Is it worth taking a mortgage: pros and cons of housing on credit

Interest in the mortgage is growing. According to the Bank of Russia, for the period of January-June 2023, banks provided 825 thousand mortgage loans totaling 3.1 trillion rubles. This is one and a half times more than in the same period of 2022.

In what cases is it better to take a mortgage, and when you choose an alternative option, we will tell you in this article.

Content:

1. Pros of mortgages
   1. Permanent housing
   2. Saving
   3. Domestic freedom
   4. The bank can reduce the financial burden if necessary
   5. Fixed payments
   6. Apartment is an investment
2. The cons of the mortgage
   1. High cost
   2. The complexity of the design
   3. The apartment belongs to the bank
3. Should I take an apartment in a mortgage?
4. Alternative mortgage: Real estate leasing

Pros of mortgages

Permanent housing

Many people want to live in their apartment because of reliability and confidence in the future. Everything is different with rental – there is always a risk that the owner will ask you to move out. Then you will have to look for new housing and organize a move. Which is especially troublesome for large families with children and pets.

Saving

Often, mortgage payments are less than rent. Especially if there is an opportunity to take advantage of benefits or maternal capital.

Domestic freedom

In a mortgage apartment, you can make repairs and start pets without restrictions. This allows you to organize your life according to individual needs.

The bank can reduce the financial burden if necessary

Some banks offer restructuring or refinancing mortgages. Not every landlord is ready to meet in case of financial difficulties.

Fixed payments

Mortgage payments remain stable throughout the entire loan term. The rent can be raised at any time, especially if there are loopholes in the contract for this.

Apartment is an investment

After paying on a loan, the apartment will be in full property and in the long term can bring income.

The cons of the mortgage

High cost

In good areas, the cost of apartments is very high. As a rule, available housing can only be found in new buildings in remote areas. As a result, monthly mortgage payments are more expensive than payment for similar rental housing.

The complexity of the design

The process of obtaining a mortgage can be complex and long. Many are faced with difficulties in collecting the necessary documents, and not all borrowers manage to get approval on favorable terms.

The apartment belongs to the bank

Although the apartment is issued for you, mortgage housing essentially belongs to the bank until the loan is completely repaid. While the mortgage is not completely paid, you can feel limited in rights and opportunities.

In addition, with a mortgage loan, it is quite difficult to change the work. And if you do not have a stable earnings, this threatens a violation of the payment schedule. In this case, you need to clearly plan the budget, and understand that you cannot make spontaneous purchases for a long time or go on an unplanned trip.

Should I take an apartment in a mortgage?

If you strive for stability in the housing issue, a mortgage is a suitable option. For families with children, rent is less suitable, since it will be quite difficult to choose another rental housing in case of moving.

However, if you do not plan to linger for a long time in one place, instead of a mortgage, it is better to conclude a lease agreement for a short term with the possibility of extension.

An unstable financial situation can make a mortgage with a heavy burden. It is also necessary to take into account your credit history. If you do not have a high credit rating, the mortgage conditions will be less profitable.

It is also important to evaluate your financial capabilities for the down payment. The lack of funds will make monthly mortgage payments unbearable. This will cause additional financial difficulties.

Alternative mortgage: Real estate leasing

Real estate leasing is rental with the possibility of ransom. Unlike a mortgage where the apartment is issued on you, when leasing you rent housing. At the same time, you can purchase it after the expiration of the lease. The interest rates under a leasing agreement are higher than mortgage, and usually amount to 15 to 20% per annum.

Leasing services are offered by several large companies, the most famous of them “VTB24 leasing”. At the same time, you can draw up an agreement both for an apartment in a new building and a secondary. True, subsidies and benefits under such a contract cannot be issued. But the government is already working on this issue and in the future plans to introduce special benefits for leasing housing.

Unlike a mortgage, leasing often does not require a significant initial contribution, which makes it more accessible to those who cannot immediately allocate a large amount.
In addition, leasing can be a less risky option. The contract may be issued for a short time and with a favorable interest rate.

However, leasing can be more expensive in the long run compared to the mortgage, since the redemption option may include additional conditions and expenses.

In conclusion

It is worth taking a mortgage if you have a stable and sufficient income and you are ready for long -term financial obligations. Also, if you strive for stability in the housing plan and consider real estate as an investment in the future, a mortgage can be a suitable option.

However, you should not take a mortgage if your financial status is unstable, you do not have enough funds for the initial contribution, or if you plan to move. Consider your personal and circumstances to make a balanced decision.