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The mortgage market in Russia has only existed since 2003, and the market is still in the development stage. Until very recently, Russians were suspicious of mortgage lending and avoided it. This has made it difficult for an expat to obtain a mortgage in Russia; however, the situation is now improving rapidly. The largest lending organisation, the state-run Sberbank, arranged 55% more mortgages in January 2014 than in the same period 12 months previously, and the total number of mortgages arranged in Russia increased from 692,000 in 2012 to 825,000 in 2013.
Nevertheless, only a handful of lenders in Russia are prepared to consider offering a mortgage to expats. Furthermore, most banks and other lenders have a limited fund for mortgage lending, so there is no guarantee even if you find a willing lender that they will grant you a mortgage. It is very likely that you will need to shop around –the services of a mortgage broker may help with this process. This is especially the case if you do not speak Russian.
Previously, lenders usually gave precedence to prospective borrowers who are educated high earners aged between 27 and 45. Many of the terms and restrictions on mortgages are in the process of being lifted.
What terms you get depends on who you borrow from. In addition to Russian banks, other possible lenders in Russia are Western banks, credit unions, regional funding schemes and building societies (ZhSS). The latter offer only small, short-term loans. Russian banks now offer a reasonable loan-to-value ratio (LTV) of generally 70% to 85%. However, interest rates are very high – the average for 2013 was 12.4% – and repayment periods, though they are 25 years on average, can be as short as 10 years (as for example, with Sberbank.)
There are also Western Banks, the best established of which are the Delta Credit Mortgage Bank (USA) and Raiffeisen Bank (Austria.) Most mortgages are nevertheless underwritten by Russian state banks.
The maximum age at full term is different for men and women; it is 65 for men and 60 for women. Mortgage payments are not generally permitted to exceed 35% or 40% of family income, though ‘family’ is sometimes taken to include extended family members.
Mortgage terms are becoming more attractive in Russia. For example, the ban on early repayment has been lifted by law. Furthermore, borrowers accrue tax deductions on their mortgage repayments.
Note that lenders in Russia are fairly ruthless when it comes to falling behind with a mortgage. Some may not make any effort to conciliate with borrowers, but many head straight for the courts.
As is usually the case in Russia, there are complicated bureaucratic procedures to go through in the mortgage application process. As a bare minimum, in addition to the mortgage application form, documents you need to apply for a mortgage typically include:
Mortgage application processing times, formerly at more than two weeks, have also been reduced recently.
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