What is cheaper mortgage or consumer loan. What is more profitable than a mortgage or a loan for an apartment

If you are firmly resolved, then try to properly arrange a loan. This is necessary so that buying a long-awaited real estate becomes a pleasant event for you, and not an unbearable burden for many years.

Pros and cons of mortgages

Mortgages are rarely taken "from a good life", most often they are issued to solve their housing problems. You get a clear plus: you solve your housing problem. But on the other hand, there is a clear minus: you overpay for the service, sometimes you can buy another apartment for the interest paid for the entire time.

There are three main advantages of a mortgage:

A quick solution to the housing issue - if you live in a rented apartment, then you experience some discomfort and restrictions in the arrangement of housing. Every month you have to overpay money to the owner of the square meters, this can last for years. Ultimately, at the end of your life, you will be left without your apartment, having overpaid a huge amount of money over the years. The mortgage will allow you to immediately call into your home, the only restriction is that you cannot sell or change an apartment without the permission of the bank.
You can save money - surprisingly, but an apartment on credit can cost you a discount. For some categories of citizens, the state compensates part of the interest at the expense of budget funds, so the overpayment will be less. For example, for the military, public sector workers, large families, etc. For more details on mortgage benefits, see the video.
Investing - you can take out a mortgage and make the borrowed funds work for you. The tenants will pay your monthly installments, and you only need to control this process and sometimes add money to the monthly payment. After a while, you will have your own property.

Along with the advantages, the mortgage also has disadvantages:

Large overpayment - Russian banks are still far from the European 3-4% per annum. Only a few financial institutions can offer 8-9% per annum, and then on condition that they receive a salary from this bank, life insurance, etc. These percentages for a long period of time with a significant cost of housing lead to a huge overpayment of hundreds of thousands of rubles.
Long term - it is difficult to predict your financial situation in 20-30 years, for which the average mortgage is issued. In addition, all this time you will have to save on everything and even give up the necessary things in order to pay off the mortgage loan installment.
The risk of losing an apartment - for such a long period of time you can get sick, a child will be born in the family, unforeseen expenses will appear. If you do not systematically pay the bank on the loan, then the financial institution has every right to sell your apartment and pay off the existing debt at the expense of this money.
The complexity of registration - mortgages are not issued to everyone, for this the bank must be sure of your solvency. To do this, you need to provide income certificates, purchase insurance at your own expense, pay for notary services. It is difficult and expensive, you need to prepare for this.

Advantages and disadvantages of a consumer loan

This is an opportunity to quickly purchase those purchases that you have dreamed of for so long. For example, you can buy an expensive couch, a TV, a smartphone of the latest model, or all at once. Personal loans are inherently inappropriate. This means that the bank has no control over where and on what you spend your money.

It is interesting! Consumer loans are issued very quickly: some banks issue them in 10-15 minutes. You can get money remotely, that is, you don't even need to come to a bank branch. Applying via the Internet and transferring money to a consumer credit card has become the norm and even a natural trend in the development of lending.

The main disadvantage of a consumer loan is its high cost. Banks and MFOs issue consumer loans in most cases without collateral, therefore, they set a high interest rate. It covers the possible risks of a financial institution due to non-repayment of debt by a part of irresponsible and unscrupulous borrowers.

How is a mortgage different from a consumer loan?

A mortgage is a form of collateral, but for most people it has become synonymous with an apartment loan. Consider how a mortgage differs from a typical consumer loan:

The mortgage has a long term of lending, this type of loan is issued for 20-30 years, sometimes for 50. Consumer loans are issued for 1-3 years, very rarely - for 5-7 years.
Interest rate - for mortgages it is 9-12% per annum, consumer loans will cost more - 15-20%. Instant loans will cost 3-5% more per annum. For MFOs, the rates are completely different, here you have to pay 1.5-2% for the day of using other people's money.
Loan amount - a rare consumer loan is issued in the amount of more than 500 thousand rubles. For a mortgage, an amount of several million rubles is the standard norm.
An application for a consumer loan is considered in 1-2 days, sometimes even faster. Mortgage documents are collected and considered up to a month.
Mortgages are issued exclusively in banks, consumer loans can be obtained from MFIs or even from individuals.
The mortgage is by default issued against bail, otherwise is impossible. A consumer loan is most often issued without collateral. Getting a consumer loan secured by collateral is more the exception than the standard rule.
The mortgage entails additional costs: purchase of insurance, payment of notary fees, etc.

The acquired real estate under the mortgage will not be your property until the moment when you fully pay off the debt on this loan. This means that if necessary, you will not be able to sell it;
With the seeming "cheapness" of the mortgage, due to the rather low rates on it, in the end you are significantly overpaying for the acquired property due to the long term of the loan. On average, the overpayment reaches 100-200%;
High requirements for borrowers on the part of mortgage banks, which not everyone can satisfy;
You will have to submit an impressive package of documents in order to apply for a mortgage loan;
A prerequisite for a mortgage is the payment of annual insurance premiums, which actually increases the cost of the loan;
If the object of purchase is secondary housing, then you will have to additionally spend money on the services of licensed appraisers.

The pros and cons of consumer lending

In the event that you decide to consider a consumer loan as a source of financing for the purchase of real estate, you will encounter a number of positive and negative aspects of such a choice. And now everything is in order, we will consider in detail each group of factors.

Advantages of obtaining a consumer loan:

Quite loyal requirements from banks to borrowers under consumer loan programs;
Quick registration of such loans and, accordingly, their prompt receipt;
If you decide to take a loan from the bank in which you had a deposit, then you can safely count on a discount from the established interest rate on the loan;
You will not need to submit a large number of documents to the bank;
Due to the fact that consumer loans are provided for relatively short periods, not such a large overpayment is generally obtained in relation to mortgage lending.

Cons of obtaining a consumer loan:

You can apply for a consumer loan for relatively small amounts;
Fairly high interest rates, especially in comparison with mortgage programs;
Since the terms of consumer lending are for the most part short, you have to pay quite impressive amounts on a monthly basis, relative to your budget. And this means that you will have to reconsider the way of life that is already essentially familiar to yourself and go into a total economy mode.

We have listed all the pros and cons of mortgages and consumer loans, now I would like to give some advice. The fact is that after analyzing the positive and negative aspects of both programs, a certain compromise can be found. And it is as follows: if you have saved up a fairly impressive amount of your own funds for an apartment, which, for example, is equivalent to 70% of its value, then it is worth taking a closer look at consumer lending in this case. Perhaps, in this case, it will be a more profitable solution, because all the initial data of a consumer loan is quite suitable for you. The amount that you will be offered for a consumer loan will be enough to add and buy an apartment. At the same time, due to a short lending period, the total percentage of overpayment on the loan will be clearly less than 100% of the cost of the apartment.

In the same case, if you do not have your own funds in the asset, then most likely you will not be able to afford consumer lending. It is quite logical in this case to consider a mortgage. The only exceptions are those circumstances when your monthly income is stable and it is really very high, sufficient to withstand the burden of large monthly payments.

Comparative calculation

And now let's move on directly to the calculation of mortgage payments in comparison with a consumer loan.

The calculations will be based on the following initial data: the amount of the required loan - 2,500,000 rubles; mortgage rate - 11% (average), and on consumer loans - 17% (average). The term of the mortgage is 15 years, and the term of the consumer loan is 3 years. The amount of payment of insurance payments on a mortgage is 1.5% per year (average value).

After reviewing these calculations, you can now be convinced of the reality of all the above facts. If we argue on the basis of the principle of the economic component, then on the face of the consumer proposal, the overpayment will eventually amount to 708,745.45 rubles or 28.35% of the cost of the apartment, and on the mortgage 3,177,187.21 rubles or 127% of the cost of the apartment. If you look at the amount of monthly payments, then on a mortgage they will amount to 28,414.92 rubles, which is quite realistic for a family with an average and slightly above average budget. And on a consumer loan, you will have to pay 89,131.82 rubles a month, which implies a very high income.

Mortgage or loan: which is better?

Buying your own home is the most significant purchase in a person's life. It is good if income allows you to accumulate the required amount in cash in a relatively short period of time.
But for most Russians, the only option is to use the bank's borrowed funds. Which loan program to choose: mortgage or consumer? Let's compare the conditions, advantages and disadvantages.

Before looking for an answer to the question, which is quite relevant for many Russians: "Mortgage or credit: which is more profitable?", You need to decide on the key points:

The amount of the required loan amount.
Optimal loan term.
Purpose of the acquired housing

According to existing banking proposals, it is easy to trace that unsecured consumer loans are limited to the amount of about 500,000 rubles. The mortgage provides an opportunity to receive borrowed funds at a time in a significantly larger amount.

To calculate the optimal loan maturity, loan officers advise to start from the definition of the monthly payment amount. It should not exceed 30% of the total income. For consumer loans, the loan term is limited to 5 years (in rare cases - 7 years), a mortgage loan can be issued for a period of up to 30 years.

The mortgage loan is accompanied by the imposition of an encumbrance on the acquired property. According to Art. 12 and the provisions of Ch. V of the Law "On Mortgages (Real Estate Pledges)" dated July 16, 1998 No. 102-F3, there are a number of restrictions on the use of housing, failure to comply with which may entail the bank's requirement as a mortgagee to terminate the loan agreement and pay off all debt at a time.

For example, if this is not stipulated in the agreement with the bank, you cannot register third parties in mortgaged housing or rent it out. Home sales are also complicated by the need to pre-pay off existing mortgage arrears. An unsecured consumer loan allows you to manage your existing housing at your own discretion.

In addition to these main points that determine the profitability of credit programs based on their purpose, there are other nuances for comparison.

Mortgage or loan: we compare the requirements of the bank

To apply for a loan, the bank only needs to check the borrower, his solvency and solvency. In many ways, these basic criteria are evidenced by the provided income certificate and the presence of a surety.

With a mortgage, in addition to the borrower's candidacy, the purchased apartment is also carefully checked. This significantly affects the period for consideration of the application.

If, with a good credit history, the borrower can obtain the required loan amount within 1 business day, then the bank takes 5 business days to consider the possibility of providing a mortgage loan.

Don't know your rights?

And of course, the package of documents required for registration of a mortgage significantly exceeds the number of documents required for a consumer loan.

Collecting documents for a mortgage loan, subsequent registration with Rosreestr, maintenance (renewal of insurance and current certificates of income) requires additional investments and time from the borrower.

Mortgage or loan: compare the interest rate

Thanks to the activities of the Agency for Housing Mortgage Lending OJSC (AHML, now renamed DOM.RF JSC), established by the Government of the Russian Federation in 1997 in accordance with Decree No. 1010 dated 26.08.1996, bank mortgage programs are continuously improved, the conditions for registration are simplified, and the interest rate decreases.

Currently, the issuance of consumer loans is accompanied by an interest rate in the range of 12-22% per annum (express loans are quite expensive, they should not be taken into account), and for mortgages the interest rate ranges from 9-14% per annum (for foreign currency loans, it is slightly lower ).

Mortgage or loan: comparing additional costs

Insurance. A mortgage loan, like any collateralized loan, is accompanied by compulsory insurance of the collateralized property. Moreover, in the event of an insured event, the funds will go to reimburse the losses, first of all, to the bank, and not to the borrower, in accordance with paragraph 2 of Art. 36 of the Law "On Mortgages (Pledge of Real Estate)" dated July 16, 1998 No. 102-F3.
While when insuring your own home without encumbrance, it is possible to receive compensation in the event of loss of home or for maintenance or major repairs in the event of an insured event.

The same can be said about the obligatory life and health insurance of the borrower and title insurance - all funds will be used to reimburse the incurred losses to the bank, and not to the borrower and his immediate family (in case of death). This is a rather significant disadvantage of the imposed encumbrance for a mortgage.
Independent housing appraisal. With a mortgage, the cost of assessing the housing is borne entirely by the borrower and is mandatory. Registration of other documents and bringing them into proper form also requires an initial investment.

Mortgage or loan: compare conditions

The most pleasant moment when registering a mortgage is the right to implement a tax deduction (see How to get a property tax deduction on a mortgage) and cash out the maternity capital as a down payment (See. Mortgage under maternity capital: what are the conditions for the down payment?) .

It is also worth noting a check for the legal purity of the acquired housing not only by the borrower, but also by the bank's security service and the insurance company. Additional guarantees that the purchase / sale transaction will not be subsequently challenged is provided by title insurance.

The disadvantage of mortgages is the limitation in the choice of secondary and primary housing. Many options are cut off at once, for example, for the developer's new buildings, which for some reason do not suit the bank, or apartments that do not correspond to the technical condition or location of the bank's conditions.

With a mortgage, banks react painfully to the registration of minor children or citizens with disabilities - after all, this causes difficulties with the implementation of the right of encumbrance when the borrower evades loan payments. For the borrower, such a condition is not very acceptable; most of the prescribed benefits can be obtained by these persons only if they have permanent registration at the place of residence.

Thus, summarizing the considered advantages and disadvantages of consumer and mortgage lending, we can conclude that there is no universal answer to the question "which is better: a mortgage or a loan". In each case, both a loan and a mortgage may be the most beneficial for a potential borrower.