Ways to reduce your monthly mortgage payment
Loan restructuring
Restructuring is a revision of the terms of the existing mortgage agreement.
The loan term increases, and the monthly payment decreases. However, restructuring depends on the age of the borrower. So, if in a particular bank the mortgage must be paid off before the borrower reaches 65 years of age, and the loan is issued for the maximum period, then restructuring in this case is impossible. The bank is not obliged to agree to restructuring - the decision on this remains at its discretion.
Those borrowers who are faced with difficult circumstances can apply for restructuring:
- permanent or temporary loss of ability to work, disability;
- dismissal due to staff reduction, salary reduction;
- registration of marriage or divorce, birth of children - any family circumstances due to which the borrower’s income has decreased.
The borrower can also apply for a credit holiday. A grace period is provided to solve financial problems. The maximum duration of vacation is up to 6 months.
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Refinancing
Refinancing is refinancing in another bank (for example, a Sberbank client can switch to VTB 24 due to more attractive interest rates).
Refinancing offers the consolidation of all loans into one . If a client pays off a mortgage, a consumer loan and repays a credit card debt, then the entire total debt can be combined, which reduces interest rates - after all, the new bank usually offers a loan on favorable terms compared to the previous institution.
At the same time, the applicant must meet the requirements imposed by the other bank in relation to borrowers.
Use of government support
If a second or third baby appears in the family, then the spouses have the right to apply for state subsidized mortgages.
Interest rates that exceed 6% will be covered from the state budget. The period of support is up to 3 years (when there are 2 children in the family) or up to 5 years (when parents are raising three children). If parents who are currently enrolled in the Family Mortgage program have another child, the grace period will last up to 8 years.
Renting out housing
If the borrower has other housing, he can rent out the mortgaged apartment .
If there is no opportunity to move, then you can rent out one or two spare rooms in housing. By using the money received from tenants to pay off the mortgage, you can significantly reduce the financial burden on the family budget. As a result, the debt will be repaid earlier, and the final overpayment will be significantly reduced. Typically, banks do not check whether third parties are using a mortgaged apartment. At the same time, the loan agreement specifies the conditions for a possible lease.
Some people pay off their mortgage entirely with rent. On average, credit apartments pay for themselves in about 10 years.
Reduction of additional insurance payments
Without collateral insurance, a mortgage cannot be issued.
Most often, borrowers choose an organization of 3-4 bank partner companies to pay for the policy. But according to the law, the client has the right to contact another insurance company, choosing it independently and saving up to 50% of the cost of the policy. Since the mortgage is issued for a long term, you can draw up an insurance contract for a year, and then renew it by contacting different companies, depending on the conditions offered. There is an opportunity to save up to 40 thousand rubles annually.
How to reduce mortgage interest? The borrower is recommended to insure life and health. This service is voluntary, and clients often refuse it, not wanting to spend money on paying for insurance. At the same time, if you refuse life and health insurance, the annual rate increases by 1-2%.
Ways to reduce rates for potential borrowers
Correctly carried out work on concluding a mortgage loan agreement can significantly reduce the payment rate for the loan. To do this you need:
- insure life and health - reduction of 1%;
- buy housing under construction from Sberbank partner companies - reduction to 2%;
- receive wages from a lender - recalculation downward by 0.5%;
- registration of a mortgage electronically - minus 0.1%.
Thus, you can reduce the mortgage interest rate by a total of 3.6%.
Additional features and nuances
If you don't have a mortgage yet, there are several ways you can reduce your monthly payment.
The first way is to get a mortgage for a maximum period . The monthly payment will be less, but the final overpayment will be significantly higher. At the same time, a small amount of monthly payments reduces the risk of non-payment of the loan.
The second way is to choose annuity payments instead of differentiated ones. The first assume the same amount of contributions throughout the entire loan. With differentiated payments, interest is calculated on the fixed part.
Since in the first years of loan repayment the main part of the payment is interest, then at this time the amount of contributions is significantly higher. Subsequently, by the end of the term, the main part is spent on repaying the debt itself, and the amount of monthly payments is reduced.
If you plan to take out a mortgage, for example, from Sberbank, then the borrower has no choice - the loan is provided only on the terms of annuity payments. In general, differentiated payments are more profitable for the borrower, but not all banks have a similar debt repayment scheme. You can get a mortgage with differentiated payments from Gazprombank, Rosselkhozbank.
Finally, monthly payments along with the loan term will be minimal if the borrower provides an impressive down payment.
How to calculate interest on a Sberbank mortgage
Mortgage interest is calculated according to specific formulas, which are derived based on the basic parameters of the loan. The loan calculation takes into account the loan amount, credit period, type of mortgage, and participation in promotions. There are several ways to calculate interest:
- using a loan calculator;
- by visiting a Sberbank branch;
- Calculating it yourself using the formula.
The first way to calculate the interest on a Sberbank mortgage is to use the Sberbank Online calculator
You can find out the amount of interest on a mortgage on the website sberbank.ru. To do this you need:
- Go here and choose the type of loan that suits you.
- After you are redirected to the page of the selected product, fill out the fields of the calculator that opens.
- Designate a suitable way to display information - in the form of a table or graph.
- Confirm the settlement transaction.
After processing the information, complete information on your mortgage will be provided:
- credit period;
- bid;
- amount of credit;
- monthly payment;
- amount of overpayment;
- start and end of payments.
On a note! You can calculate mortgage interest using third-party services that offer a free loan calculator, for example, here. It is accessible to any Internet user, does not require registration, quickly calculates interest, and has a user-friendly interface.
The second way to calculate the interest rate on a Sberbank mortgage is to visit a bank branch
If it is not possible to find out information on a mortgage using the Internet, you will have to go to the nearest Sberbank branch. A bank employee, having received the necessary information from the client, will carry out and provide all calculations.
On a note! The big advantage of contacting a bank is the opportunity to find out all the nuances of lending and hidden costs, which are not always displayed in the online calculator report.
The third way to calculate the Sberbank mortgage percentage is using the formula
All calculations for the mortgage provided, regardless of whether it is done by an automatic program or by a bank employee, are carried out according to economic formulas. If the borrower wants to understand the essence of mathematical calculations and independently calculate the amount of the required payment, he can use one of these formulas:
- formula for annuity (fixed) payments: Payment = Mortgage Amount*(i*(1+i)ⁿ/(1+i)ⁿ-1);
- formula for differentiated payments: Payment = Mortgage amount/n+balance*((i*30)/365).
In the formula, the symbol “i” means the interest rate, and the symbol “n” means the loan term in months.
If you decide to reduce your mortgage interest rate at Sberbank, try to resolve this issue within the bank. The staff will likely help you optimize your mortgage to reduce unnecessary costs. Well, if all the options used do not bring the desired result, transfer the mortgage loan to another bank.
Let's sum it up
So, there are many ways to reduce your monthly mortgage payment, whether you have an existing one or one that has not yet been taken out. If you encounter financial difficulties, you can contact your bank for restructuring or a third-party lending institution for refinancing. You can also save on insurance and rent out the apartment (or part of it).
Those who have not yet taken out a mortgage are advised to enter into an agreement for the maximum term, choose annuity payments and make a large down payment.
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How to reduce the mortgage interest rate at Sberbank for potential borrowers
If applying for a mortgage is only in your plans and the loan has not yet been issued, you need to take a closer look at the terms of the mortgage from Sberbank. A competent approach to this issue will help to significantly reduce the interest rate. Necessary:
- Submit documents showing your income.
- Study current promotions and become a participant in one of them (“Young Family”, “Showcase” and others).
- Initially make a down payment that exceeds the minimum amount.
- Reduce the credit period.
- Take out an insurance policy.
On average, subject to basic conditions, it is possible to reduce the rate from 0.1% to 4%.
Formation of monthly payment
In order to reduce your monthly mortgage payment, you should understand how the amount of debt and the payment schedule are formed.
Banks offer various mortgage programs: for a new apartment, for secondary housing, for country real estate. There may also be various preferential loans with a reduced interest rate: military mortgages, for doctors, for young families, for civil servants and employees of budgetary organizations, with state support, regional programs, using maternity capital.
Thus, the monthly payment is based on: the loan amount, the down payment, the cost of the purchased property, the income of the borrower and his family, the mortgage term and the interest rate. It should be remembered that the higher the total income of the borrower's family, the shorter the term and the larger the debt payment.
There are two types of payment schedules: annuity - in equal parts throughout the entire period, and differentiated - the payment amount gradually decreases. With an annuity schedule, the payment is structured in such a way that interest is paid in the first half of the term, and the body of the loan (the amount of debt itself) is closer to the end of payments. With a differentiated schedule, the loan body and interest are paid simultaneously. Of course, it is convenient to pay one fixed amount every month and not get confused. But when the question is how to reduce your mortgage payment, a differentiated payment schedule will be indispensable.
Two legal ways to reduce your loan payment
How to reduce your mortgage payment
You can reduce your mortgage payment if you reduce additional costs when signing a loan agreement. For example, you can take out risk insurance not from a bank. The state provides the opportunity to use maternity capital as an opportunity to partially repay the loan amount. You can also reduce your mortgage payment through restructuring and refinancing.
Is it possible to increase the loan term?
If the borrower’s financial situation has changed and he cannot repay the debt monthly in the same amount, a procedure is provided for reducing the contribution amount. In this case, the borrower can contact the bank with an application to reduce the mortgage payment. Documents confirming the decrease in income must be attached to the application. Such documents may be:
- A copy of the work record and a certificate from the employment center;
- Medical documents, proof of disability;
- Birth certificates of children.
Based on the application, the creditor bank considers the possibility of reducing payments. This takes into account the absence of arrears and the credit history of the borrower. In this case, the creditor may offer debt restructuring. When restructuring a loan, the bank reduces the amount of monthly payments, but at the same time increases the loan term. This method is only possible if there is a truly valid reason.
It should be remembered that increasing the mortgage term and reducing payments entails an increase in overpayments
