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Mortgage: what is it



The housing issue today is a pressing one for most citizens of our country. When the issue of housing becomes particularly acute, many people think about mortgages, but not everyone fully understand what a mortgage is.

Before you can figure out which type of loan you need, you need to understand the terminology. A mortgage is a form of pledge of real estate. It is it that guarantees that the borrower will be paid back in full.

If we explain the meaning of such a loan in simple words, a mortgage is your property (house, apartment or any other real estate) that you buy with the money borrowed from the lender and immediately pledge it to the lender, the bank, which means that you retain the right to use the property as long as you meet your obligations under the loan.

The most important thing here is not to confuse a mortgage with a mortgage loan. A mortgage loan implies a loan secured by existing real estate, as well as the one that is bought with the money from the loan.

When a bank extends a loan to buy real estate, and the debtor pledges this property, then the property purchased by virtue of the law acquires the status of a mortgage, and the loan is considered a mortgage.

The main difference between a mortgage and an ordinary pledge is that when a mortgage is executed on real estate, the transaction is immediately entered in the State Register of Rights to Real Estate and Transactions Therewith. The pledged property is marked with a characteristic marking that there is an encumbrance (pledge), and an extract from the register can be taken by any interested person, since mortgages are of a public nature.

The principle of the mortgage: how it works

Since the mortgage is a large segment of the real estate market, where large sums of money are operated, even with a stable average income, the client will not be given a loan for the amount needed to buy the property. A simple solution in this case, is to pledge to the bank the property purchased with the money issued by this bank.

If the client violates the terms of the contract on the mortgage, that is, does not pay the installments on time, the pledged real estate is fully in the possession of the bank: so the bank is guaranteed to return their money. Given that the real estate is only becoming more expensive, the bank wins in any case.

As the registration of any loan from a bank, the mortgage requires the collection of a large number of documents, a list of which will vary depending on the selected mortgage program, as well as the bank that executes the transaction: one bank will ask for one set of documents, the other will require additional papers. Therefore, first of all, you should choose a bank, and then ask it for a list of necessary documents.

Types of mortgage programs

Because of the great competition in the housing market, banks are replete with mortgage programs, which are classified according to different principles, for example:

  • The purpose of the loan;
  • The target audience;
  • The presence of co-borrowers;
  • Currency of loan;
  • Fixed or floating rate;
  • Type of property;
  • The way of calculating monthly payments, etc.

The main criterion for classifying mortgages divides them into two branches: residential mortgages and commercial mortgages. The latter in Russia is not so developed, as the acquisition of commercial property involves a lot of risks.

In turn, residential mortgage schemes have been operating in our country for 15 years, many banks have standardized mortgage offers and offer many ready-made programs: standard mortgage, social mortgages, mortgages for military personnel.

Types of standard mortgages

Standard mortgages have the most offerings because they are designed for citizens with stable average incomes. Standard mortgages include:

  • A mortgage on a home under construction is a favorable offer characterized by low interest rates. Not all banks are willing to give out such a loan, because if it is impossible to repay the loan, the bank will only get the right of claim against the developer, but not the real estate itself. Since it has not yet been commissioned, and the deadline may not be met.
  • Countryside mortgages allow banks to cooperate with developers and offer their clients interesting variants on mutually beneficial terms.
  • Mortgages on construction of housing is the best option for those who own a land plot.
  • Second-home mortgages include a number of preferential subprograms with optimal interest rates, good terms and fast processing.