Mortgage lending is a long-term loan provided by a bank to a legal or natural person on the security of real estate: land, industrial and residential buildings, premises, and facilities. The subject of the mortgage is the property remaining in the possession of the mortgagor. Mortgage lending is part of a market economy and affects the development of the banking system. In modern conditions, the value of mortgages for the social development of society is increasing. Housing mortgage lending helps to provide citizens with affordable private residential property, being a powerful factor in the formation of the middle class of society.

In this paper, for comparison, three countries were chosen: the Russian Federation, Germany and the United States.

Table 1.

Mortgage conditions

Minimum age 21 years18 years 25 years
Evaluation of payment abilityAvailability of income, at least in excess of future mortgage payments.For some mortgage programs, it is possible to include in the total family income the income of parents and other close relatives.Monthly payment should not exceed 35% of family income, and the maximum loan period is limited to 20 years. It is also necessary to have a source of stable income and at the same time have a profession in demand in the labor market.the cost of housing for a bank is the value of the property, plus a tax on its ownership, plus the services of a lawyer, plus the cost of making an entry in the property accounting book, plus possible expenses for furnishing an apartment, plus broker services. All money in savings accounts and settlement accounts of the buyer are credited to their capital. If there is a sum of more than 40% of the value of the property, then the terms of the loan will be the best. You can even think about selling another property or car before applying to the bank for a mortgage to get the lowest interest.Accounting for customer income.  When considering an application for the issuance of a mortgage, US banks take into account not only the client’s income from wages, but any of his personal savings, including pension, as well as dividends, and rental income. For a mortgage, the bank will look at factors not directly related to the credit history, such as: total work experience and seniority in last place, total household income, total debt level, etc., etc. At the exit of 35- a working summer couple with a total income of $ 150 thousand per year and a rating of 760 will have better chances than a 30-year-old couple with only one working spouse with an income of $ 200 thousand, a rating of 790, but a bunch of credit obligations.
Credit historythe borrower’s accuracy is assessed in respect of loan payments – credit history. The presence of debts under the existing loan agreements is a 100 percent basis for refusing a mortgage.The complete lack of credit history is reason for doubt. If the loan agreement, under which there were debts and late payments, was already completed several years ago, you can try to change the opinion of the bank about this fact in its favor.Before deciding to issue a loan, the bank requests information about the potential client from the SCHUFA database. The system stores personal information about borrowers and their financial obligations: debts, maturities and interest, concluded contracts for mobile communication, landline telephone and the Internet.Getting a loan with a bad history at SCHUFA in Germany is difficult. If the database contains negative information about the person, the loan will be refused or offered a high percentage per annum.Over time, these data disappear, so some Germans are waiting for several years to borrow. If money is needed urgently, borrowers turn to private lenders or abroad. For example, Swiss banks issue loans without checking history, but at a high interest rate and with obligatory paid additional services.A credit score is like the second “me” of every inhabitant of America. It shows how respectable you are, whether you can handle money and whether you can be trusted. A lot depends on your credit rating: can you rent a house, take a mortgage or a car loan. Some employers also check the credit history of applicants for employment.
Requirementsto the subject of pledgeHere liquidity is estimated. Depending on how quickly and at what price you can sell the intended object in the market, the bank decides:issue a loan against collateral or refuse to issue it;whether to require additional guarantees from the borrower (use a guarantee or increase the number of guarantors);how much is possible to credit the borrower.In addition to liquidity, for the study of which applies, among other things, market valuation, the pledged object must meet certain other requirements. The apartment offered as a pledge should not be burdened with the rights of residence of minors who are incapacitated, serving in the army by conscription, being in places of deprivation of liberty.The loan is issued by the bank on the security of real estate; the creditor will refuse to take as a pledge an apartment in an emergency house or a house with hardwood floors (due to high fire risk).The big advantage of loans secured by housing is their preferential taxation. The size of benefits depends on federal laws, so it does not hurt to contact the local tax authorities for reliable information. Credit lines secured by housing The so-called credit lines, also opened on the security of housing, differ slightly from loans. They do not look like a loan with a fixed amount and a fixed interest rate. Having opened a credit line, you use your house as a payment means option for current expenses. It’s like a credit card, but without the card itself. The cost of your share of housing is in this case the collateral for an open credit line. Since the bank has a guarantee of repayment of loans, interest on lines of credit secured by housing is usually lower than interest on a regular credit card. Due to the existing risk of non-repayment of the loan, you should not use the money issued on the security of housing to purchase consumer goods such as cars or furniture, as well as to spend this money on rest. Borrowed funds can only be used for reliable investments.
InsuranceA mandatory requirement of all mortgage programs in Russia is the insurance of collateral against the risk of damage or loss. In addition, very often banks strongly recommend to insure the life and health of borrowers, or at least the main one (according to the law, credit organizations cannot make such a claim, but failure to fulfill a recommendation often serves as a reason for refusing a loan).To insure the life of a mortgage taker is a must. Many banks issue loans only with such insurance. You can close this question by  issuing Risikolebensversicherung . This type of insurance allows you to save a certain amount per month, as an addition to your pension. At the end of the contract, all savings can be withdrawn at once or you can start receiving them in installments, as if you were retiring. And in the event of the payer’s death until the end of the contract, another insured event occurs, which entails the payment of not only accumulated savings, but also the amount for which the client was insured.Borrower’s life insurance is usually not required. One-time costs for mortgages in the United States range from 350 to 2 thousand dollars, the buyer also pays a fee of 2% of the cost of the loan, but in addition each year you need to pay 2-3 thousand dollars for home insurance.
An initial feeat least 10%,standard -30%the client already has at least 20% of the property valueThere is a down payment for the purchase of real estate, which is usually equal to 30-50% of its price. In some cases, the first payment can be avoided, but this usually increases the cost of the loan.
Interest ratefrom 8% to 18%from 1% to 8%3.5-7% per annum
Non return If the delay on a mortgage loan is a one-off character, then the borrower will face the fact that the bank imposes a penalty on him or a penalty, the amount of which depends on the period during which he could not make a monthly payment. If the borrower has lost a source of income and non-repayment of the mortgage loan is a long-term one, his further interaction with the lender will develop along a different path. The concept of a mortgage allows the bank to foreclose on the property transferred to it as a pledge, with the result that the borrower who has taken the mortgage loan is left without real estate that was acquired through a mortgage. After the credit organization realizes the sale of real estate and sends the received day for early repayment of the mortgage loan, the remaining part of the funds will be transferred to the borrower.Unforeseen delay without informing the bank – a disaster. The information enters the SCHUFA database for 2-3 years, and the bank sends a request for repayment of the delay with a fine. If the client ignores the payments, the bank terminates the contract with an increased penalty and takes the case to court.If the debtor ceases to pay on the mortgage, it, by a court decision, can be forced to return the loan, putting the property on a forced auction.In America there is a special procedure for the bankruptcy of individuals, the property is sold at auction. At the same time, the borrower’s credit history suffers, its credit score (this is a three-digit number from 850 and below) decreases, and in the future loans for such a borrower will be much more expensive or not at all available.
Special featuresAs is known, since January 1, 2007, the law on maternal capital is in force in Russia. According to this law, a woman who gave birth or adopted a second and subsequent child after January 1, 2007 receives maternity capital in the amount of 250,000 rubles. In subsequent years, this amount will be adjusted for inflation.So, this very maternity capital can be used in whole or in part to pay off a mortgage loan. The truth is that this is possible only when the child reaches 3 years of age.Tilgung.The higher the Tilgung, the higher the monthly mortgage payment and the faster the debt is extinguished. The problem is that the bank is not profitable.Usually, German banks offer Tilgung 1% by default. As a result, the person pays a small amount, as a percentage of the mortgage, and very little in the body of the loan. The monthly installment is very small, much less than renting the same apartment. Thus, in the example above, the monthly installment would be only about 350 €. That sounds very seductive.But paying 1000 € per year to pay off the mortgage in 10 years, we will owe the bank about 90000 €. And how much will we pay the bank? Approximately 30,000 €! That is, in fact, with Tilgung at 1%, people will stagnate, paying mostly only interest on the loan, and the debt will decrease at a snail’s pace.In the USA, unlike in many other countries, there is such an important economic concept as home equity. At its core, equity is the paid share of housing purchased on credit (and in the United States, almost all homes are bought only on credit). Equity is calculated as the total value of a house less unpaid loans for its purchase. This means that the more time you pay off your mortgage, the more your net worth grows. The second factor affecting the value of your share of a house is the fluctuation in the market prices of real estate. For example, if you can sell your home for $ 200,000 dollars, but have not yet repaid a $ 60,000 dollar loan, then your net worth is $ 140,000 dollars. 

The cost of the paid share of the house can be used for all sorts of investments.

We considered the conditions for obtaining a mortgage in three countries. As can be seen from the table, each country has its own characteristics and requirements. Based on the above data, we can conclude that the most favorable mortgage conditions are provided to German citizens.

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