Today, banks offer mortgages and apartment loans, but not everyone understands the difference between these loan programs. In short, a mortgage is a targeted loan that is issued for the purchase of housing in the primary or secondary market. The contract clearly regulates the rights of the parties, and money cannot be spent on anything else. Consumer loans for the purchase of an apartment do not assume that customers will spend money on housing. They can use them to start a business, repair it, and so on. In other words, there is no need to report to the lender how the money received is spent. It is worth considering in more detail the fundamental difference between these programs in order to understand which of them is more profitable in a particular case.
Why do I need a loan to buy an apartment?
Customers do not always want to apply for a mortgage when they need a loan for housing in Ukraine. In this case, it makes sense to apply for a cash loan for the purchase of an apartment. There are several reasons for this:
- the property will not be pledged to the bank, so it can be sold at any time if necessary;
- when entering into a mortgage agreement, most banks specify in the contract that it is impossible to rent out the pledged object, and some citizens buy housing for rent and pay for the loan with rent income;
- you can buy any item. There are no restrictions on cost, location, or other parameters.
- you don’t need to report to the bank where the funds were spent;
- no initial payment required;
- the minimum set of documents, since you do not need to issue a mortgage, but in most cases a pledge or guarantor is required;
- there are no additional costs for estimating the item’s value.
- you can search for a suitable option without time restrictions, just get money borrowed from a bank;
- cash payment with the seller is possible;
- you can take more money than you need for the purchase, and spend the rest on repairs or other needs.
All this forces many people to apply for a consumer loan for housing, rather than a mortgage. This is especially true for those who want to buy a home outside the country or in another region, as many banks limit the geography of buying an apartment or house to the area in which the loan was issued.
Mortgage or home loan: the main differences
Mortgage or buying an apartment on credit is a question that is often asked by people who want to buy real estate. It is worth considering in detail the main differences between these two programs.
|Term of the agreement||Up to 30 years old||Up to 5 years in most cases, some banks offer up to 20 years|
|The Bank’s risks||is minimal, so the bid is reduced||is high, so the bid will be slightly higher than the market average|
|Security form||Collateral and surety||Pledge or surety, it is not necessary to provide the acquired property as collateral|
|Time frame for making a decision||Up to 7 days||Up to 1 day|
|Purpose of lending||Buying a home||It doesn’t matter where the client spends the money|
|Repayment||Annuity payments||Annuity or differential payments|
|Amount to be received||80% in most banks, 20% — initial payment (if there is no initial payment, then the rate increases)||100%|
When applying for a mortgage, there are several significant restrictions that customers should be aware of before contacting the lender:
- Until the loan is fully closed, you will not be able to make transactions with secured real estate without the bank’s consent. That is, if you want to sell or lease an object, you must contact the bank to obtain consent to the transaction.
- When applying for a mortgage, you need to provide more documents, as well as make sure to evaluate the property to confirm that its value corresponds to the state.
- In most cases, it is forbidden to buy housing outside the region where the loan is issued. Also, a mortgage is not issued for the purchase of real estate abroad.
- Object insurance is mandatory, and the bank may additionally require life insurance for the borrower.
The main problem with mortgages is bureaucracy. In other words, all processes are coordinated at several levels, and as a result, registration takes a long time. There are also a lot of restrictions that stop some customers. On the other hand, it is possible to use various subsidies to reduce the interest rate. If the bank cooperates with the developer, you can get even more favorable conditions for real estate on the primary market.
Conditions for applying for a loan to buy an apartment
Buying an apartment on credit without providing collateral in Ukraine is real. This requires a standard package of documents:
- two identity documents;
- income statement;
- documents for a guarantor or pledge.
It is important to understand that property owned by the client is accepted as collateral. The requirements for borrowers are as follows:
- citizenship of Ukraine;
- age from 21 to 70 years;
- availability of an official source of income;
- availability of registration in the loan processing region.
Non-targeted apartment loans are much more profitable, despite their higher cost, because they are easier to get, require a smaller package of documents, and the client has full control over the use of the purchased property and the funds received.
What do I need to get a home loan?
To get a loan for an apartment in the Bank of Ukraine, you need to follow a certain algorithm:
- Select the bank that issues the required loan amount.
- Submit a request. It requires specifying all data in accordance with the subscript. They must completely coincide with reality.
- Specify the loan amount and term.
- Send a request.
Within an hour (sometimes longer), specialists contact the potential client to conduct an interview. Based on the results of the telephone conversation, the decision on the application is announced.
You can apply for a loan online. It is recommended to contact several banks at once to understand where they offer the most favorable terms of cooperation. Based on this, you need to choose a lender. Usually, the application remains open after approval for 30 days. In other words, you need to come to the service office with all the required documents to sign the contract before the expiration of this period.