The housing problem in Russia is closely related to the solvency of the population. Due to the ongoing crisis, citizens have become interested in the possibility of extending the state lending assistance program. It was assumed that mortgages with state support would not be introduced in 2017. This is due to the fact that the program was introduced with the aim of helping citizens repay loans. Government regulation of mortgages helped stem the rise and subsequently lower interest rates.
Will there be a mortgage extension in Russia?
The government does not plan to continue the program of state regulation of mortgage lending for 2017. This is due to the fact that most banks reduce the interest rate on mortgage lending. Let us recall that according to the program the rate was 12%, while now banks offer credit lines at 10-11%, which is certainly beneficial for citizens. There is no need for additional government subsidies.
The reason for introducing mortgages with state support in 2015 was a surge in the number of developments with a simultaneous increase in the cost of housing. The situation was also affected by the ratio of the ruble to foreign currency, in particular to the dollar, to which many mortgage agreements were tied. Since its introduction in 2015, the program has been revised several times, with interest rates and limits adjusted. It is expected that in 2017 there will be no need for government price control, and that the cost of mortgage lending will decline relative to today’s levels.
What does this mean for the population?
Some Russians took the latest news painfully, believing that the winding down of the government subsidy program would lead to an uncontrolled increase in interest rates on mortgage loans. According to experts, current lending rates are critical. When the amount of payments under mortgage agreements increases, there is a risk of insolvency among the population. However, panic is unnecessary. The lending market currently offers citizens the correct rates. The government assures that, if necessary, the mortgage program with state support will be resumed.
Mortgage conditions at VTB
Some banks offer mortgage extensions with state support for Russians. For example, VTB Group published lending rates for 2017 for mortgage lines. So citizens can count on the extension of state rates until March 1, 2017. And until the end of this year 2016, loans will be provided at 10.4-11.4% per annum. The expected size of standard mortgage lending in 2017 is 12.1% when the agreement is drawn up in rubles.
Lending programs and rates at VTB are as follows::
| Conditions | Sum | Term | Down payment | Bid |
| State program | 300 thousand – 8 million | up to 30 years old | from 20% | 11,4% |
| State program | 300 thousand – 3 million | up to 30 years old | from 20% | 11,4% |
| Urgent receipt within 2 days | 300 thousand – 30 million | up to 20 years | from 40% | 13,6% |
| On bail | 600 thousand – 15 million | up to 20 years | from 0% | 14,6% |
| Military | up to 2.01 million | up to 14 years old | from 15% | 12,1 – 13,1% |
| Through bidding | 600 thousand – 60 million | up to 30 years old | from 20% | 12% |
| Primary housing | 600 thousand – 60 million | up to 30 years old | from 20% | from 12.6% |
| Refinancing | up to 15 million | up to 30 years old | — | 12,6% |
Sberbank offers the lowest interest rate
Despite the winding down of the state mortgage support program for 2017, Sberbank will continue to issue preferential loans to the population after March 1, 2017. This is due to the fact that for applications submitted to the bank before December 31, 2016, a decision may be made in 2017. The date of adoption of the resolution does not affect the procedure for granting a mortgage loan. The standard validity period for a decision on a citizen’s application is 60 days, during which a mortgage agreement can be concluded.
Purchasing housing with a loan is a heavy burden for Russians with low incomes. They must pay the principal and interest on the loan. To alleviate the plight of borrowers, since 2015, the Russian government has provided a program of state support for mortgage lending.
Was the mortgage with state support extended in 2017?
The program involves government support for borrowers through partial financing of housing loan costs. It was adopted after experts analyzed the housing construction market and the demand for mortgage lending. Higher loan rates led to a drop in demand for housing loans and an outflow of investment from the construction industry. Developers experienced significant difficulties in continuing to operate in the housing market.
In 2016, government officials and experts made statements that banks had significantly reduced rates for housing loans, and the construction industry had revived at the expense of citizens. It has been suggested that the extension of the state mortgage support program for 2017 is not expected. The financial services market demonstrated a further decline in the cost of mortgage loans, so the program was scheduled to end in December.
Extension of mortgage term with state support 2017
Due to the expected end of the state program, the fourth quarter of 2016 was characterized by a busy filing of applications from the population for preferential loans. Banks participating in the project stated that state support for mortgages in 2017 will be valid until March, and in the second quarter and until the end of 2017, financial market experts predict a natural drop in housing lending rates.
Types of state support for mortgages
The social program of state support provides for the opportunity for citizens to take advantage of state subsidies when applying for a housing loan and reimburse part of the loan costs from the Pension Fund. Types of mortgages with state support depend on:
- source of financing (local, state budgets);
- targeted orientation of the social program.
There are various ways to reimburse the population for housing loans as compensation:
- down payment;
- parts of the loan;
- part of the interest on the loan;
- or the provision of a preferential interest rate by a credit institution.
Social mortgage in 2017
Under the existing program, all employed citizens in need of housing or improved living conditions can take advantage of state assistance. Purchasing a property with partial compensation of expenses from public funds is possible only in new buildings. There are no benefits for the secondary housing market. The state obliged banks to inform borrowers about the full cost of a housing loan at the beginning of the contract. Preferential mortgages in 2017 are issued on the following terms:
- lending up to 30 years;
- making a down payment of 15% of the cost of housing;
- the possibility of registering other property as collateral instead of a down payment;
- compensation of part of the loan with maternity capital funds;
- the ability to reduce interest on the loan when depositing funds in excess of 40% of the value of the property.
As an additional bonus from the state, borrowers are given the right to a tax refund of up to 260,000 rubles. The program involves issuing an insurance policy for the purchased property. The state provides preferential terms for the provision of credit services to certain social groups:
- Young families.
- Military.
- Employees of the public sector.
- For pensioners.
Sometimes it is possible for the bank to reduce interest rates for borrowers:
- salary card holders;
- for new buildings from partners with whom banks cooperate;
- bona fide clients with an excellent credit history for previous loans.
Extension of mortgage restructuring with state support
For people who took out a mortgage loan in foreign currency in previous years or are experiencing financial difficulties due to a decrease in income, support is provided - debt restructuring. It involves compensating the borrower for part of the remaining bank loan. Mortgage restructuring under the state support program provides for an extension until the end of May 2017.
The extension of the program occurred with the introduction of changes. The preferential list of categories of social groups that are given the opportunity to formalize restructuring has expanded. Families with adult children who are studying at universities were added to the list of categories: disabled people, military veterans, families with minor children. The maximum amount of compensation increased to 30% of the remaining debt amount and amounted to 1,500,000 rubles. Borrowers can clarify all the nuances of restructuring by calling the Mortgage Lending Agency hotline.
Mortgage with state support from Sberbank
Sberbank is included among the banks that operate with state support. Mortgage with state support 2017 - its extension at Sberbank provides for lending to all citizens and special categories: military, young families. Since February 2017, the credit institution has reduced interest rates on housing loans. An additional bonus of 0.5% per annum is provided to young families and borrowers who purchase a home online. The bank has expanded the list of areas in which borrowers are provided with a 0.5% bonus on mortgages.
Mortgages with state support from Sberbank are issued to working citizens after reaching 21 years of age. The age limit is 75 years at the end of the loan agreement. For citizens who have not taken out life insurance, the age for issuing a loan is limited to 65 years. Early repayment of a housing loan is allowed. There are no restrictions on the minimum amount of early repayment.
Obtaining a housing loan involves providing the credit institution with the following documents:
- confirming the ownership of the property provided as collateral;
- passports;
- statements.
After the bank makes a decision to issue a loan, it is necessary to draw up documents for the purchased property within 60 days and submit them to the credit institution. Additional documents may be required.
The conditions of state support have changed. The maximum reimbursement amount has been increased from 10% to 20% of the mortgage balance. Maximum - 600 thousand rubles.
Families with dependent children under 24 years of age can now receive state support. Previously, only families with minor children participated in the program.
The rules for calculating income, the requirements for a mortgage agreement and the availability of other real estate have changed.
Take it while it lasts 🍻
Who does this program apply to?
Now the program concerns families:
- who took out a mortgage on their only home,
- who have children under 18 years of age, dependent students or disabled children,
- who over the last three months, after deducting the mortgage, had less than two subsistence minimums per person.
So what, they give you money?
Under the state support program, they give money, but not to the family, but to the bank as a mortgage loan. If a family is entitled to state support, it turns to the bank and chooses the restructuring option. The bank may reduce the monthly payment, shorten the payment period, lower the rate or recalculate the exchange rate.
For example, a family with a child bought an apartment with a mortgage. Two years later, the wife went on maternity leave, and the husband’s salary was reduced by 30%. It’s hard to manage a mortgage and two children on one salary, and there’s nowhere else to live. The family will write an application for state support. The bank will reduce the monthly payment, and the family will have more money for food and utilities.
How much money can you get from the state program?
Now the state will compensate 20% of the mortgage balance, but not more than 600 thousand rubles. For example, if the mortgage debt is 1 million rubles, the state will provide 200 thousand. And with a debt of 3 and 6 million rubles, state support will be 600 thousand rubles in both cases.
I have no children, but my income has decreased. Am I participating in the program?
Maybe. If there are no children, only a combat veteran or a disabled person can receive state support. An unemployed bachelor with a mortgage or a family without children do not participate in the program.
I heard that the mortgage agreement must be valid for 12 months. If I took out a mortgage six months ago, am I not eligible for assistance?
It's set. Late last year, the government lifted this condition. Now the main thing is to agree with the bank on restructuring before March 1, 2017. The date of the loan agreement does not matter. If the borrower meets all the requirements, but bought the apartment six months ago, you can write an application.
I have a mortgage. After college, my son cannot find a job and lives at my expense. Will we also have 20% of our debt written off?
No, they won't write it off. According to the law on state support, only full-time students under 24 years of age are recognized as dependents. The child can study in graduate school, a military academy, or be a resident.
And if the son received a manager’s degree, at 22 years old cannot find a job and sits on the neck of his retired parents, he is not considered a dependent. For such a family, part of the mortgage debt will not be written off.
We already have an apartment. But we took out another mortgage and are renting it out so as not to have to work. What about government support?
These days, due to high interest rates, few families can afford a conventional mortgage. For those in need of improved living conditions and with an average income, mortgages with government support have been created.
Features and advantages of mortgages with state support
This is a project in which only individual banks participate. The government partially allocates funds from the Pension Fund for housing loans, which allows banks participating in the program to use a reduced interest rate. Mortgages with state support are intended for the purchase of apartments in new buildings, the construction of which took place with state funding.
Who might be interested in this program?
Of course, ordinary families living on an average salary and wanting to buy an apartment in a new building.
Mortgage conditions with government support
Interest rate - from 11% per annum.
The loan is issued for a period of up to 30 years, or until the borrower reaches the maximum permissible age.
The down payment in all banks is from 20% of the cost of the purchased property (with the exception of TransCapitalBank, where the down payment is from 15%). When registering another residential property owned by the borrower as collateral, there is no down payment.
If the borrower is able to make a down payment of 40-60%, then the interest rate will be lower.
The participant retains the right to a tax deduction on the mortgage.
All bank fees are eliminated.
Insurance of the borrower's life and ability to work is not mandatory in some banks, which allows for significant savings. However, in any case, the mortgaged apartment is insured against the risks of damage and loss.
The mortgage loan amount is limited by region:
for Moscow and St. Petersburg - no more than 8 million rubles;
for any other region of the Russian Federation - no more than 3 million rubles.
The estimated value of the housing that is being pledged is also taken into account. The loan amount cannot exceed 80% of the value of the collateral apartment. The borrower is given 120 days to select housing.
What are the requirements for the borrower?
The requirements for the borrower are not much different from other mortgage programs. Age - at least 18 years (in some banks no younger than 21 years old) and no more than 65 years old at the end of loan payments (in Sberbank no older than 75 years old). Russian citizenship, at least six months of work experience at the current place of work, and sufficient confirmed income are required. It is often allowed to attract three or four co-borrowers (depending on the bank); their income is taken into account when calculating the maximum loan amount. Spouses must be co-borrowers. The monthly payment should not be more than 45% of the total income of all co-borrowers participating in the mortgage transaction.
Currently, no more than 10 banks offer this program, with various names - mortgage for housing under construction with state support, as well as “New Building” or “Fundamental” loan. The largest banks with state support for mortgages are Sberbank and VTB24; Gazprombank, Uralsib, Investtorgbank, TransCapitalBank and some others also work under this program. AHML offers very favorable lending conditions under the “Novostroika” program: the interest rate is set at 7.9%-11% per annum, it is possible to make a down payment using maternity capital, and there are special deductions for families with two or more children. In other banks the rate ranges from 11% to 15% per annum. Banks provide favorable conditions to their salary clients.
Disadvantages of government-backed mortgages
Even though interest rates are low, government-backed mortgages have several disadvantages.
Firstly, loans under this program are issued by a limited number of banks. While residents of megacities can choose a suitable bank, residents of small provincial towns do not have this opportunity.
Secondly, the reduced interest rate (11% per annum) begins to apply from the moment the borrower registers ownership of the apartment. During the construction phase, interest rates are higher.
Thirdly, funds for a down payment of 20% of the cost of housing. Not every borrower with an average income will be able to save this amount (this is the category of citizens the program is designed for).
Fourthly, banks have a list of accredited development companies, and housing will have to be purchased from them, otherwise the rate will increase.
Mortgage with state support is a fairly promising program, but it has many limitations. It is used only for the purchase of apartments on the primary market; the number of banks issuing it, and the new buildings themselves where you can purchase housing, are limited. For now, the program is focused only on housing under construction. We'll see what happens next!
Duration of the program
The state mortgage subsidy program expired on December 31, 2016. Despite this, Sberbank decided to continue issuing loans under the terms of the “Mortgage with State Support” program in 2017. However, only those who managed to apply for a mortgage with state support before January 1, 2017 will be able to receive such a loan. Alexey Trubnikov, executive director and head of the secured lending development department of Sberbank, told Vedomosti.
On January 1, banks stopped working on mortgage programs with state support. Despite the government's promises to continue subsidizing interest rates at least until March 1, 2017, the state program has been completed. However, construction companies claim that they have already found ways to compensate for the lack of government support - from various joint programs with banks to independent promotions and discounts.
The completion of work under the Izvestia state program was confirmed by the construction companies Urban Group, FSK Leader and several others.
To date, the program has not been extended, and since January 1, banks have not offered mortgage programs with state support,” said Yana Maksimova, director of information policy and PR at Urban Group.
The VTB press service also announced the completion of the state program for subsidizing mortgages. In this regard, the acceptance of applications by VTB and VTB24 banks for the mortgage subsidy program was completed on December 31, 2016. At the same time, VTB noted that clients who submitted applications under the subsidy program before the end of 2016 and receive bank approval now will be able to use it and receive loans under the current terms of the program until March 1. But mortgage applications submitted to VTB and VTB24 after January 1, 2017 are considered on the terms of standard bank products.
Let us note that at the end of last year, representatives of the Russian government made several statements about the possibility of extending preferential mortgages. In particular, in early December, First Deputy Prime Minister Igor Shuvalov, at a meeting between Prime Minister Dmitry Medvedev and deputy prime ministers, said that the state program would be extended until March 1, 2017. Deputy Prime Minister Dmitry Kozak, in an interview with the Rossiya 24 TV channel in December 2016, said that the state “spent 10.7 billion rubles on subsidizing the interest rate on mortgage loans, and the government will continue to move in this direction.”
At the same time, the Minister of Construction and Housing and Communal Services Mikhail Men over the past year has repeatedly expressed the opinion that the state program was effective when the key rate exceeded 17%. Then the difference from 12% per annum under the state program was noticeable. And now banks without state support are ready to issue mortgage loans at almost the same interest rates as with state support. Therefore, according to Mikhail Men, the continuation of the state program in its current form in 2017 will be inappropriate.
The banks noted that no official orders to extend the mortgage subsidy program were received from the government and, thus, the program ended.
Construction companies essentially agree with the Minister of Construction. Representatives of developers interviewed by Izvestia said that they are already ready to offer buyers conditions that are almost better than under the program with state support. Thus, Pavel Timoshenko, head of the mortgage and subsidies department of the Leader financial and construction corporation, said that banks have now developed their own programs that allow you to purchase an apartment with a mortgage on favorable terms. For example, VTB operates with a rate of 10.85% per annum with a minimum down payment of 15% of the purchase amount for a period of up to 30 years. And a joint program with SMP Bank allows you to take out a mortgage without a down payment. In this case, home buyers will receive funds from the developer to their current account in the amount of the current discount.
Yana Maksimova from Urban Group says that, together with VTB, the company is ready to offer its clients a mortgage at a rate of 10.6% (that is, lower than it was under government subsidy programs) with an initial payment of 15% per annum. Also, for one of its projects, the company is ready to provide the client with a “mortgage holiday” - buyers will receive bonuses in the amount of 20% of the cost of the apartment, which can be used to pay off the mortgage during the construction period.
First Vice President of Opora Russia Pavel Sigal suggests that at the end of the state program, most mortgage loans will be issued at rates in the range of 13–14%.
This will encourage developers to reduce prices or organize special promotions to prevent a decline in home sales. In conditions where household incomes have been declining for the last 25 months in a row, in the mass segment, developers will bear the brunt of the state’s refusal to subsidize mortgages, he believes.
Vladimir Sergunin, a partner at the consulting company Colliers International, believes that the abolition of state support for mortgages in general will not bring positive results to the residential real estate market, especially in the comfort and economy class segment. To a lesser extent, the abolition of state support will affect the market of new business and premium class buildings. Thus, according to the expert, in the business class the share of transactions involving mortgages in 2016 decreased compared to 2014 and 2015, amounting to 15–16% of the total number of purchase and sale transactions. Also, the abolition of state support, Vladimir Sergunin believes, will not have any impact on the apartment market, which was actively developing in the past year, since mortgage benefits did not apply to it.
