Ways to save on your mortgage. How to save on your mortgage? Hidden capabilities of the banking system Optimal loan term

During periods of instability in currency markets and the economic crisis, the question of whether saving on a mortgage is possible becomes relevant.

For the borrower, purchasing a loan will be much more profitable if he knows some of the subtleties that allow him to save part of his savings.

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Selecting a credit institution and mortgage program

When deciding whether to take out a mortgage, you should analyze your financial capabilities, carefully weigh everything, study the details and possible risks.

After this, you should not go to apply for a loan at the nearest bank without familiarizing yourself with the offers of other institutions.

When choosing a mortgage program, you first need to pay attention to the following points:

• interest rate;
• the cost of additional services related to the preparation of documents (client’s application, commission for issuing a mortgage, etc.);
• the final overpayment of the loan, since some organizations first attract people with a low rate, and then part of the financial burden is placed on hidden commissions;
• the cost of a notary, real estate appraiser, and insurance specialists.

How can you save money?

Many people believe that there is not much difference between the offers of banks, and the programs differ only in loan terms and interest rates.

This opinion is not entirely correct, since there are many other features.

Saving on a mortgage loan is only possible if you have complete information about the product, the disadvantages of which experts do not disclose.

A potential borrower must make the right decision when choosing an interest rate.

To do this you need to know the following:

• the indicator will decrease with an increase in the size of the down payment, as well as a reduction in the loan term. In the second case, monthly payments will increase, but you will still save significant money.
• The interest rate decreases when purchasing housing on the secondary market, since when purchasing a house under construction, work may take a long time, after which the rate usually increases.
• It is recommended to choose a fixed interest rate, since a floating one has no guarantees and may increase (in reality, this is what happens).

The loan term is another indicator that allows you to save.

It is determined based on the financial situation of the borrower.

Most banks offer to issue a mortgage for up to 30 years, taking into account the age at the end of the contract.

By shortening this period, overpayments on debt are reduced.

When choosing a mortgage program, it is important not to make a mistake in choosing a payment repayment scheme:

• annuity– the deposited amount is equal throughout the entire term of the contract. The positive side: the debt is paid off evenly and the person does not need to deposit a lot of funds at once. However, in the first years, interest is mainly paid, and the loan principal decreases slowly. The result is additional costs;
• differentiated– large sums of money are deposited first, then gradually decrease as the loan is paid off. This form of payment is more economical, since the bulk of the debt is repaid faster. However, banks obviously issue less funds than under the annuity scheme.

Every year, banks’ loyalty to customers increases due to tougher competition, so borrowers should continue to review the current offers of credit institutions.

Refinancing can save the borrower money thanks to more favorable terms and the following options:

• change the loan currency;
• reduce the debt repayment period;
• reduce the interest rate;
• change the type of interest to fixed or floating.

The disadvantage of refinancing is the loss of the right to a tax deduction and re-payment of insurance and appraiser work.

Saving money on foreign currency and additional expenses

Russian banks offer mortgages in different monetary units, the rate on which may differ by approximately 3-5%.

The following types of currencies are available:

• ruble;
• U.S. dollar;
• Euro;
• Swiss frank;
• Japanese yen.

Therefore, preference should be given to such monetary units in which a person receives a stable income - this could be:

• renting out real estate abroad;
• availability of deposit accounts.

Mortgage lending involves additional costs: consideration of the application, commission for issuing a loan, rent of a depository box, services of individual specialists, and others.

You can shorten them as follows:

• request from the bank a list of accredited notaries and appraisers, compare the cost of their services;
• choose banking products with minimal commissions;
• draw up title documents without the help of brokers (the procedure for issuing a loan may take longer, and there is a risk of not taking into account important details);
• insure the collateral yourself, which will allow you to save 0.5% of the remaining debt amount annually;
• agree with the real estate seller on the possibility of settlement without using a depository box or minimally reduce the rental period.

You can save money on how to get a mortgage.

For cashing out money the commission is 0.5%, and for transferring up to 1.5%. In monetary terms, for every million loans, the difference between these numbers is approximately 10 thousand rubles.

Current legislation allows borrowers to claim one of two types of tax deductions:

• property (when purchasing a home) – 13% of the value of the property is returned, not exceeding 2 million rubles;
• interest on the loan - 13% is issued without restrictions on the amount.

This method of saving can be used once in a lifetime; it is a complex procedure.

State program and support for the birth of children

Purchasing a mortgage is a pressing issue for many families, which becomes easier to solve thanks to government support.

If the spouses purchased housing with an area of ​​18 m2 on debt, then:

• upon the birth of one or two children, part of the debt is written off from the local budget;
• When a third child is born, the state fully covers the debt to the bank.

To take advantage of the advantageous offer, the family must submit an application to the local authorities and attach certain documents to it.

Borrowers can save money by participating in certain government incentive programs.

They are presented in the table.

Early loan repayment

After taking out a mortgage loan, borrowers are faced with the question of early repayment of debt.

Depositing money ahead of the due date is beneficial in any case (especially when inflation is low), as it results in lower interest rates.

There are two types of early loan payment:

• full (payment of all remaining debt);
• partial.

Today, situations often arise when, in order to purchase or build your own home, you have to contact a bank to get a mortgage for this. Of course, it should be noted that recently financial organizations have been pleasing their clients (especially salary clients) with low interest rates, but even in this case, you want to save money and save your money. Now we will try to figure out whether it is possible to save on a mortgage, and if so, what methods exist for this.

Current conditions

The trend in 2017–2018 was a decrease in mortgage interest rates, as banks revised their lending policies. In this regard, lending conditions have become more favorable for those wishing to purchase their own home. The reduction in rates occurred both for loans for the purchase of finished housing and for new buildings.

Even though the program of state support for mortgage transactions ended in 2017, banks today can maintain the rate that existed at the time of the program, and sometimes they can even reduce it. This behavior of credit institutions is due to the increased demand of citizens to purchase housing with a mortgage.

Since 2018, a new form of support has appeared for families with 2 or more children in the form of providing a rate reduced to 6% for a period of 3 to 8 years.

One of the most significant ways to save on your mortgage is by reducing the amount you overpay. This can be achieved in several ways:

1. Reducing the loan amount - less mortgage amount, less interest on the use of bank funds;
2. Increase in down payment;
3. Reducing the loan term.

But reducing the overall overpayment is far from the only way to save your own money.

Choosing the right currency

Banks in our country make it possible to receive a loan not only in rubles, but also in other currencies. In Russian financial institutions you can get a loan in US dollars, euros, Swiss francs and Japanese yen.

Due to frequent fluctuations in the dollar exchange rate, taking out a mortgage in this currency is very risky, as this may entail additional expenses, or even the loss of housing pledged to a lending institution.

But it should be noted that the conditions under which financial organizations provide loans in foreign currency are more favorable than in rubles. Experts recommend taking out a mortgage in the currency in which the borrower receives income, as this will reduce the risks from changes in exchange rates.

Which payment type should I choose?

In order to save, you need to know that the bank provides several ways to repay your mortgage:

• Annuity payments– that is, the borrower contributes funds to the debt in equal amounts throughout the entire loan term. The advantage of this method is its stability, since there is no need to make large payments at once, and repayment occurs evenly. But it should be noted that in the first years the client mainly makes interest payments, while the principal debt decreases slowly, thereby increasing loan costs.
• Differentiated payments– with this method, large payments are made at the initial stage of repaying the mortgage, and later they are reduced. The advantage of this method is the repayment of the principal debt in a shorter period of time. But it is important to know that the size of the loan issued by financial institutions with this payment method will be less than when choosing the annuity repayment method.

How to choose a bank?

Speaking about the opportunity to save on a mortgage, it is important to note that this can be achieved even at the stage of choosing a bank. Now credit institutions are more loyal to their payroll clients, providing them with more favorable conditions than other users. Such benefits include the provision of a minimum package of documents and the possibility of reducing the interest rate by 1-3% per annum.

How to choose a program?

Now that a bank has been selected to obtain a mortgage, it is worth deciding on a lending program. It is important to choose the one that meets your goals and fully suits you according to the offered conditions. To make the right decision, it is worth comparing several options; to do this, you should pay attention to the following signs:

• Interest rate;
• Availability of hidden payments (commissions);
• The amount of payment for services for preparing documents.

Moreover, now every bank offers its clients the opportunity to use an online loan calculator, which allows them to clearly evaluate the benefits of a particular loan program and get a visual comparison of them without leaving home.

If a specific property has not yet been selected and there is a choice to purchase housing on the secondary or primary real estate market, there is an additional way to save your money. Since banks are currently providing more favorable conditions for mortgages for new buildings (especially from accredited organizations), it makes sense to take this into account when making a decision. This behavior of banks is due to the fact that the borrower has a specific loan object and enters into a construction contract with the developer, which requires much less time than if the client was looking for a suitable option on the secondary market, checking the possibility of purchasing it (encumbrance), drawing up all the necessary documents for buying an apartment.

How to reduce overpayment on a loan?

Even after choosing the bank where the mortgage will be obtained and the borrower’s lending program, there is another way to save by reducing the overpayment. To do this, you need to know that savings in this case can be achieved in two ways:

1. Increasing the down payment amount– the larger the down payment, the smaller the loan amount, and the smaller the overpayment for the use of borrowed funds;
2. Reducing the duration of lending, that is, its term - the shorter the term, the less the overpayment of interest.

Speaking about the interest rate, it is important to note that it is better to choose conditions under which it is fixed rather than floating, since the latter may increase during the loan term and the borrower will not be able to influence this in any way; the bank reserves the right to do this.

Pay your mortgage on time

It is important to note that saving your own funds will allow you to make mortgage payments on time, since the bank charges a penalty for late repayment of the loan in the amount of the key interest rate established by the Bank of Russia on the amount of the overdue payment for the entire period of delay.

If the delay is 3-6 months, the bank can go to court to impose a fine, seize the collateral (that is, real estate) and sell it through an auction.

About early repayment and depositing large amounts

We have already received funds for the purchase or construction of our own housing from the bank and have free funds. The question arises: is it worth investing these funds in early repayment of the loan? Early repayment is beneficial because it results in a reduction in the amount of overpayment, especially considering the fact that today commissions and penalties for early deposit of funds have been abolished.

The client can pay the entire balance of the mortgage in full, or pay it off partially, depending on his capabilities.

If you have chosen a differentiated form of payments for yourself, then it is useful to know that it is more profitable to deposit funds in the first years, since it is at this moment that the amount of the principal debt decreases, thereby reducing the overpayment. If you make annuity payments, then early repayment will be beneficial regardless of the time of payment.

As a result of paying the fee ahead of schedule, the credit institution is obliged to change the payment schedule. To do this, the bank will offer to either reduce the term of the loan or the amount of the monthly payment. Choosing the first option allows you to save a larger amount than in the second case, but it also allows you to save money. It is important to note that the bank does not always provide the opportunity to shorten the loan term, so it is better to immediately inquire about this opportunity when applying, especially if you plan to make payments ahead of schedule.

Use of subsidies and other programs

Now banks provide various benefits and a variety of mortgage programs for all kinds of categories of borrowers, for example, there are programs for military personnel, medical workers, teachers, civil servants, and people in need of improved housing conditions. Only to obtain a mortgage on preferential terms will you have to collect a more extensive package of documents. Permission to provide benefits in this case is provided by local authorities, since the difference between the regular rate and the social bank is paid by the state from the federal budget.

Even today, it is possible to use maternity capital as a down payment or to pay off interest on a loan, which can significantly reduce mortgage costs.

Conclusion

So, we have looked at the most common ways to save on a mortgage loan; all that remains is to choose the appropriate ones and use them in practice to save your money.

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Reduce payment and shorten term at the same time

I have a 10-year mortgage, but I plan to pay it off in five.

Maxim Kainer

pays off the mortgage for four years

When I started early repayment, I asked the bank to calculate options for shortening the term and reducing the payment: I wanted to understand how to pay more profitably. The employee replied that he could not make accurate calculations. I had to figure it out myself. It's good that I did it.

What will you learn

An example we will use to analyze

Mortgage for 10 years, issued in October 2013. The loan amount is 1.1 million rubles. The rate is 11.9%. Monthly payment - 15,719 RUR.

Let’s say that in May 2017, 400,000 RUR appears, which can be deposited to pay off the mortgage loan ahead of schedule.

How to pay off your mortgage profitably

1. Avoid unnecessary payments in the form of fees or late fees.
2. Check that the agreement allows you to make regular payments for partial early repayment.
3. Make sure that monthly partial early repayments do not make the process more expensive due to any contract conditions.
4. Find out from the bank whether it is possible to pay off your mortgage early without going to the branch, so as not to fill out paper applications every month.
5. Choose a lower monthly payment amount rather than a shorter term. In this article we will tell you why.
6. Continue making your down payment each month as if you had not reduced it.

What is better to reduce: term or payment

The bank advised me and all my mortgagee friends to shorten the term, because this option reduces the amount of overpayment. This works for any amount: at least 400,000 rubles, at least 25,000.

If you shorten the term, you have less overpayment on the loan. This is what the credit calendar thinks. Here's a comparison chart.

I deposited RUB 400,000 ahead of schedule, what next?

No early repayments

We'll overpay

786 139 RUR

Payment after May 2017

RUB 15,719

Last payment due date

October 2023

Last payment amount

RUB 15,578

We reduce the period

We'll overpay

RUB 498,754

Payment after May 2017

RUB 15,719

Last payment due date

March 2020

Last payment amount

4110 R

We reduce the payment

We'll overpay

RUB 612,239

Payment after May 2017

8261 R

Last payment due date

October 2023

Last payment amount

8486 R

But the bank does not take into account that after the minimum payment is reduced, the borrower can continue to pay the same amount that he paid before. This is the whole secret: to pay off early, you need to reduce the payment, but continue to pay more. Then the amount of each subsequent mandatory payment will be less and less and at some point you will have enough money to pay off the debt completely ahead of schedule.

In our example, to repay the mortgage loan early, you must continue to pay 15,719 RUR every month, despite the fact that the new payment after its reduction amounted to 8,261 RUR. And you need to continue to do this: deposit RUR 15,720 each time and choose early repayment each time.

How do I pay off my mortgage early?

Regular method	Maxim Kainer method
	Minimum payment: 15,720 RUR
We shorten the period. The minimum payment remains 15,720 RUR	We are reducing the minimum payment. Now it is 8261 R
We continue to deposit 15,720 RUR. The minimum payment does not change	We continue to deposit 15,720 RUR. We reduce the minimum payment every month
We will close the loan in March 2020.	In March 2020, the minimum payment will be 115 RUR. We deposit 4109 R and pay off the balance of the debt

Regular method

Minimum payment: 15,720 RUR

We deposit additional money: 400,000 RUR

We shorten the period. The minimum payment remains 15,720 RUR

We continue to deposit 15,720 RUR. The minimum payment does not change

We will close the loan in March 2020.

Maxim Kainer method

Minimum payment: 15,720 RUR

We deposit additional money: 400,000 RUR

We are reducing the minimum payment. Now it is 8261 R

We continue to deposit 15,720 RUR. We reduce the minimum payment every month

In March 2020, the minimum payment will be 115 RUR. We deposit 4109 R and pay off the balance of the debt

Total: you pay as if you were shortening the term, but in fact you reduce the minimum payment.

Why such difficulties?

This early repayment method is for one thing only: to reduce risk in the future. Look.

When I choose to reduce the mortgage term, I tell the bank: “I want to continue paying these 15 thousand rubles, but so that it ends faster.” That is, I promise the bank that the rest of the time I will continue to pay 15 thousand. My minimum payment is always 15 thousand, even if I lose my job or go on vacation. Yes, my term is being shortened, but throughout this period I have to pay the maximum.

When I reduce my payment, I reduce my monthly debt load. Every month I owe the bank less and less money. But while I have the opportunity, I choose early repayment: I pay more and again reduce my debt load.

As long as I have the opportunity to pay the full 15 thousand, I will not feel the difference between regular and early repayment. I pay the same amount all the time. But if, for example, I lose my job or go on vacation and can no longer pay 15 thousand, it won’t be so scary for me: my minimum payment by that time will be greatly reduced. For example, in April 2018 the minimum payment amount will be about 6,700 rubles, and in May 2019 - about 3,700 rubles.

If I fall on hard times, I can pause early repayments and return to my scheduled payments. For example, if my income decreases in May 2019, I will simply continue to pay my 3,700 rubles until the situation improves. It will take me longer to pay rent, but it won't be as hard.

I understand that this is difficult to understand in the text, so I have prepared a table for you. There are four options for paying off your mortgage, mine is the last one. Scroll down to the AR column where I deposit 400k early and watch the math magic.

This is where the magic begins

Remember that advice on the Internet should not be taken as a guide to action. When you apply for a mortgage, always read the contract, carefully study the payment schedule and create spreadsheets in Excel. There is nothing more reliable than a hand-drawn early repayment schedule.

Read the contract

This is stated in the contract:

If there is something wrong with your agreement, check with your bank that there are no obstacles to regular partial early repayment.

Make payments convenient

Prepare the infrastructure. Every time I make a payment and want to write off the overpayment against early repayment, I need to fill out an application for partial early repayment. In the first months, I went to the bank, took cash and filled out a written application for early repayment. These are unnecessary transaction costs.

To exclude them, I created a creditor bank card linked to my mortgage account. A salary from one of my employers falls onto this card. According to the terms of service, if more than 10,000 rubles pass through the account, then you do not need to pay for the card.

Remember

Before you start making payments under my scheme, make sure that you can do everything so that monthly partial early repayment is convenient and does not make the process more expensive.

See that the agreement allows you to make regular payments for partial early repayment, and then completely close the loan.

Find out from the bank how to make early repayment convenient so that you don’t have to go to the branch every month and fill out paper applications.

Enjoy your minimum payments.

Attitudes towards mortgage lending in our country are different. Some people are afraid of loans like fire, and they can be understood, but for others, a mortgage is the only reasonable way to acquire their own home in the foreseeable future. Personally, I took out and almost paid off two mortgages, constantly improving my living conditions. Despite the “predatory” lending conditions, if it weren’t for this, I would still live in my parents’ apartment.

Be that as it may, a long-term loan, often involving impressive monthly payments over decades, is always a responsible step.

It is vitally important to soberly assess your strengths and choose a bank where the lending conditions match your capabilities. Can provide some help mortgage calculator, but you must understand that it is just one of the tools. You need to slowly weigh all the pros and cons, talk with a knowledgeable person, and ultimately make a thoughtful decision.

And if you have already taken out a loan, do not be lazy to follow economic news so that if something happens, you can save money. Unfortunately, a short-sighted consumer, due to lack of education in the field of lending or banal immaturity, is not even aware of possible methods of saving. But we are often talking about hundreds of thousands and even millions of rubles.

What is refinancing?

Imagine that at one time you took out a loan on the best terms, having previously studied the available offers. You paid it in good faith, and then discovered that market conditions have changed, and the same or another bank is offering a similar loan on more favorable terms.

You contact a banking organization and ask for refinancing. In fact, it will look like you took out a new loan to fully or partially repay the old one, but under new conditions.

Of course, there are also pitfalls. For example, not all banks are ready to refinance loans, especially those not taken from them. There may be special requirements for borrowers. If the loan is secured, then the borrower will pay increased interest during the refinancing period. If you have already paid the interest and transferred to the “body” of the loan, you will not be able to refinance anything. In addition, there will be certain costs for re-registration and so on.

If the reduction in the interest rate ultimately covers the costs of re-registration, if the bank does not impose a moratorium, the conditions for early repayment are acceptable, and the rate can be reduced by more than 2%, refinancing can be called an effective tool for saving.
Mortgage refinancing

Let's look at everything using a specific example. You took out a mortgage loan at the height of the crisis at a high rate - don’t blame yourself, many did the same. You have been approved for 5 million, at 15% and for a period of 10 years

Over the past year, the mortgage rate has decreased by several percent (to around 10-11%). You understand that if you take out a loan for a similar amount and term now, you will pay less. And not just less - but 11 thousand less per month. Moreover, the total savings will be almost one and a half million rubles!

Of course, this does not take into account additional conditions, but no one is stopping you from at least checking the possibility of savings.

Refinance calculator

Of course, everyone's mortgage terms are different, and refinancing may not be right for everyone. By spending five minutes, you can, for example, calculate how much you can approximately save after refinancing, and whether you can save it at all.

Mortgage refinance calculator is an intuitive tool that, after filling out several fields, gives approximate loan terms on new terms. Optionally, you can change the loan term or payment amount to see how this affects the terms. It, of course, does not take into account all factors, and only gives a general idea of ​​the situation.

Let us remind you once again that refinancing is profitable and not always possible. It may turn out that the cost of re-registration will be greater than the final savings on the interest rate. It may turn out that the bank will not allow you to withdraw the collateral, an appraisal examination will be required, which will not work in your favor, and so on. But it may also turn out that by refinancing you will reduce the interest rate and save a million rubles.

To obtain up-to-date and reliable information about the pros and cons of refinancing, it is recommended to contact a qualified and preferably uninterested specialist.