Classic or American mortgage
The number one choice when buying a new home is usually a classic mortgage. This is a long-term type of special-purpose loan, the repayment of which is secured by collateral. You can only use a mortgage to buy a new home or renovate your existing house or apartment. Since October last year, however, the rules for obtaining a mortgage loan have been a bit more complicated. You must have at least 20% of the total amount you are planning to invest in your new housing in your own money. At the same time, the repayment of the mortgage and any other loans you have may not exceed 45% of your net monthly income.
Will you have a problem meeting the conditions? The solution for you could be an American mortgage. It differs from the classic in that it is a non-purpose type of loan. You don’t need to have your own savings to get it. For some non-banking companies, you may not even have to prove your income. All you need is your own property to be guaranteed.
When deciding which type of mortgage is best for you, be sure to bet on a US mortgage comparator. It will help you get an idea of the offer on the market.
Building savings loan
The big disadvantage of building savings loans is their considerable complexity, which prevents easy comparison of different types of offers. So it is difficult to find out whether in your particular case a building savings loan or a mortgage will be more advantageous. You should be interested in the interest rate and annual percentage rate, but these are not the only indicators. Also important is the method of repayment, which consists of several parts for building savings.
The first is the bridging loan, which is intended to bridge the time when the contract does not meet the conditions for granting a building savings loan. The first condition is to save 40% of the required amount of the loan, the second is the expiry of the period of two years from the establishment of savings. Therefore, the bridging loan repayment consists of the repayment and the interest repayment but does not contain the principal. In practice, this means that if you want to buy an apartment for 2 000 000 USD and you have not yet saved 40% of this amount, you will pay interest in the bridging loan of 2 million while you grow up.
By not paying the principal, however, the debt itself does not decrease at all. This phase then ends when the client fulfills both conditions and the bridging loan is converted into a regular loan. This is a very long and costly period, which is why the building savings loan is used rather than obtain smaller amounts, for example, for the reconstruction or refinancing of a mortgage loan.
As soon as the bridging loan is switched to proper loan repayment, the situation becomes very similar to mortgage payments. You pay interest and debt in one installment. The only exception is some savings banks, which minimized the bridging loan phase. In these cases, the entire repayment process is very close to a classic mortgage.
State loan for housing
Last year, the state started offering favorable housing loans to young families through the state housing development fund. This type of loan can be used not only for the acquisition of a new house or apartment, but it is also possible to pay for the reconstruction. The main attraction is a favorable interest rate. This is determined by the unified trade reference rate, at least 1% pa The rate is fixed for a maximum of 5 years. The aim of the small Flat rate Box is to ensure that housing is accessible to young families while improving its quality. A government loan for housing looks like a great choice but unfortunately has several major limitations.
First of all, this type of loan can only be used by young people up to 36 years old who take care of a child up to 15 years old. The loan is purpose-built and can only be used for the construction of a family house whose floor area does not exceed 140 square meters. If you do not want to build, you can also buy a house with a home loan, but the same rule applies as for a new building, the floor space is limited. The maximum loan for a house is USD 2,000,000. However, you will receive no more than 80% of the cost of construction or purchase, the remaining 20% will be paid from your own funds, mortgages or non-bank loans.
If you are considering buying an apartment, the area must not exceed 75 square meters. The maximum loan you can get for an apartment is USD1,200,000. As in the case of a family house, however, at least 20% of the price you have to pay from your pocket or other loans.
It is also possible to draw the loan for the modernization of housing. Here the amount can range from USD 30,000 to USD 300,000.
The maturity of the loan may also be restrictive. If you borrow for renovation and modernization, the loan maturity is ten years. If you are buying new housing, you must repay the loan from the State Fund within 20 years.
It is clear from the resulting conditions and constraints that this financial product is intended rather for financially weaker families. A stable income family with some cash saved usually prefers to use classic or American mortgages, rather than having to restrict themselves to well-defined square meters. At the same time, these loans are not a good choice in larger cities where you are far from sufficient for a new home.