The maximum mortgage loan term is 30 years. During this time, anything can change, from the financial situation of the borrower to the economic situation in the country. Therefore, it is better to insure yourself in advance by getting the most favorable conditions for a mortgage. How to lower your mortgage interest rate and who can count on it? We will discuss in the article.
It is possible to reduce the mortgage
Over the past few years, the conditions for granting a mortgage loan have become much softer. The reasons for this were the decrease in the interest rate by the Bank of Russia to a record low and the development of a state support program, under which the state subsidizes preferential rates on loans issued for housing. Thus, the state periodically lowers the mortgage interest on its own in order to stimulate economic growth in the country.
Reduce the rate on already issued loans
In some banks, it is possible to revise the mortgage rate for already issued loans due to the Central Bank’s rate cut last year. It should be noted that each application is considered by the bank on an individual basis. In case of a positive decision, the bank makes a decision to reduce the rate on a mortgage loan, while the amount depends on the bank’s policy, the terms of the agreement, the borrower’s credit history and the current base rate on the mortgage.
In addition, if the loan was issued before July 2020 and the interest rate on it is very different from the conditions for a mortgage in 2021, then it makes sense to apply for refinancing.
Refinancing a mortgage loan
By mortgage refinancing This implies the repayment of the mortgage debt at the expense of another loan. That is, the bank issues a new targeted loan to the borrower on the condition that it will be used to pay off the debt on the mortgage loan.
As a result of refinancing, the amount of the monthly payment, the total amount of the debt and the term of the agreement are adjusted.
However, for refinancing, the following conditions must be met:
- the loan is repaid for more than 6 months;
- no delays and debts;
- there are at least six months left until the end of the contract.
In this case, the borrower must have:
- official income;
- Russian citizenship;
- positive credit history.
When is refinancing advisable?
Refinancing makes sense if:
- the new interest rate is lower than the current one by at least 1%;
- the borrower is suitable for one of the state programs;
- the loan has been paid in half or more.
For refinancing, the borrower has the right to contact any bank, but it is best to do this where the mortgage loan is issued. If a new bank is chosen, then the entire package of documents for the mortgage will have to be collected again. Additional financial costs will also be required: payment for real estate appraisal, registration of a new mortgage (state fee is 1 thousand rubles) and insurance (calculated individually).
Changing the terms of the agreement is not the responsibility of banks, but a right that is determined by their internal policy.
The borrower has a similar right: the client can provide grounds for reducing the rate and apply to change the terms of the mortgage. The decision is made individually and depends on many factors. But it’s worth remembering that the bank may refuse if the loan has already been refinanced earlier, the borrower has overdue debt on non-earmarked loans or the property valuation does not correspond to the market value.
How to get a mortgage at a minimum interest
The base rate on a new mortgage loan can be reduced if:
- the potential borrower is a payroll client of the bank;
- complex life and object insurance is issued;
- the minimum contribution has reached a set threshold, for example, 20%;
- the borrower meets the conditions of one of the state support programs.
To calculate the preliminary rate, you can use the online mortgage calculator, which is located on the website of each bank.
State support programs
As part of government support programs, banks offer clients loans for the purchase of real estate at a rate of 1%, and the difference to the base rate is paid by the state to the bank…
State support programs have a limited duration and require the provision of a first installment. For rural mortgages this is 10%, for the rest – 15% of the value of the acquired real estate. To repay the loan, you can use other state subsidies – maternity capital, military mortgages, subsidies for large families.
What to do if it is impossible to reduce the rate
If a reduce interest on a mortgage loan there is no possibility, you can take advantage of debt restructuring. Restructuring is possible if the borrower’s living conditions have worsened or his financial situation has changed. The reason may be delayed wages, dismissal, military service, disability due to illness, the birth of a child. Here it is important to honestly inform the bank about the problems, to collect official confirmations.
As part of the restructuring, the following are used:
- prolongation – an increase in the term of payments to reduce the monthly load;
- change in the payment schedule;
- credit holidays – a deferral of a monthly payment or part of it.
The application can be approved if the borrower has no delinquencies and has a good credit history. The following factors also increase the chances:
- the borrower’s age is from 21 to 60 years;
- mortgage rate above 12%;
- no restructuring has been carried out yet;
- the borrower has insured his health, the risk of “disability” is taken into account.
If you pay too much on your mortgage, study the current mortgage programs and conditions of banks for refinancing. Before concluding a new contract, check if you qualify for a mortgage with state support.
In most cases, there is the possibility of lowering the mortgage interest rate through insurance, increasing the down payment or shortening the term of the mortgage. Consider all the options to choose the one that is comfortable and correct.