What is the difference between a loan and a mortgage loan. Advantages and disadvantages of home loans and mortgages
In the previous article we talked about the difference between a loan and a credit, and today we will look at the differences between a loan and a mortgage. When planning to purchase a home, the most pressing issue is lending. In this article, we decided to highlight in detail the features of these types of loans, consider how a mortgage differs from a loan to purchase a home, and help the reader choose the most profitable option.
The banking services market, as well as the country's monetary system as a whole, is continuously developing. Leading companies in the sector are constantly developing new financial products and instruments - a variety of cards, online services, targeted loans and much more.
What is a mortgage loan?
This concept refers to the service of providing funds secured by real estate. Most often this is an apartment, house or plot of land. The borrower does not have the right to dispose of funds at his own discretion, since their issuance is targeted.
The guarantor of the mortgage is the purchased property accepted as collateral. If the debtor fails to fulfill its obligations under the agreement, the bank has the right to sell it through auction.
Advantages and disadvantages
The advantages of mortgage loans include:
- variable down payment size;
- comfortable monthly payment amount (a long term allows you to pay off a large amount in installments convenient for the borrower);
- low interest rate compared to other types of lending (8-13% depending on various factors);
- variety of government programs, preferential conditions for certain categories of citizens (young and large families, doctors, military, etc.). The state subsidizes the purchase of housing and provides the opportunity to use maternity capital for a down payment or repayment of the loan;
- additional preferences in the form of a tax deduction on interest paid for the period;
- preliminary verification by banking structures of the legal purity of the transaction object eliminates problems with the legitimacy of the purchase of housing in the future.
Obviously, this loan provides a lot of additional prerogatives, especially if the user belongs to one of the categories with preferential conditions. But let’s not get ahead of ourselves and to make an objective assessment of whether a mortgage or a loan to buy an apartment is better and more profitable, let’s look at its disadvantages:
- The living space acts as collateral and is owned by the bank until the obligations are fully repaid. This means that the disposal of property is possible only with its approval;
- need for insurance. The borrower is obliged to regularly insure his life and property throughout the entire period. In addition to the fact that these are additional costs, if an insured event occurs, the bank will become the beneficiary;
- paperwork takes a lot of time - the applicant needs to put together a large package for the application, and there is no guarantee of a positive decision on the loan;
- limited list of objects available for purchase. The potential object of the transaction must be approved by the credit institution, otherwise you may be refused a loan;
- It is problematic to register property together with minor children and disabled people. Since the rights of these categories of persons are especially protected by social services, banks rarely take the risk of additional burden on living space;
- significant overpayment of interest. For a long period of use of borrowed funds, the debtor pays a cost several times greater than the purchase price of the property.
To get the most complete picture of what is better and more profitable to take – a mortgage or a loan, let’s turn to the second type and consider what its features and differences are.
A few words about the pros and cons of classical lending
A regular loan also has its advantages:
- ease and speed of registration;
- non-target nature;
- minimum applicant package;
- lack of insurance;
- there is no need to mortgage the property;
- unlimited choice of properties for purchasing a home.
Among the shortcomings we note:
- high interest rate for using funds;
- The loan term is significantly shorter compared to a mortgage;
- high regular payment;
- maximum amount restrictions.
As you can see, the working conditions for both types of loans are largely opposite and mutually exclusive. If you are still unsure which to choose, consider both options in relation to your situation and choose the most suitable one.
In what cases can a consumer loan be more profitable?
The most common situation in which users prefer a non-targeted loan is when they need to borrow a relatively small amount for a short period of time. In the example of buying an apartment, this is 10–20% of the total cost of living space for a period of 1–2 years. A high rate will not play a decisive role, since the borrower will quickly pay off the debts. And the ease of registration, savings on insurance and the absence of other restrictions stated in the disadvantages of a mortgage fully compensate for the overpayment.
The best option would be a loan for an apartment and when performing real estate exchange transactions with an additional payment. The initiator has the opportunity to quickly obtain a small amount of missing resources.
What amount can you expect in both cases?
The size of the mortgage loan is determined based on the conditions of the credit institution and participation in a particular support program. In addition, there are regional characteristics - in Moscow and St. Petersburg the order of numbers can be several times higher.
According to general rules and based on statistical data, financial organizations provide mortgages from 500 thousand rubles to 25 million rubles.
In a situation with classic lending, the lower limit is not set, and the maximum value is about 8 million. When considering applications for large housing loans, banks also require collateral to secure obligations.
Deciding which is more profitable, a mortgage or a consumer loan, can only be done by comparing real bank offers based on individual conditions and specified transaction parameters.
A detailed overview of the differences between a mortgage and a loan
If you go into detail, there is a big difference between the two methods of raising borrowed funds. Let’s select the main criteria on the basis of which we will make a comparison:
- deadlines;
- target;
- interest rate;
- the amount of the down payment;
- risks for the borrower;
- limiting the amount;
- registration procedure;
- associated costs;
- special conditions for provision.
Let's take a closer look at each aspect.
Loan terms and goals
We have already mentioned earlier that mortgage loans have a longer period, it averages from 10 to 30 years, the application is considered 2-3 weeks or more. Consumer loans, on the contrary, are issued for 1–4 years; high interest rates make this type of loans unprofitable for a longer period of time. The approval time ranges from 1 to 5 business days and is established by the internal regulations of the financial and credit company.
A classic loan has no specific purpose and can be taken for any need. In the case of a housing loan, not only the purpose is clearly indicated, but also the specific object for which financing is issued.
The rate is the main difference between a mortgage and a home loan
For many people, the loan interest rate is the determining factor when choosing an instrument. The average value for mortgage offers is in the range of 11–14%. The opponent loses greatly in this indicator, reaching 20% or more.
The given figures are not guidelines for considering banking products; in this example, we only clearly illustrate the spread of tariffs for both types of lending. Individual conditions depend on market conditions, the key rate of the Central Bank, the scale of attracting finance and other factors.
Experts note that for a detailed comparison of benefits, it is necessary to make full calculations in absolute terms, not focusing on the difference in the percentage of the cost of loans, and also take into account non-financial criteria and reservations. To understand the difference between a mortgage and a loan, you need to take into account many factors, which we will discuss below.
Restrictions on total amount and initial payment
The loan amount for a consumer loan without guarantors usually does not go beyond 1 million, while a mortgage issued against collateral reaches 40 million or more (if the scale of the asset allows) - this fact often leaves no questions about what is better to take for the transaction large purchase.
Classic borrowing on a small scale does not require an initial deposit; mortgage, on the contrary, sets the main condition for security in the amount of 10–50% of the transaction value. It follows that in order for the deal to be approved, you first need to accumulate or take on another debt.
Procedure for obtaining a mortgage
The regulated procedure for considering a loan case has significant differences, due to the term of the loan, its volume and the type of guarantor. Mortgage in this context is considered as the most complex mechanism, involving a long-term relationship between the lender and the borrower. Therefore, applicants to receive it undergo a rigorous selection process.
At the first stage, the applicant collects a folder with the following documents:
- passport;
- an extract from the work record book or its certified copy;
- certificate of income in the form of a bank or 2-NDFL;
- proof of availability of the amount for the down payment;
- military ID (for men);
- marriage and birth certificates (if available);
- other documents that indicate permanent sources of income.
The list may be shortened or expanded depending on the regulations of the credit institution and participation in government programs on preferential terms.
The second stage of applying for a mortgage loan (and here we can see how different it is from a consumer loan) begins only after the borrower’s candidacy has been agreed upon. It consists of checking the potential object of the transaction for compliance with the requirements of the collateral property.
The following papers and identifications will be required:
- seller's passport;
- title documents for real estate (certificate of ownership or extract from Rosreestr);
- technical documentation - cadastral passport, approval of redevelopment, technical passport, etc.;
- notarized consent of the seller’s spouse and other owners for the sale of the property;
- a certificate from the passport office about registered persons at this address;
- an extract from the Unified State Register of Encumbrances confirming the absence of encumbrances.
A regular loan can be issued using 1-2 documents. If the amount of debt is large, it is possible to attract guarantors. This fact is rightfully considered the main advantage or advantage of a consumer loan over a mortgage.
Related costs
To complete a package of documentation for the purchase of a home, you will have to spend money on notarization of some forms, the services of an appraiser, state registration of the transaction, insurance of real estate and the life of the borrower, and other additional payments.
For lending on general terms, all these expenses are absent. Thus, high interest rates are offset by implicit administrative and insurance costs.
Possible user risks
Taking on debt obligations (especially long-term ones) is always risky. Unforeseen circumstances may deprive the debtor of solvency; this should be remembered and alternative sources of raising finance should be thought through in advance.
If there is a systematic delay in mortgage payments, the bank has the right to demand the property and then sell it at auction to close the debt. Then the debtor is left without an apartment, without money and with a bad credit reputation. It is good if the proceeds from the sale are enough to fully cover the debt.
In the classic version of lending, these threats are also present - bailiffs are authorized to confiscate living space for repayment. But this is done only as a last resort - usually the loan is first restructured or other assets of the borrower are sought.
Insurance also plays an important role in this matter – with its help you can neutralize some of the risks. Explaining the difference between a mortgage and a loan, let us remind you that insurance is a mandatory procedure for mortgage loans, but not for consumer loans.
Do you want to lower your mortgage or loan rate?
If you already have a loan, but would like to get more favorable conditions and reduce your payment, consider the current offers of all banks in one place! Using our online service, you can initiate the refinancing of your home loan and save significantly on interest overpayments.
An online calculator service is available on our website for a detailed calculation of the payment schedule, as well as the ability to check your credit history and submit an application to any bank or microfinance organization via the Internet.
Summary
To sum up the comparison, it is impossible to say with certainty that one type of loan is better or worse than another. Each individual case must be considered separately, and the choice depends on many factors and resources available to the potential debtor. Practice shows that when solving a housing problem, citizens use both mortgage and general-purpose loans based on the amount, rate, desired repayment period and their own capabilities.
As additional material for thinking about the difference between a mortgage and a loan, watch a fascinating video about the pitfalls of both types of borrowing funds.
Video review about the difference between a loan and a mortgage
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The development of the banking sector has led to the fact that many banking products accompany the life of a modern person day after day: people actively use credit cards, receive salaries from banks, and pay utility bills. Most experts note that among the wide range of banking services, standard loans and mortgage lending have become the most in demand. However, not everyone knows the difference between a loan and a mortgage.
Any mortgage is a loan.
From an economic point of view, any mortgage, be it a mortgage by law or contract, is a loan where the borrower’s real estate serves as collateral. In most cases, a mortgage is taken out for the purpose of acquiring real estate by the borrower - an apartment, land, house, cottage, but in some cases the borrower has the right to use the loan funds received from the bank at his own discretion. The property pledged serves as a guarantee for the bank that the borrower will fulfill its obligations under the loan and, if the borrower does not fulfill them, the bank will have the right to sell the property pledged by the borrower.
Despite the fact that a mortgage is a special case of a loan, most citizens consider mortgages to be a special type of banking service, and by a loan they mean non-targeted loans that banks issue in the form of so-called consumer non-targeted loans.
Five main differences between a mortgage and a loan.
- The main difference between a mortgage and a loan is the mandatory presence of real estate as collateral. It is impossible to obtain a mortgage without the lender having a lien on the property. Today, a borrower can take advantage of a mortgage by pledging to the bank not only the housing he already owns, but also the property he is purchasing with borrowed funds. When using a standard loan, there is no need to pledge real estate as collateral.
- Another important difference is the loan amount that a potential borrower can count on. Today, the mortgage amount can be tens of times greater than the size of a standard non-targeted cash loan.
- The third difference between a loan and a mortgage that needs to be mentioned is the loan term. While the standard term of a conventional unsecured loan rarely exceeds 5 years, the mortgage lending market allows the borrower to find a mortgage that can last up to 30 years.
- An important difference is also the level of interest rates for the use of borrowed funds. Due to the fact that the bank’s risks in the case of a mortgage are minimal, the rate on it differs significantly from conventional loans and is lower.
- The last thing that distinguishes a mortgage from a loan is the purpose for which the borrower plans to receive a loan. In most cases, people resort to using a mortgage in order to improve their living conditions, and standard loans can be used by the borrower for various purposes - from purchasing household appliances to purchasing a car. However, it should be noted that in some cases, a conventional loan can also be used to purchase real estate, in connection with which the question is -
Citizens planning to make such a large purchase as real estate often wonder how a mortgage differs from a consumer loan, and which is more profitable to use to purchase a home. This article describes the difference between a mortgage and a loan, what advantages and pitfalls a borrower will encounter when choosing a particular loan product.
Definition of mortgage lending
In fact, a mortgage is one of the types of loan products provided by banks. Due to a number of differences and features of a mortgage from a conventional loan, it still stands out as a separate category. The main difference between a mortgage and a loan is the purpose of funds allocated by the bank strictly for the purchase of real estate, and the money is not issued to the borrower, but goes directly to the seller’s account. At the same time, the real estate does not become the property of the actual buyer after the purchase and sale transaction is completed, remaining the subject of collateral with the bank for the entire loan period. Thus, the concept of mortgage lending means obtaining a cash loan from a bank for the purchase of real estate, on conditions where the purchased real estate becomes the subject of collateral under an agreement and becomes the property of the borrower only after full repayment of the allocated funds.
Main differences
In order to answer the question of how a loan differs from a mortgage, it is necessary to consider the characteristic features of different types of loan products. The difference is this:
- Targeted loan issuance. Despite the fact that consumer loans can be issued for specific needs, for example, for the purchase of a car (car loan) or the purchase of household appliances, lending in the general sense of the word may not be targeted. This means that the client has the right to spend the funds received from a banking institution at his own discretion, while mortgage money can only be used to purchase real estate.
- Decor. Due to the fact that the bank spends significant amounts when issuing a mortgage, potential clients are checked much more carefully than when receiving regular non-targeted loans. In particular, the financial institution uses its own internal security reserves to comprehensively verify the client’s solvency. To obtain such a loan, a more impressive package of documents is required, and sometimes the presence of a guarantor, while a small amount of non-targeted funds can be obtained, literally, with a passport.
- Amounts and terms. Mortgages are issued in amounts ranging from 300,000 rubles to 25,000,000, so it is logical that repayment periods extend over several decades. The amount of consumer loans rarely exceeds the level of 1,500,000 rubles, therefore the terms for repayment are shorter, as a rule, no more than 5 years. Mortgage lending is issued for a long time, allowing the client to pay off the banking organization without significant damage to the family budget. The main condition in this case is that the borrower’s age should not exceed 65 years on the date of the last payment.
- Ensuring compliance with the terms of the contract. In addition to the fact that the decision to issue a mortgage loan is made only after a thorough check of the client, the bank, in order to minimize its own risks, leaves the acquired real estate as collateral. This means that if the borrower fails to fulfill contractual obligations, the mortgaged property can be seized for sale in order to pay off the debt. For additional security, the bank may oblige you to insure both the home itself and directly the life insurance of the buyer.
- Loan interest. The interest rate on mortgage lending is slightly lower than on other loan products. This is explained, firstly, by the fact that the risks of a financial institution, due to the presence of collateral, are minimized, and secondly, due to the significant period for repayment, the bank’s benefit will ultimately be many times higher than in the case of issuing a regular non-targeted a loan at a high interest rate for a short period. For example, at Sberbank you can get a home loan at a reduced interest rate with government support, however, the main condition for participation in the program is the ability to make a down payment of 20-50% of the cost of the purchased home. That is why, when answering customer questions about a loan and a mortgage, what is the difference, Sberbank, for example, refers in its response to the difference in the interest rate.
Important! Mortgage housing, due to the fact that it is collateral until the debt is fully repaid, may be subject to foreclosure if the borrower fails to fulfill its contractual obligations.
Conclusion
Despite the obvious advantages of purchasing a house or apartment with a mortgage, this method of acquiring real estate also has its disadvantages. This includes the need to provide a number of documents to confirm trustworthiness, the need for a guarantor, and the strictly intended purpose of funds allocated exclusively for the purchase of housing. In addition, the most significant disadvantage of this program is that the buyer of real estate becomes the full owner and owner of the home only after full fulfillment of his obligations to the banking institution. Therefore, in situations where a relatively small amount is not enough to purchase your own square meters, it is much more rational to use consumer lending. The money received can be spent on anything, including housing, while the buyer’s ownership rights arise from the moment the transaction is registered in Rossreestr.
The lending market offers the population several types of banking products that are easy to use to purchase housing. The main ones are mortgages and consumer loans. Each of them has its own characteristics, advantages and disadvantages. In order to make the right choice and take out borrowed funds as profitably as possible, it is better to understand in advance how they differ and what type of banking service is suitable in a given situation.
Mortgage and consumer credit: what is common and what is the difference
And these are two completely different types of financing. The key difference is that a mortgage always requires the presence of collateral, which can be either your own home or the property you are purchasing. Consumer loans can be issued with or without collateral. Moreover, in the form of payment guarantees, banks accept not only a pledge of property, but also a surety.
Let's look at the differences in the main parameters:
- Amount to be issued. Maximum limits on consumer loans rarely exceed 5 million rubles, and standard figures vary from 100 thousand rubles to 1 million. Mortgages start at 300 thousand rubles, and the maximum limit is most often limited by the estimated value of the property pledged as collateral. In numbers, this could be 10–100 million rubles.
- Deadlines. Loans are issued for a period of up to 5 - 7 years, mortgages are issued for a period from 1 year to 25 - 30 years.
- Purpose of financing. Consumer needs are understood as a whole range of different expense items, but banks do not check exactly where the money was spent. Mortgage is always a targeted type of lending.
- Method of issue. The loan can be issued in cash or transferred to a bank card with the ability to withdraw money at any time and in any amount. Mortgage funds are not issued in person; the bank, after approving the transaction, transfers them by bank transfer directly to the seller’s account.
- Rates. A mortgage is cheaper than a consumer loan.
- Real estate object. Having received money in cash for consumer needs, the borrower can buy absolutely any property in any locality. Mortgage loans require accreditation of the new building, compliance of the property with the requirements of the bank and insurance companies. In other words, the list of housing available for purchase will be less extensive.
Secondary factors also follow from the above. For example, when taking out a home mortgage loan, property must be insured. On a voluntary basis, borrowers insure life and health, as well as the risks of loss of property rights.
Since a mortgage is closely related to the purchase of real estate, the agreement must include official spouse is involved. It is necessary to obtain consent from him (her) for the transaction, and the spouses also act as a co-borrower or refuse to participate in the agreement, while drawing up a marriage contract. A consumer loan can be taken out without the involvement of other persons, although the purchase of real estate still requires the participation of a spouse. But in this case, the object can be registered in the name of another relative or organization.
When choosing a mortgage, the funds received are always enough to pay for the property, since the limit under the contract is equal to the cost of housing minus the down payment. When applying for a consumer loan, there is a chance that the bank will approve a smaller amount and the difference will have to be covered by other income.
What common:
- The procedure for checking a potential borrower's solvency is used for any type of lending.
- Each of the listed loans can be refinanced. But when refinancing consumer loans, the client almost always has the opportunity to receive a certain amount in excess of the debt to another bank. When refinancing a mortgage, the bank covers only the amount of the debt; in rare cases, it is possible to combine a mortgage loan and several consumer loans.
- Unfair fulfillment of obligations is reflected in the accounting book.
Which is easier to arrange?
Taking out a standard consumer loan is somewhat easier than taking out a mortgage, but only if the amounts are small. It can be obtained without collateral, which will already save a certain number of days, applications are processed faster, the package of documents is much narrower, and the involvement of guarantors is not always required. The absence of a down payment also makes it easier to obtain a loan, but in the banking services market you can also find flexible conditions for mortgages when a down payment is not required.
However, in order to borrow an amount sufficient to purchase real estate, the borrower must confirm a stable and high income. Due to the short payment period, monthly payments will be significantly higher than with a mortgage. Accordingly, more stringent requirements are put forward for earnings.
A loan secured by your own real estate is the same as a mortgage, but on softer terms. The purpose of spending borrowed funds may not be specified; a down payment is not required. But the client must still pledge the property as collateral, as with standard mortgage lending.
Applying for a mortgage is a relatively long process. First of all, a fairly wide package of documentation is required here. It includes not only certificates and documents about the borrower and co-borrowers, but also a whole list of papers on real estate and the seller. Secondly, additional costs arise in the form of insurance, payment for safe deposit boxes, and other organizational issues. But getting approval for a larger loan, with equal income and requested amounts, is easier than for a consumer loan. In this case, the bank definitely has a guarantee of receiving the issued funds in the form of collateral, plus a smaller payment reduces the risk of non-repayment of the loan.
The most profitable loan for real estate
In a literal sense, a mortgage will become a more profitable solution than a consumer loan. Currently, there are quite a few types of mortgages - “On two documents”, “Without a down payment”, “For an apartment/apartment/private house/construction”. Combined with lower rates, this type of financing beats any consumer lending offer.
For more accurate conclusions, you need to compare the financial side of the issue. Let's look at the example of Sberbank loan calculators for a loan of 3 million rubles:
- Consumer loan. Term 5 years, rate 11.9%, monthly payment amount 66,582 rubles. Total overpayment: 994,911 rubles.
- Secondary mortgage. The down payment is minimal – 450 thousand rubles, the rate is also minimal – 8.6% per annum, term 20 years. The monthly payment amount will be 22,292 rubles, the overpayment (the amount of interest for the entire term) will be 2,799,877 rubles. If the lending period is shortened to the same 5 years, then the loan payment will be 52,441 rubles, and the overpayment will be 596,409 rubles, which is significantly less than the loan. With a maximum period of 30 years, the contribution will be equal to 19,789, and the overpayment will be 4,573,788 rubles.
Moreover, the most favorable financing conditions appear here; in practice, the numbers can be even higher. And with such large loan payments, the bank will approve the loan only if you have even greater income. Mortgage insurance will increase the cost of servicing the contract, but monthly expenses will still be significantly less than for a consumer loan.
For a more complete analysis, you can compare the parameters of two financial products within the same institution.
Sberbank of Russia
Loan for consumer purposes:
- Amount of up to 5 million rubles for salary clients; up to 3 million for other borrowers.
- Duration up to 5 years.
- Rate from 11.9% per year.
- No collateral required.
- Receipt method: transfer the amount to a debit card.
Loan for consumer purposes at Sberbank
Amount of credit
up to 6 million
rubles
loan terms
up to 5
years
loan rate
from 11.9%
per annum
* - no collateral required
Non-targeted loan secured by your own real estate:
- An amount of up to 10 million rubles, but not more than 60% of the estimated value of the property being pledged.
- Duration up to 20 years.
- Rate from 12% per year.
- Security: garage, townhouse, apartment, land or house with land.
- Property insurance is mandatory, life and health insurance is optional.
Mortgage for purchasing housing on the secondary market:
- The amount to be issued is from 300 thousand rubles to 85% of the estimated price of the acquisition object.
- The rate is 8.6 – 9.0% for young families, 9.1 – 9.5% for other categories of clients, 9.6 – 10.5% when applying for two documents.
- Duration up to 30 years.
- Down payment from 15%.
- Security before registration of property rights and mortgages is a guarantee or other real estate, after which the purchased property is pledged.
Mortgage for the purchase of living space on the secondary market in Sberbank
Amount of credit
from 300 thousand rubles to
85% of the property price
loan terms
up to 30
years
loan rate
from 8.6%
per annum
* - the rate depends on the category of the borrower
In all cases, the requirements for clients are almost the same - when registering real estate as collateral, you must be over 21 years old, a consumer loan can be taken out from 18 years old, if you have a bank salary card or a pension is credited to your account. Work experience of at least six months at the current place of employment, cumulative, over the past 5 years, more than 12 months.
VTB Bank
Loan for various consumer purposes:
- Amount of up to 3 million rubles for all clients, up to 5 million for salary card holders.
- Rate 11.9 – 19.9%.
- The term is up to 7 years for salary clients, up to 5 years for other borrowers.
Non-targeted loan secured by your own real estate:
- Amount up to 15 million rubles.
- The rate is 11.1%.
- Duration up to 20 years.
- The form of issue is transfer to a card or account.
- Collateral – an apartment in an apartment building located in the bank’s coverage area where the loan is issued. The object may be owned by the borrower, as well as by a spouse or other family members if they are involved as a guarantor.
- Property insurance is mandatory.
Mortgage for finished housing:
- Amount up to 60 million rubles.
- The rate is 9.1%.
- Duration up to 30 years.
- Primary contribution from 10%.
- Collateral is the property being purchased.
- Comprehensive insurance is provided.
Lending to Rosselkhozbank
Consumer loan without collateral or security:
- An amount of up to 1 million for all salary clients, up to 1.5 million rubles for those who have owned a salary card for more than six months, up to 750 thousand rubles for holders of salary cards from third-party banks.
- Duration up to 7 years.
- Rate from 10.5% per year.
- Special conditions: if the loan amount is more than 1 million rubles, only those incomes that are credited to the account at the Russian Agricultural Bank for a period of 6 months are taken into account.
Consumer loan without collateral or collateral at Rosselkhozbank
Amount of credit
up to 1.5 million
rubles
loan terms
up to 7
years
loan rate
from 10.5%
per annum
* - loan amount depends on the borrower’s status
Consumer loan with collateral:
- Amount of up to 1 million for all borrowers, up to 2 million rubles for payroll clients receiving income into the RSHB account for 6 months or more.
- The term is up to 7 years for salary clients and public sector employees, up to 5 years for all other categories of borrowers.
- Rate from 10% per year.
- Special conditions: if the loan amount is more than 1 million rubles, only those incomes that are credited to the account at the Russian Agricultural Bank for a period of 6 months are taken into account.
- Security: surety and/or real estate pledge.
- The funds received are transferred to an account at the RSHB bank.
Mortgage for finished living space:
- Amount up to 20 – 60 million rubles.
- Duration up to 30 years.
- Rate from 9.05% per year, when purchasing real estate from a partner developer – from 8.85%
- Down payment from 15 – 30%.
- Property insurance is mandatory.
Mortgage for finished housing at Rosselkhozbank
Amount of credit
Is it possible to combine a mortgage and a consumer loan?
Combining two types of lending is only possible when refinancing, and such a merger must be included in the list of conditions. For example, refinancing a mortgage at Sberbank will allow you to combine several existing loans taken in other banks, into one new one:
- mortgage for purchase or construction – up to 7 million;
- car loan, credit card, consumer loan – up to 1.5 million;
- take funds for personal purposes - up to 1.5 million.
It is worth considering that not all banks offer such conditions; as a rule, refinancing is divided into mortgage and consumer. If the balance of the mortgage debt is small, then it can be covered with a new consumer loan.
Advantages and disadvantages of mortgages and loans when purchasing real estate
In addition to their characteristic differences, the two types of financing have their own strengths and weaknesses. Moreover, these factors, in some cases, can become decisive when choosing a suitable banking product.
The main advantages of a mortgage include:
- Use of subsidies (maternity capital, federal programs of state support for citizens).
- You can buy real estate in shared or common ownership.
- It is possible to apply using two documents, without supporting certificates of income and employment.
- Refund of funds in the form of a tax deduction.
Among the significant disadvantages are:
- A down payment is almost always required.
- Relatively long and complex design.
- Refusal of voluntary insurance almost always increases the percentage of overpayment.
Advantages of a consumer loan:
- The ability to borrow funds without the involvement of third parties (co-borrower, guarantor) and without the consent of the spouse.
- Issuing money in cash or to your account.
- Almost always there is no purpose for spending funds.
- You can find a financing program in foreign currency.
- There is no requirement for property insurance.
The main disadvantages of lending:
- Increased income requirements.
- Relatively small maximum amounts.
Conclusion - mortgages are cheaper and more cost-effective compared to other types of financing. Under equal conditions, it is easier to obtain and pay, and if necessary, you can always refinance and shorten the term, increase/decrease the payment. Reducing the financial burden will ensure the use of state support, if there is a right to it, and the receipt of a tax deduction (by the borrower and all co-borrowers), if such a right has not yet been used.
A consumer loan for a large amount can be obtained with high incomes that can cover large payments. This is the best solution when the property is planned to be transferred to the ownership of other persons, or if it cannot be accredited and/or insured.
A loan to purchase a home is for many people a real chance to finally get their own apartment.
The conditions for obtaining such a loan vary; accordingly, they can be divided into two types: mortgage and home loan. Let's look at the difference between a mortgage and a loan.
What are the similarities and are there any differences?
These banking products have common features:
- To get a loan, you need to make a down payment. The larger the amount, the more favorable lending conditions you can count on;
- The amount of the contribution is determined individually, depending on the type of property being purchased and other conditions;
- As soon as the agreement is signed, the borrower needs to repay the borrowed funds according to the established schedule and with interest.
There are also some differences that you need to know in order to understand the difference between a mortgage and a loan:
- To obtain a mortgage, a potential borrower submits to the bank all documents that can confirm his solvency. And in order to take out a home loan, the seller of the home provides the buyer with an installment plan;
- An apartment purchased with a mortgage becomes the property of the client from the first day of execution of the contract, but until the debt is repaid, it is encumbered by collateral. If housing is purchased on credit, then until the debt is repaid, the buyer does not have ownership rights to it;
- Mortgage terms are about 30 years; a housing loan is given for only 25 (sometimes more) months.
Now about all these features in more detail.
Main differences
Both methods allow you to purchase real estate using borrowed funds. Payment, urgency and repayment are the main principles of such transactions.
According to the mortgage loan agreement, the borrower receives ownership of the apartment, which is encumbered with collateral until the debt is fully repaid. The debt and interest for the use of money must be repaid according to the agreement. If any financial difficulties arise, you can reach an agreement with the creditor and sell the home or restructure the debt.
The terms of a home loan are more convenient at first glance, but a loan from a developer is also issued under fairly strict conditions. The average loan term is 5-7 months; as for the maximum loan amount, it is lower than with a mortgage.
This is due to the fact that the bank, before signing the agreement, conducts a lot of checks and determines the reliability and creditworthiness of the borrower. Based on this data, the bank’s potential risks are assessed, after which a loan is issued.
The main difference between a home loan and a mortgage is the amount. In the first case, without collateral you can get much less than with a mortgage. But if the client uses the money to pay only part of the cost and he already has the main amount on hand, then such a deal is clearly profitable. In addition, the seller can meet halfway when concluding a deal.
The popularity of mortgages is also due to the fact that the payment terms are 20-30 years. Thus, monthly payments are slightly reduced and even despite the overpayment, at the moment paying is not very strained on the budget.
But in the end, compared to a housing loan, the overpayment percentage is much higher. It seems to be profitable to take out a mortgage, but due to the costs of insurance and the need to provide collateral, the benefits disappear.
As for the financial issue, housing debt may be less of a burden for the borrower than a mortgage. It is best taken by people with high incomes who are able to repay the debt in full within a couple of years. But the seller usually sets fairly low interest rates - only 2% or a little more.
A mortgage will be a more optimal solution for families who have a small but stable income. Often this is the only opportunity to buy a home, even with large overpayments. If the borrower already has about 50% of the cost, then the debt burden is reduced several times. Also, you can almost always pay off your mortgage early.
Now that you understand the difference between a mortgage and a home loan, you can draw conclusions and decide what advantages each of these transactions has.
What are the advantages and disadvantages of these loan products?
First, let's look at the pros and cons of a mortgage:
- This type of lending is so attractive for borrowers primarily because it gives quite a lot of time to repay the loan;
- for most clients with an average salary level, the rates are relatively acceptable, and in order to stand out from similar offers from competing banks, lending conditions are sometimes revised. So you can get a better deal;
- you can easily find a lender, since there are plenty of offers;
- After signing the contract, you can move into the chosen apartment. But although the borrower is considered the owner, the housing is pledged until the debt is repaid;
- To obtain a mortgage, you need to collect a lot of documents, and also spend money on concluding a home and life insurance agreement for the borrower, and this is a lot of money. If insurance is refused, the bank has the right to increase the interest rate by 5% or higher;
- It is impossible to conclude a deal without conducting an independent one.
For comparison, we will tell you the pros and cons of buying real estate using a home loan:
- It is relatively easy to get a loan;
- there is no need to take out expensive insurance;
- the loan term is much shorter than with a mortgage, so the amount of monthly payments can be very serious;
- at the same time, the interest rate for using money is minimal - 2.3%;
- You can get a small amount (usually no more than 1.5 million rubles) and the loan terms are limited.
In any case, you need to choose a more suitable option based on the specific circumstances in the family. If you have the financial ability to handle large payments, then it is better to take out a home loan. Otherwise, a simple mortgage will be more profitable.
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