How to get a mortgage without a down payment

Living in your own house or apartment is the dream of many. However, purchasing a home is not always an easy task. Sometimes you have to resort to the help of banks when applying for a loan. However, not everyone has the ability to pay a down payment on a mortgage. Then potential borrowers begin to look for ways to take out a mortgage without a down payment or other possible options.

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What is a down payment and why is it needed?

Down payment is the amount from the borrower’s personal funds that must be paid when applying for a loan. This is part of the cost of the purchased property in the case of a mortgage. How much the down payment will be in rubles or percentage will depend on a large number of factors:

• selected bank and loan program;
• the cost of the purchased property;
• loan period;
• income of the potential borrower.

The minimum down payment can range from 0% to 30%. Typically, the more the borrower is willing to deposit immediately, the lower the interest rate on the loan for him in the future.

In addition, the monthly payment is also significantly reduced in the future, since the more money you deposit, the less you need to borrow from the bank, and accordingly, interest will be charged on the smaller amount.

At a time when mortgages had just appeared on the domestic financial services market, many banks issued funds for the purchase of housing without a down payment, and subsequently had many problems with unscrupulous borrowers.

When applying for a mortgage at a bank, it is better to make as much of a down payment as possible. Thus, the overpayment will decrease not only due to the fact that the interest rate will decrease, but also due to the reduction in the loan term. The optimal ratio is 50/50 of the bank's funds and the borrower's own money.

The source of the down payment can be the borrower’s personal money or funds from the sale of real estate and other property. In some cases, banks allow the use of maternity capital as a down payment on a mortgage.

It is also possible to use credit funds as a down payment on a mortgage, but this will greatly complicate the payment for the bank client, since the debt burden will increase and not everyone will be able to cope with it.

When is the fee paid?

The payment is made directly during the process of drawing up a loan agreement with the bank. After the money arrives in the bank account, the contract continues to be drawn up on the terms that were previously agreed upon between the two parties.

If a smaller amount has been deposited than required, the registration is suspended. If there is a large amount, the balance can be used to pay off the mortgage early.

It is impossible to say exactly what fee must be paid, since each bank has its own conditions regarding this period.

What is the down payment for a mortgage in 2021?

In 2021, the amount of the down payment ranges from 0 to 50 percent of the cost of the property. The exact value depends on the selected property and the bank program. For apartments in the primary fund, the contribution is usually minimal. Resale properties require a one-time payment of 0 to 20 percent of the price. The maximum contribution is assumed for individual residential buildings and townhouses - up to 50 percent.

However, getting a loan for a new apartment is more difficult. If you can’t raise money quickly, it’s better to take out a mortgage for a secondary home. The down payment in most banks will be much lower - 15%.

Regardless of the cost of housing, the down payment on average should be at least 30%, so before applying for a loan it is recommended to check whether it is possible to collect such an amount, and if not, probably look for a cheaper apartment or house.
How much is the down payment for a mortgage in banks in 2021?

How to transfer a down payment on a mortgage

During the transaction, the down payment on the mortgage must be transferred to the seller. How to do it right? The process is regulated by the procedure for obtaining a housing loan:

1. After approval of the mortgage application and a specific property, you can enter into a transaction.
2. Sign the purchase agreement and transfer the money in the agreed amount to the other party.
3. The signed agreement and confirmation of payment of the down payment must be submitted to the bank by the day the loan agreement is executed. Together with credit and collateral documentation, they are submitted for registration to Rosreestr. It is better to do this on the same date; it is advisable to transfer the money at the office where you take out the loan.

How is the down payment on a mortgage transferred in cash or non-cash? It all depends on your agreement with the real estate seller. For some it is convenient to receive funds in their hands, for others – in a bank account. In any case, after transferring the first payment, you must have a document that you have already paid the first part of the amount.

When paying in cash, the other party writes on a separate sheet of paper with the obligatory indication of their name, passport details, the essence of the transaction (to pay for the apartment at the address...), and the transferred amount. A short acknowledgment of the transfer of the mortgage down payment to the seller at the end of the purchase agreement is acceptable. In this case, he writes that he received funds for partial payment and signs.

For individuals and legal entities who are paying a down payment on a mortgage, a wire transfer is safer . It is often used by organizations (for example, developers when selling apartments in a new building) and private sellers who are afraid of having a large sum of money on hand. The borrower will need to provide the bank with an executed payment order stamped and signed by the cashier.

If you make a transfer to a bank account at another bank, there may be a fee. It is taken from the sender of the money, that is, from the buyer of the property.

There are other options to transfer money to the seller, but they are used much less frequently:

1. Through a safe deposit box, this is one of the safest ways to pay a down payment. The agreement for the use of a bank vault specifies the condition for issuing money to the second party only after successful registration of the transaction in Rosreestr (). Until this moment, he will not be able to collect the first payment. On average, the cost of renting a safe deposit box is 200 rubles per day, so the total will be 1.5-2 thousand rubles.
2. Through a letter of credit, or nominal account. The price of this service is quite high, sometimes it reaches even 40 thousand rubles. This is the most secure way to pay a down payment on a mortgage, but due to the high costs, it will only be appropriate for large transactions. A special account is opened in the bank for this transaction (), which contains all the terms of the transfer and the data of the parties. Even if the sale falls through, the buyer will be sure that he will not lose his money.

Recommended article: Mortgage loan agreement: what to look for when signing

If Rosreestr returns the documents due to the impossibility of registering the transaction, the initial payment must be returned to the buyer. By agreement with the bank, the borrower is looking for another real estate option. Secure payments using a locker or letter of credit account are much more attractive to him.

When you transfer funds to the other party in cash or send them to a bank account, there is a chance that if the transaction is cancelled, you will not receive them back. Of course this is against the law. However, you should not exclude the risk of running into a dishonest person or a real fraudster. Then all that remains is to go to court to demand the return of the money paid towards the first installment.

Where can I get money for a down payment?

The desire of many to take out a mortgage rests on the 20-30% required down payment, without which the bank simply will not agree to issue a loan.

To avoid getting into trouble by submitting an application and, after approval, discovering that there are not enough funds to make the down payment, you must:

1. Choose housing and find out its exact cost.
2. Then you should consider the available loan programs of various banks, compare the conditions and choose the most suitable ones. Using a loan calculator, which is available on the websites of all major financial organizations, such as SberBank or VTB, you can calculate the down payment required from the mortgage amount. From the developer, secondary housing or just a new apartment - all these aspects need to be taken into account when studying offers. This will allow you to understand how much money, for what period and at what percentage you can receive.
3. After calculating the monthly payment, it is recommended to start saving this amount each month by depositing money into a deposit account. This way you will be able to save up funds for a down payment.

Mortgage with a minimum down payment

A mortgage with a minimum down payment of 10% is considered profitable. Of course, there are offers at a lower rate, but they have too high an annual interest rate and therefore are not particularly popular.

The following bank offers can be considered as a reduction in the down payment:

• Applying for a separate loan for investing funds at the initial stage. Thus, Alfa Bank and Deltacredit offer this opportunity to clients if necessary. You only need to leave your existing property as collateral.
• Providing a maternal certificate (Gazprombank).
• Having a salary card at the institution where they are trying to take out a mortgage loan.

For your information
, Rosselkhozbank, Promsvyazbank and Metallinvest Bank completely waive the contribution at the initial stage if the collateral is personal property.

Options for reducing down payment

To reduce the established amount of the first payment, the creditor must provide other guarantees that the debt will be paid in full and on time. But this does not mean that if the borrower provides documentary evidence of solvency, he will not need to make a payment. These subtleties and nuances must be discussed in advance with the consultant involved in processing the loan.

You can reduce your payment in the following ways:

1. Additionally, involve guarantors or co-borrowers . The guarantor is also fully responsible for repaying the loan, as is the title borrower. Co-borrowers are counted as an additional source of income.
2. Providing collateral. Any property can be used as collateral, including real estate or a car.
3. Take advantage of promotional offers. Sometimes financial companies launch preferential lending programs, by signing up for which you can reduce the monthly payment or reduce the size of the down payment on the loan. It is recommended that you familiarize yourself with all available mortgage programs before applying for a mortgage.

The down payment is a beneficial insurance not only for the lender, but also for the borrower. The more amount is paid at the very beginning of debt payment, the less will be the overpayment on the loan and the monthly payment according to the schedule. Therefore, it is recommended to approach this issue responsibly and try to accumulate as much money as possible.

Minimum and maximum down payment at Sberbank

Each borrower is subject to individual requirements regarding the down payment. It depends on many factors. The minimum down payment at Sberbank is 15%. This amount is set for an existing house or apartment that you plan to buy. If the client is dealing with developers, then the level of the down payment will be many times higher.

One of the factors in determining the first payment is the choice of a preferential program. A minimum down payment is required when participating in the following projects:

• Purchasing an apartment in a new building. If the borrower plans to buy an apartment in a new building, then the down payment amount will be 15% of the cost of housing. This size is fixed, regardless of whether the multi-story building is ready or under construction.
• Project "Young Family". The amount of the first payment when using this project is also 15% of the cost of the apartment. You can use a family capital certificate if there are two or more children in the family.

A maximum level of the first payment has also been established, which is required extremely rarely. This is 50% of the cost of housing. This fee applies to participants in the program “Registration of a mortgage using two documents.” Sometimes citizens cannot provide a whole package of documents. In this case, borrowers use only a passport and a second document of their choice (SNILS, military ID, driver’s license). Due to the fact that there is no certificate of income, and it is necessary to confirm your solvency, the down payment must be equal to half the cost of the property.