All news
Installment plans for apartments have become more accessible. What buyers get and what they risk
In Russia, fractional home sales have been going on for several years now. At the same time, the terms of these transactions have also changed significantly. Interest in installment products is growing due to the steady growth in mortgage prices. On October 25, financiers expect a new increase in the central bank's base interest rate. When this happens, your mortgage interest rate will become even higher. Thus, buyers' interest in alternatives that make it possible to purchase a home will increase. In this situation, installment products are becoming one of the most popular products.
— Now that mortgage lending has become a problem due to high interest rates, installment products are becoming more and more widespread on the market. This is an opportunity to purchase housing in installments. The terms may vary significantly depending on the seller providing the service. Installments may be interest-free. That is, as in the case of bank loans, there will be no overpayments or interest in the end,” said Petr Gusyatnikov, senior managing partner of the law firm PG Partners.
In principle, if the product is provided in installments at a certain rate, it is lower than the market average. One of the biggest disadvantages of installments is their short term. Most of them are from 1 to 4 years. Therefore, you should understand that the payment in this case will be significant. The amount of the down payment is not limited. The market has become possible to purchase real estate in installments with a down payment of 10%.
— Previously, in Russia, an installment plan was announced for the construction period, and the final payment according to the schedule coincided with the commissioning of the facility. These are unique times when the installment plan of developers is extended to seven years. The most interesting thing is that we offer an installment plan for three years for finished houses,” said Anastasia Afanasyeva, founder of the real estate agency Development Estate.
It was noted that from a legal point of view, there are specific provisions for the execution of installment payments. There are two options: The first is to immediately register the buyer's ownership right, fixing payments according to the payment schedule. The second is to pay 100% of the cost of the housing, register the ownership right and sign the purchase and sale agreement.
"The first case is safer for the customer. Secondly, the developer can include a clause in the contract that the cost per square meter may change due to unpaid amounts. It is important to carefully read the contract or consult a real estate lawyer," explains Anastasia Afanasyeva.
The biggest advantage of installments is that you can optimize your expenses without using a mortgage. This option is ideal for people who expect money to arrive soon (six months or a year), but do not want to miss out on opportunities now. This was noted by the owner of the construction company "Lazovsky Dom" Maxim Lazovsky.
— Another disadvantage of installment plans in most cases is the high initial price of the property. Usually, developers bring a certain pool of apartments to the market, offering to buy them in installments, but the price is higher than 100% payment or mortgage. In this way, they try to compensate for the risks of installments — inflation and the risk that the buyer will ultimately not pay the full cost, explained Petr Gusyatnikov.
The advantage of an installment loan is that you can buy a home with less overpayment than with a mortgage loan. But here too, you need to consider shorter terms and higher payments. So this can be both a plus and a minus.
If a small part of the amount is not enough to purchase a home, an installment plan may be a profitable option, especially during the construction stage, when real estate prices continue to rise. If we are talking about 90% of the costs, you need to carefully weigh everything and assess your financial capabilities.
— Installments may have some disadvantages. Firstly, the developer uses borrowed funds for the entire installment period. It is logical to include installments in the sale price or set a small term or installment amount. For example, 90% now and 10% in 3 months. In addition, installments may entail significant penalties for late payment. With a mortgage, you retain ownership of your apartment or house. Despite the burden on banks. Installments usually mean transfer of ownership after full payment. If something goes wrong with the payment, you can incur serious losses," said Maxim Lazovsky.
— In my opinion, people with a stable income, who are ready to make regular payments and do not want to take out a mortgage, should consider an installment plan. This is especially relevant for buyers of business or luxury real estate. In the economy and comfort class segments, buyers more often choose a mortgage. It is better to refuse an installment plan if you have doubts about the stability of your income, since there is a high risk of losing the apartment in case of late payment. Also, if you plan to live in the purchased house for a long time, it is better to take into account that full ownership of the apartment is possible only after full repayment," added Diana Suvorova.