPA) and write a receipt that the seller received money from him in the amount of the difference between the actual and inflated price as a down payment.
2. The buyer, in turn, gives a receipt to the seller that he borrowed the same amount from him. In this way, the seller insures himself against termination of the transaction, in which he is obliged to return to the buyer the entire amount of funds specified in the contract.
3. The buyer presents the seller's receipt to the bank employees, receives a mortgage and pays the seller an amount equal to 100% of the actual cost of the home.

Questions and answers

Why is an appraisal album needed if there is a purchase and sale agreement and the price is indicated there? Why does the bank need this assessment when it has its own specialists?

The seller has the right to set any price. The buyer may agree or disagree. This is a relationship between two persons involved in commodity-money relations. The bank here is a third, disinterested party. He doesn't care whether the deal goes through or not. But the buyer wants to fulfill his desire not with his own money, but with the bank’s money. The bank was drawn into the deal. He requires guarantees. He needs something as collateral that he can sell and get his capital back if the buyer breaks his promise to repay the debt. How much does the product (apartment) actually cost if it needs to be sold quickly? How will the value fall over the years? The bank doesn't know this.

He needs the opinion of an expert, who is a professional appraiser. Independent - because the buyer does not want to be deceived. The bank requires additional guarantees, and another person enters into the transaction - the insurance company, because over the long years of the loan, anything can happen to both the buyer (already both the borrower and the mortgagor) and the goods (the apartment, which is the collateral ). The insurance company also wants to know how much the apartment actually costs in order to calculate the amount of insurance. In such a situation, the cost of the apartment under the purchase and sale agreement plays a role only in the relationship between the seller and the buyer, when signing a mortgage agreement, in court, and in the tax office. The appraiser gives an answer to the bank’s question about liquidity – is it worth taking this apartment as collateral or not.

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Property value: market value or?

To register a pledge of an apartment, residential building or other property, the bank requires the market value. The term is defined in many legal acts. We will not burden the reader with complex valuation categories, let’s simply say: this is the value at which an object can be sold on the free real estate market, at a price that suits both the seller and the buyer, provided that the parties make their decision without the pressure of negative circumstances.

The term "salvage value" is often used. It is interesting to the lender because it informs them how much money can be gained from a quick sale of the property if, for example, the borrower is not creditworthy.

A “rough” calculation of the indicator that is sometimes used is the market value reduced by 20-30% or minus the down payment.

Extract from the assessment report

The value of collateral is assessed by expert appraisers. The result of the expert’s work will be a reasonable indicator of market value, which will be reflected in a document - a report. Lending banks are not ready to work with all appraisers, but in order to select the best, they carry out an accreditation procedure. The work rules that guide the expert appraiser are professionalism, independence of judgment, objectivity and impartiality.

For the lender, the correctly calculated market value is the “starting” figure for the calculation:

• mortgage down payment amount. Depending on the lending program, equal to 10-30% of the indicator;
• loan for the purchase of real estate. Lenders aim to lend 70-80% of the property's value.

Therefore, banks pay close attention to the assessment result obtained. If the borrower turns out to be insolvent, the property is put up for sale at the value calculated by the appraiser.

I also note that overvaluation is a fairly common reason for refusing a mortgage on such a property. That is, if there is a positive decision from the bank regarding the borrower, the bank also carefully considers the property. Each bank has an acceptable price range for all objects. Therefore, if you try to greatly inflate the price, the bank will certainly refuse. Or, at best, it will issue less mortgage money, while increasing the down payment.

From 3000 “wooden” to 3000 “green”

The traditional assessment scheme is as follows. After receiving approval, the borrower begins searching for real estate. The bank gives an average of three months to search. If an apartment cannot be found within this period, approval will have to be obtained again.

After an apartment is found, the documents for it are transferred to the bank and insurance company. It is at this stage that an assessment of the collateral is ordered.

After receiving the report, the bank makes a decision whether to accept or not accept the property as collateral. Lenders provide a list of appraisal companies they work with. Appraisals can only be made from these appraisers. The cost of the assessment depends on the value of the property and ranges from 3,000 rubles to $3,000 if we are talking about exclusive country houses.

When purchasing a one-room or two-room economy class apartment in the capital, the services of independent appraisers cost an average of 4,000 to 6,000 rubles.

Sales stages

As we have already found out, you should not resort to any deception. That is why we would like to remind you about the stage of a purchase and sale transaction in a standard situation, without inflating the cost.

• First of all, you find the apartment you want to buy.
• Next comes the stage of concluding a preliminary purchase and sale agreement. This is necessary if you are not ready to pay the seller yourself.
• The bank checks the apartment from the legal side.
• An agreement is drawn up and signed by all parties.
• In the case of a mortgage, the bank provides the necessary amount to the buyer. And he, in turn, pays the seller of the apartment.
• Next comes the process of registering real estate ownership.

So, by following these simple steps, you can purchase the housing you need. However, what to do with the down payment if we have excluded the option of inflating the price?

Risks of overestimating the cost of an apartment with a mortgage

In fact, there are not so few of them. We all understand that if the scheme described above is successful, everyone will be happy. But let's talk about what happens if something doesn't go as you planned.

First of all, I would like to note what the seller risks by inflating the price of his apartment:

• You may be accused of fraud.
• If the bank refuses a mortgage, particularly unscrupulous buyers may demand from you the money that they “paid” you according to the receipt.
• You may be invited to the tax office and demand payments based on the inflated cost of housing.

In addition, you will waste a lot of time and nerves, and in the end you will never sell your apartment. Agree, it's hardly worth it.

However, when it comes to the buyer, he has much more reasons for the transaction to inflate the price. Let's take a closer look at them.

How to inflate your home with a mortgage

In order to correctly inflate the cost of an apartment with a mortgage, the scheme must be clearly defined and planned in advance . According to statistics, 3 out of 10 such transactions are successful, because the modern real estate market is so unpredictable and diverse that it can mislead even the most experienced appraiser. The planned price increase is made as follows:

1. Suitable housing is selected, preferably with one owner, so as not to complicate the plans. Let's say its cost is 4.5 million rubles.
2. The acquirer draws up an advance agreement with the owner in the amount of 1.5 million rubles. for real estate at an inflated cost of 6 million (4.5+1.5). By the way, at the same time you can draw up another agreement, but taking into account real numbers.
3. The seller issues a receipt for the advance payment (1.5 million).
4. The acquirer submits to the creditor bank an agreement indicating the cost of housing at 6 million and a receipt indicating the availability of the amount of money required for the advance payment.
5. At the same time, an agreement is drawn up between the seller and the buyer to accept this amount from the owner. This paper is retained.
6. The lending bank gives permission to issue a loan of 4.5 million rubles, which is 100% of the cost of the home (at the current price). But for the bank it will be only 80%.
7. After the transaction is completed, the acquirer gives a receipt to the owner for receiving 1.5 million in advance from him.
8. And the seller, for his part, draws up a document confirming receipt from the buyer of the real cost of the apartment (4.5 million).

Objective reasons for inflating prices

Overpricing may not only be due to fraud. Let's look at what can cause the price of apartments to go up:

• Focus on the upper threshold of the cost of objects. Calculations by appraisal companies are sometimes carried out with different orientations towards the price threshold, which is why there is such a gap. If similar apartments cost: one, say, 4 million rubles, and the second 6 million, the appraisal company takes into account that the living space that the borrower wants to buy will cost 6 million rubles. This is not an error, but simply the specifics of the calculations;
• An error in the documents for the apartment, for example, with the date of construction of the house, etc. This problem does not occur often, but if it does occur, then the cost of living space may be inflated unconsciously, and therefore is not recognized as relevant;
• Changes in the real estate market. Since the market situation is unstable, there is always a risk that prices will collapse sharply. Therefore, the assessment that was made recently can no longer be trusted, since the price in it will be significantly inflated.

Overpricing

The bank has strict requirements for the borrower, the main of which is a down payment of 10-20% of the cost of the property. This is necessary so that the bank suffers as few losses as possible in the event of non-repayment of the debt. But even a small percentage is a fairly impressive amount, which will amount to at least 400-500 thousand rubles; not everyone has it. Some particularly resourceful buyers may suggest that the seller indicate an inflated price in the purchase and sale agreement in order to buy a home without a down payment.

For example, the cost of an object is 3 million rubles, of which the seller needs to invest 600 thousand rubles, or 20%, from his own funds, and take the remaining 2 million 400 thousand rubles as a mortgage. The borrower can agree with the seller that he will increase the cost by 750 thousand rubles, and he will not need a down payment. That is, the buyer must transfer 750 thousand rubles directly to the seller, the bank gives a mortgage for 3 million rubles, this is the actual cost of the property.

But not everything is so simple; you shouldn’t count too much on the price of an apartment being inflated when taking a mortgage. The risks of the seller, just like the buyer, are quite high, and the scam will be discovered at the initial stage. Namely, when the object is assessed by an independent expert, he must also determine the real cost of the apartment, and if it does not coincide with the requested one, the bank will not approve the loan . The buyer, of course, can negotiate with an expert and receive a document with the data he needs, but this is also a bad option, because the chances in this case are zero.

Another option is to agree with the seller on an installment plan for the amount of the down payment; we’ll talk about this risk a little later. In general, I would like to note that the bank is ready to pay only a certain percentage of the cost of the apartment, and not only the price set by the seller is taken into account, but also the assessment of an independent specialist.

Please note that most lenders, in order to protect the transaction from fraudulent activities on the part of its participants, require the potential borrower to provide evidence of the amount he has for the down payment.

There is one more nuance. It is not profitable for the seller to inflate the real value of the property if it has been owned for less than 3 years, because then he will have to pay income tax. Although if the property has been owned for more than 3 years, then this tax does not need to be paid.

Mortgages with overpriced apartments in 2020: is it worth it?

Many citizens who want to take out an apartment on a mortgage cannot save money for a down payment. In order not to make a down payment, some buyers collude with the seller and artificially inflate the cost of the apartment being sold. Let's consider what overpricing an apartment with a mortgage is, what risks it carries for the seller and buyer, and whether it is profitable to do so.

Why inflate the value of real estate with a mortgage?

As mentioned above, the main reason why the parties resort to a transaction with an inflated value of real estate is the buyer’s lack of money for a down payment. Often this is no less than 20% of the cost of the apartment, which in large cities is a significant amount. It is in such situations that the need arises to inflate the cost of the property, get a loan and cover all expenses.

Another reason why people take out an overpriced mortgage is to buy an apartment without renovation. In this situation, borrowers often request a larger amount from the bank than is necessary for its purchase, and spend the remaining funds on home repairs.

Or the third option. The buyer simply needs cash for personal needs - purchasing a car or traveling.

It is the above reasons that push borrowers to take overpriced mortgages. This is not entirely fair and legal, but everyone gets their own benefit.

Cadastral and market value: what is the difference?

Any property has 2 prices:

The market price is the real, objective cost of the apartment. It depends on renovation, location, infrastructure, etc. This figure is also influenced by the general state of the real estate market and the competitiveness of housing: the first floor is cheaper than the rest, and other similar “rules”.

Cadastral price is the amount that is used to calculate property taxes. It is always below the market price. What is beneficial for the owner is that he pays less taxes. The cadastral value depends on the region where the housing is located. Each region has a certain coefficient that is used to calculate the price per square meter.

When obtaining a loan to purchase an apartment, it is important to know exactly its market value. It is she who is being overestimated.

How does overstatement work for a mortgage?

The easiest way to understand the mechanism of overestimation is with an example.

Boris wants to buy an apartment from Victor with a mortgage, but the bank requires a down payment of 20%. The buyer does not have that kind of money, and he plans to receive the missing amount as part of the loan itself.

To do this, Boris negotiates with Victor against a receipt stating that he has already allegedly transferred the amount of the first installment to him. It is best to draw up such agreements under the guidance of a lawyer. Otherwise, you may suffer from fraudulent activities on both sides.

At the next stage, Boris contacts an appraisal company and negotiates with the appraiser to inflate the value. Next, he submits the appraisal report and receipt to the bank, thereby proving that he has fulfilled the conditions for the down payment. Now he needs to wait for bank approval and get a mortgage. Finally, the parties draw up a purchase and sale agreement and conclude a deal.

When is it better not to overstate?

Such a scheme is questionable and cannot guarantee complete security for either party. Both the buyer and the seller must understand what they are getting into. This is especially true for the buyer, because he risks a little more.

There are 3 reasons that should stop you from making an overpriced transaction:

1. The buyer does not have a stable income. This risks the fact that if an unfavorable situation occurs, he may not be able to pay the mortgage. The bank will take away the housing, and if the scheme is discovered, you may find yourself under investigation.
2. The buyer has not established a trusting relationship with the seller. This is a complex psychological aspect. In matters such as real estate and money, you should hardly trust anyone other than your immediate family.
3. The buyer chose an expensive apartment that is difficult to compare with competitors. In such a situation, the appraiser will most likely not agree to give a knowingly false report, because the deception here will be too obvious.

Buyer's risks when the mortgage is overstated

Taking out a mortgage on an apartment without investing any of your own funds into it is profitable and convenient. But remember that a scheme to inflate the cost of an object is illegal. This means that it has its own quite significant risks. Both sides take risks, but now let’s talk about what risks the buyer bears.

Risk 1. They will refuse a mortgage and blacklist you

Do not think that financial institutions are not aware of such fraud. When studying documents, bank specialists will definitely pay attention to the significant difference between the cadastral and market values.

The mildest punishment that awaits the buyer is refusal of a loan. Then the buyer is blacklisted. Do not forget that banks transmit information about unscrupulous borrowers to the Credit Bureau, and in the future you will not be able to take out a loan from this or any other financial institution.

Risk 2. The seller will not return the overstated amount.

The bank transfers the entire value of the property to the seller. He, in turn, must give a certain part to the buyer. In this regard, situations may arise when the apartment owner simply refuses to do this. Therefore, it is necessary to draw up a receipt for the refundable amount. She won’t go to the bank, but she will protect the buyer.

Source: https://IpotekuNado.ru/voprosy/zavyshenie-pri-ipoteke

Why do you need a down payment?

Almost all mortgage lending programs require a down payment, which ranges from 10 to 45 percent of the cost of the purchased property (some banks allow up to 65%). This mandatory contribution has the following main purposes:

• assessment by the lender of the solvency of the borrower who is interested in obtaining a mortgage and applies to the bank;
• established requirements of the Central Bank of Russia in relation to certain mortgage lending programs;
• reducing the lender's risk of incurring losses when providing a loan to an dishonest borrower;
• certain guarantees of the legal purity of the transaction for the acquisition of real estate.

At the moment, many lenders provide for issuing a mortgage without a down payment, however, they establish other requirements for borrowers, or require the presence of collateral. In other situations, the initial payment is a prerequisite for issuing funds to the borrower for the purchase of real estate.

In what cases is a mortgage without a down payment beneficial and when is it not?

Before contacting the bank, it is important to understand whether a down payment is required to apply for a mortgage or whether it is worth doing without it. The absence of a “zero” tranche is not always beneficial for the borrower.

If you have savings, it is better to contribute them to repay the loan. This way you will be able to reduce the interest rate and increase the bank’s loyalty to you. We cannot refuse government assistance. To participate in government programs, you will have to collect a lot of documents, but in the end the cost of the apartment will be much lower.

In a situation where there is no money for the initial mortgage payment and there is no possibility of obtaining an additional loan, the only option is to inflate the cost of the apartment. But before you decide to take such a step, you need to carefully assess all the risks.

Scheme for defrauding a bank

To fraudulently obtain funds from a bank, you need to carefully approach every step. Nowadays, the banking system anticipates the risk of fraud and is very jealous of valuation documents. In order not to let yourself down and not lose the trust of a banking institution, you need to work according to the following scheme:

• Choose the right property. As a rule, buyers are looking for apartments that have been owned for more than three years, giving preference to offers from the secondary market;
• Next, you need to talk with the seller, because this scheme can hit him the hardest;
• The owner of the apartment must write a receipt indicating that the buyer has provided him with the amount of the down payment. This receipt must be taken to the bank;
• The buyer gives a receipt that he took the same amount, so that if the transaction were terminated, each party would remain with their own;
• If the borrower did everything correctly and was lucky, the bank approves the mortgage. The buyer pays an amount equal to one hundred percent for the apartment.

Naturally, bank employees understand that such a scheme is not in their interests, therefore every self-respecting bank has an accredited appraisal company, or even several companies with which they cooperate. These companies independently evaluate the property for which the mortgage will be issued and set their own value, which should be practically identical to the figure specified in the contract. If this does not happen, the seller will be in trouble because his valuation is not adequate and may raise suspicions of fraud.

Concepts of market and cadastral price

At the moment, there are officially two prices for real estate: cadastral and market.

1. Market price. This is the price that a buyer is willing to pay for real estate in a competitive market. It is considered to be as objective as possible, since it is compiled on the basis of available comparative data.

You can install it yourself or by contacting an appraiser. If you turn to a professional, the property owner will receive a detailed report, which is provided to the bank if you need to take out a mortgage to purchase the property. During the assessment, the following are taken into account:

• Facility layout;
• Usable area;
• State of communications;
• Location of the apartment, and so on.

All of the above conditions significantly affect the market value of the apartment, so you can evaluate the property yourself, using sound judgment. If the apartment is in good condition, located close to transport interchanges, hospitals and schools, in a comfortable area, then its cost will be high.

1. The cadastral value is the price on the basis of which real estate taxes are set. A nice bonus is that it is usually lower than the market price, so it is rarely artificially inflated. This is simply not necessary, because by its nature the cadastral price for housing is always lower than the market price. True, even if there have already been attempts to increase it, there is still a considerable difference between the market and cadastral value.

Not many factors can affect the cadastral value of an apartment, so it wouldn’t hurt to know them:

• According to the region index, the average price per square meter is calculated;
• The service life of the house being assessed.

It is not surprising that with such a meager list of evaluation criteria, the market value is a third higher than the cadastral value. Although there are situations when the cadastral and market values ​​of real estate come together, as a rule, this is not very good, because we are talking about old real estate, the market price of which is very low. How can you buy real estate with a mortgage without paying a down payment?

Performing Basic Calculation

Before you contact the bank to get a mortgage, you should familiarize yourself with the current programs and choose the most favorable conditions.

You can study bank offers when visiting a bank or using the website of a credit institution.

Having selected a lending program, you can make a calculation using a mortgage calculator by entering the necessary information into the table (loan size, interest rate, loan term).

Having analyzed the data received, you can contact exactly the bank that suits the borrower according to all the conditions.

But the final calculation is made when submitting an application, so you should not rely entirely on the preliminary calculation.

Submission of documents

After submitting the necessary documents, the bank makes the final settlement of the mortgage.

After the bank verifies the client's solvency, the terms of the mortgage may be adjusted.

Therefore, the final amount may vary compared to the preliminary calculation.

Borrower approval

In most banks, you can perform mortgage calculations not only when visiting the office, but also online on the bank’s official website.

Online payment allows you to save your time, as well as obtain preliminary approval and choose a convenient time for an appointment at a bank branch.

If the size of the mortgage is not very large, then the application can be made electronically, after which bank employees will contact the applicant by phone and inform about the decision made.

During a personal visit to the bank, the borrower must provide copies of the necessary documents and originals for verification.

After verification of the borrower, the final payment is made, and the bank client is given a payment schedule.

Is it possible to take out a mortgage to build a house, see the article: mortgage for construction.

Calculating a mortgage involves determining the amount of monthly payments, overpayments on the loan and the total amount of the loan.

Video: How to calculate a mortgage:

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Down payment on a mortgage and why it is needed

Down payment on a mortgage and why it is needed
Mortgage conditions in each bank differ in their risk policies. The more risk a bank is willing to take, the more favorable conditions it tries to provide. A very important point in such conditions is the down payment.

To take out a mortgage you usually need to save up about 15-20% of the market value of the apartment. Only a number of banks offer mortgages with a down payment of 10% or without it at all.

Attention! You can learn how to get a mortgage without a down payment from our previous post.

There are three main reasons why a bank requires a down payment:

• The requirement of the Central Bank (if a bank starts issuing a mortgage without a down payment or with a low PV, then, by law, it will be required to put more money into the reserve than for a mortgage with a PV of 20%, and this is not profitable for the bank because it could I would like to use this money for lending and making money);
• Minimization of risks (if the bank needs to sell a mortgaged apartment for non-payment, it will not be able to sell it at the market price, and the first payment will be a guarantee of compensation for the difference between the sale price and the market price);
• Confirmation of the borrower's solvency (if a person was able to save money for a down payment, it means that he is able and will most likely continue to pay the mortgage).

Important! There is a misconception that the lower the down payment on a mortgage, the higher the risk of non-repayment and the worse the payment discipline. This is actually a myth. Our practice has shown that borrowers who took out a mortgage without a down payment pay even better than those who found 20 or even 50% of the cost of the apartment.

Is it possible to get a mortgage without a down payment?

To live a full life, young families have to rent an apartment, which is where most of their earnings are spent. Therefore, they cannot save enough for the first tranche. You have to think about whether it is possible to take out a mortgage without a down payment, because paying for your own apartment is much more profitable than paying for a rented one.

For your information

In pre-crisis times, banks fearlessly provided mortgages without requiring a down payment. Today it is extremely difficult to find such offers. Financial institutions don't want to take risks. But you can still get a loan.

There are several ways to get a mortgage without a down payment:

1. Apply for a consumer loan from another credit institution. If the borrower owns real estate or a car, they can be used as collateral. This way the loan will definitely be approved.
2. Take advantage of government assistance allocated to young families, mothers of many children and military personnel.
3. Receive subsidies from regional authorities. This becomes possible for employees of budgetary organizations: teachers, health workers, scientists.

Additional information
Another option to solve the problem is a mortgage without a down payment directly from the developer. Many construction companies conduct similar promotions to attract customers.

Why does a buyer need an inflated price for an apartment in a purchase and sale agreement?

I have a forum message in front of me: “We are selling an apartment. A potential buyer wants to take out an apartment on a mortgage . In the purchase and sale agreement, the buyer asks to indicate the inflated price of the apartment . explains this by saying that “he receives a loan from the bank without a down payment.” Why does he need this, and what will happen to me if I agree to his terms?”

I’ll show you with an example why a borrower who buys an apartment needs to overestimate the cost .

There is an apartment. And, let’s say, the apartment is sold for 5 million. Let’s also assume that the borrower’s down payment, according to the bank’s rules, should be 10%.

This means that the bank will issue, in the form of a loan, 90% of the cost of the apartment. If the apartment costs 5,000,000, then the bank will issue 4,500,000, and the borrower must contribute 500,000 from his own savings.

But the borrower does not have these same 500,000, otherwise why would he deceive the bank? And therefore, he wants the bank to pay for the apartment in full.

How to do it?

The buyer thinks that he needs to come to an agreement with the seller, supposedly he is selling the apartment at a higher price. That is, if the loan is 5 million, and this is 90% of the cost of the apartment, then the seller must agree to indicate 5,000,000 / 90% x 100% = 5,555,556 rubles in the purchase and sale agreement. It is clear that such a strange figure will arouse suspicion, and therefore we round it up, for example, to 5,600,000.

Such cunning buyer-borrowers (who do not have money for a down payment, but who want to buy the entire apartment with credit money) sometimes occur.

And the banks know that this is possible.

That is why the bank insists on appraising the apartment by independent appraisers. And although the appraisers are formally “independent,” they are nevertheless accredited by the bank.

Gone are the days when appraisers easily inflated valuations, deceiving banks. Why? Because there are many appraisers, but few “accredited by the bank”.

Without a bank, few sellers or buyers of apartments need an appraisal.

Being an appraiser accredited by a bank is an honor and pleasure: There are, say, three appraisal companies affiliated with the bank—these three companies have a constant flow of clients from the bank. And those who are not accredited do not have such a flow of clients. That is why appraisers now rarely deceive banks by inflating the value of the appraised apartment.

In addition, in many banks (especially where the bank gives up to 90% of the cost of an apartment as a loan), there are specialists who check the correctness of the assessment made by independent appraisers (in fact, their own appraisers who double-check the assessment of independent appraisers: perhaps a certificate of assessment is not given). In addition, the apartment is advertised, and appraisers, when selecting analogues for evaluation, see an advertisement, including one about the sale of this apartment. It is difficult to explain why an apartment advertised for 5,000,000 was suddenly sold for 5,600,000.

That is, it is not enough for the buyer-borrower to agree with the seller of the apartment on an inflated valuation; he also needs to agree with the appraisers.

Will appraisers want to negotiate? After all, if the bank discovers fraud, the appraisal company may lose its accreditation with the bank, and therefore lose the flow of clients!

What will happen in a “good situation”?

The borrower will negotiate with independent appraisers, who will inflate the valuation. And the bank will not double-check the appraisal of the apartment made by independent appraisers.

In this case, the bank will issue a loan to the borrower, the borrower will give the money to the seller, and the transaction will take place. There is a possibility of such a development of events, but I would estimate this probability at 30%.

But I estimate the probability of another development of events as 70%: Either the borrower will not be able to come to an agreement with the appraisers, or the bank’s appraisers will not believe the assessment of independent appraisers.

In this case, the bank will either refuse to issue a loan secured by this apartment at all, or will give the borrower less money, and the borrower simply will not have enough money to buy the apartment.

The fact is that the bank, when issuing a loan, issues 90% of the lesser: - or the price of the apartment that the buyer-borrower agreed on with the seller; - or the cost of the apartment according to appraisers.

And if appraisers value the apartment not at 5,600,000, as the buyer wants, but, for example, at 4,800,000, then the bank will issue a loan of 90% of this smaller amount.

If the buyer does not have enough money to buy an apartment: - or he will persuade the seller to sell the apartment cheaper; - or he will persuade you to sell the apartment with an installment plan (10% later). Moreover, he will look like a victim of the actions of a “bad bank”: “You saw what kind of bank it turned out to be”! - or the seller will simply have to look for other buyers again.

There is another risk: “In the event of termination of the transaction, the parties are obliged to return what was received under the transaction”: the buyer must return the apartment to the seller, and the seller must return the money, including those that he did not receive. The likelihood of this risk is small: buying an apartment and then terminating the deal - I have never seen this in my practice, but theoretically, such a possibility exists.

That is why I personally am not a supporter of deceiving banks.

Mortgage: risks for the buyer

Buying a home is always a very important step. And doubly responsible if we mean buying an apartment with a mortgage. What risks can a buyer expect? Let's talk about this in more detail.

Bank search

You should start by finding a bank. In general, it is recommended to start looking for a home after the bank approves the loan, since the buyer will have enough time to search for a future purchase. However, some people first look for a suitable apartment, and only then start looking for a bank. And if there are no problems with housing on the market (you can find any apartment), then banks may refuse to issue loans. Therefore, it is better to start looking for housing after the bank has approved the mortgage loan.

Apartment search

Let's say that the mortgage is approved for a certain amount. The borrower finds an apartment that suits him. Only the bank may not agree with the client’s choice. This happens rarely, but it still happens, for example, if it is a problem apartment. Therefore, in order not to waste time, it is better to work together with a realtor. Thus, the speed of finding suitable housing increases significantly.

Buying a home

In this case we are talking about the transfer of funds. I would like to note that the transaction in which the bank participates can be considered perhaps the safest of the existing ones. However, you need to keep your eyes open if the bank offers non-standard payment plans. In addition, there is a probability of bank collapse, although extremely low. We talked about payment schemes earlier.

As for buying a secondary home with a mortgage, there are much more problems here, because, for example, a person who is in a not so remote place may be registered in the apartment. At the same time, according to the documents, he was discharged, but this is done only for the duration of his imprisonment. In the future, the prisoner returns and has full rights to his living space, even if it was sold. This kind of fraud is not that rare in the real estate market, so be careful when checking all the documents for the apartment.

Payments

If a borrower has found a suitable apartment and purchased it, this does not mean that he can relax. After all, now he must repay the debt to the bank, and this takes on average 10 years or more, depending on the loan agreement.

The problem is this: the main thing is that the borrower always has the opportunity to repay this debt. But, as recent events have shown, this is not possible in all cases. Someone was laid off, someone's salary at work was reduced, and now the borrower does not have enough funds not only to pay the monthly payment, but even to pay the rent.

In particularly advanced cases, the bank can seize the apartment and sell it in order to pay off the borrower’s debts. At the same time, the money from the sale of a home is not always enough to fully pay off the debt. Thus, the borrower ends up without an apartment and with a large debt. That’s why a mortgage is an extremely responsible and balanced step.

*****

Generally speaking, a mortgage is one big risk. But risks can be avoided if you use the services of specialists - both realtors and lawyers. In this case, you can avoid risks, although you will have to spend a little money.