7 life hacks that will protect your mortgage from overpayments
Miscellaneous / / August 25, 2021
1. Choose the optimal loan term
The term of a mortgage loan directly affects the amount of overpayments: with its increase, the amount that must be paid to the bank for using the money also increases. This leads to the idea of taking out a mortgage for a shorter term. But it is important to correctly assess your ability to pay. If you do not pay off the mortgage, the amount of debt will increase due to penalties. And in some cases, the bank may terminate the loan agreement. But usually banks from the first day of delay discuss the situation with the client. In the worst case scenario, you face a lawsuit with the bank and the sale of an apartment to pay off the debt.
In order not to get into a difficult situation, it is better to take a mortgage for a period with a margin. The term should be calculated on the basis of an understanding of a comfortable financial burden, so that funds remain for a normal life and possible force majeure. Monthly payments should not force you to save on basic needs: food, clothing, recreation. You will always have the opportunity to pay off your mortgage ahead of schedule, while reducing the amount of overpayments.
2. Increase your first installment
The larger the amount you deposit at the initial stage, the less the amount of debt and overpayments will be. You can pre-calculate the overpayment using a special formula or on a mortgage calculator.
Suppose you are planning to buy an apartment for 10 million rubles. You want to get a mortgage for 20 years and are ready to make an initial payment of 1 million rubles. At a rate of 10% per annum, the overpayment on the loan will be more than 11.8 million rubles. If you increase the initial payment to 3 million rubles, then the overpayment will be less - 9.2 million rubles. This is a preliminary calculation, the exact terms of the mortgage will be provided to you at the bank.
The bank considers the initial payment, along with employment, level and stability of income, as confirmation of the client's solvency. In this case, the first installment does not go to the bank, but is transferred to the seller, forming, together with the loan, the total value of the property. Some banks offer to take out a mortgage without a down payment, but the interest rate for this the loan may be higher or the bank will require a pledge of real estate that you already have in property.
Mikhail Seroshtan
Head of Mortgage Lending Department - Vice President of VTB.
According to our database, the average down payment is more than 30% of the property value. However, we issue loans with an initial payment of 10% or even less if clients use maternity capital funds that make up at least 10% of the cost of housing. The amount of the down payment should be such that the loan amount and monthly payments are comfortable for the borrower.
3. Explore mortgage programs
It is possible to reduce overpayment on a loan with the help of incentives and subsidies. For example, you can use maternity capital to form an initial payment or repay a loan. This year you can getMaternal (family) capital 483 thousand rubles for the birth or adoption of the first child and 639 thousand for the second or subsequent.
There are preferential programs for the military, for families with children, as well as those who want to buy housing in the countryside or in the Far East. Extending until July 1, 2022How to get a mortgage with state support at a rate of 7%? preferential mortgage: a loan can be issued at a rate of up to 7% per annum. The maximum loan amount for all regions is now 3 million rubles.
You can get a mortgage for finished or under construction housing. Buying an apartment at the pit stage is cheaper than when the house has already been commissioned. True, you will not be able to enter it right away, and you may have to simultaneously extinguish your mortgage and pay for the rent of the apartment. Calculate in advance whether this option is profitable.
Mikhail Seroshtan
Borrowers choose housing both in the primary and secondary real estate market, each of these options has advantages. The purchase of new buildings is now supported by state programs with preferential rates, but at the same time it is necessary to comply with the conditions of such a program. There may also be special offers from the developer for the purchase of real estate. When buying a secondary property, you can take advantage of the discounts that the bank has in addition to the base rate and thereby also receive a favorable offer. In addition, this is an option for those who do not want to wait until the house is completed, but plan to quickly move into a new home and start building their nest there.
If you have already taken out a mortgage loan, you can refinance it on more favorable terms. For example, in VTB are applying for refinancing under the updated family mortgage program at a rate of 5%. Previously, only families with two or more children could participate in the program. Now it applies to families who had their first and subsequent child in 2018–2022, or have a minor child with a disability. You can apply for refinancing at VTB in one visit - you no longer need to sign up and go to the MFC and provide a bunch of documents. You can apply for refinancing on the bank's website. You just need to fill out an application form and show information on the past loan.
Learn more4. Choose a convenient payment system
You can repay the mortgage with differentiated or annuity payments. With a differentiated system, the size of payments is gradually decreasing. The highest financial burden falls on the first years of mortgages. With an annuity, payments remain unchanged throughout the entire loan term, but the final overpayment on the loan will be higher.
You can pre-calculate monthly payments by calculator. Suppose you plan to take out a mortgage for 7 million rubles for a period of 20 years at 10% per annum. With an annuity, you will have to pay 16.2 million rubles, that is, the interest overpayment will reach 9.2 million rubles. In this case, the monthly payment will be fixed throughout the entire period of the mortgage - 67.5 thousand rubles.
With a differentiated system, it will be necessary to pay 14 million rubles, the overpayment will be 7 million rubles. But the first payments on the loan will reach 88 thousand rubles.
Banks use annuities more often. A differentiated payment system is suitable for those who are well versed in finance and can pay in the early years of the mortgage maximum contributions against the background of expenses for repairs, purchase of furniture, rental housing (if an apartment is bought in a building under construction). Also, the borrower needs to take into account that the size of monthly payments under a differentiated system will constantly change, so it will become more difficult to plan a family budget.
5. Make payments ahead of schedule
There are several options for paying off your mortgage ahead of schedule.
- Reduce the loan term. Helps to increase the part of the regular payment, which is aimed at paying off the principal debt, and to reduce the share of interest.
- Reduce monthly payment. The loan term remains the same, and the balance of the principal debt is distributed over this period. Most of the monthly payment is accrued interest, and a smaller part is the principal debt.
- Use the combined option. With its help, you can reduce both the term of the mortgage and the size of the payment.
It is more profitable to shorten the loan term, because in the end you will overpay less in interest. But reducing the regular payment is safer: if income suddenly falls, it will be easier for you to pay off the bank. The best option for many will be a combined scheme. For example, you can make a certain amount ahead of schedule, reducing the monthly payment, but then continue to pay on the mortgage in the same amount as before. This will reduce both the mandatory payment and the loan repayment period.
Mikhail Seroshtan
It is necessary to repay the mortgage ahead of schedule when such an opportunity arises - there are no restrictions. The main thing is comfort and rational calculation of your capabilities. This also applies to the selection of the parameters that you want to reduce.
6. Refinance your mortgage
Refinancing is the registration of a new loan to repay the old one. Thanks to him, you can get the best interest rate and thereby reduce the size of the monthly payment. The game is worth the candle if the difference in rates is at least 1%. Sometimes, in order to open a new loan and pay off the old one, you need to pay insurance premiums, notary services, and so on. After all the calculations, it may turn out that it is more profitable not to conclude a new contract.
In some banks, for example, there is a temporary surcharge to the refinancing interest rate - for the period when the collateral is reissued in favor of a new lender. This process can take 2-3 months, during which you will be charged an increased payment.
Mikhail Seroshtan
The mortgage can be refinanced multiple times. Banks evaluate such borrowers on the "nothing personal" principle: they go through standard procedures approvals in accordance with the requirements of the bank, regardless of experience refinancing.
Some people do not take the risk of taking out a mortgage, because they are afraid that they will not be able to pay the loan on time. But a good bank will always find a way to meet the borrower halfway. V VTB when refinancing a mortgage, you can use the "Deferred Payment" option and not pay the loan for three months without increasing the amount of the debt. In addition, the bank does not have an increased refinancing rate for the period of paperwork.
Apply to VTB it is also possible to refinance a mortgage in another bank. In this case, the rate will be at 8.2% per annum.
Submit your application7. Get a property deduction
When purchasing real estate, you can return up to 13% of the value due to property deduction. Each person can apply for a tax deduction once and subject to the limit. The maximum amount for calculating the tax deduction for the construction or purchase of real estate is 2 million rubles, even if yours was worth more. That is, you can return 260 thousand rubles. If you bought an apartment for less than 2 million rubles, then the unused balance can be transferred to another object.
You can also apply for a tax deduction for the interest paid on the mortgage. Here the limit is higher - 3 million rubles. The deduction will be 390 thousand rubles. In this case, the unused balance cannot be transferred to another object.
In total, when purchasing real estate in a mortgage, you can return up to 650 thousand rubles. A tax deduction can be issued on the condition that you receive a white salary and pay income tax at a rate of 13%. Deductions cannot exceed the amount of income tax paid. For example, if you have added 100 thousand rubles to the budget in a year, the deduction cannot be higher than this amount. But the balance can be carried over to the next year.
In some cases, it is impossible to issue a property deduction: for example, if the apartment was bought at the expense of maternity capital or budget funds.