How to refinance a mortgage after the birth of a second child

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• Refinancing a mortgage with children

What is a family mortgage: conditions for registration

Who can refinance a mortgage?

Rules for refinancing a mortgage at the birth of 2 children

Basic requirements for a pre-arranged mortgage

Benefits of refinancing your mortgage

Refinancing your mortgage means paying off your existing loan and replacing it with a new one. There are many reasons why loans are refinanced:

• get a lower interest rate;
• shorten the mortgage term;
• change from an adjustable rate mortgage to a fixed rate mortgage or vice versa;
• tap into your home equity to raise funds to address an emergency, finance a major purchase, or consolidate debt.

Because refinancing can lower the principal amount of the loan and requires an appraisal and application fees, it is important for a homeowner to determine whether refinancing is a smart financial decision. Mortgage refinancing is a strategy that helps homeowners achieve their goals. When a bank refinances a mortgage, the new lender pays off the old mortgage and replaces it with a new one.

But citizens of the Russian Federation have another opportunity. The government allows refinancing for those clients who have a second or third child in their family during the mortgage term. 6% from the state is a great chance to pay off the loan faster or reduce the monthly payment amount. Refinancing a mortgage upon the birth of a child has a number of conditions that must be met in order for the operation to proceed.

Legislative regulation of a mortgage loan at the birth of a child

According to the Civil Code of the Russian Federation, the terms of the contract are determined by its parties, and all subjects of the Russian Federation are free to conclude different types of contracts.

Based on this information, the terms of the loan agreement secured by real estate are determined by the parties. This means that mortgage benefits upon the birth of a child are only possible if such conditions are stipulated in the mortgage agreement. For example, it is possible to defer a mortgage upon the birth of a child at Sberbank - the organization provides a special program “Young Family”, according to which the borrower of funds can receive a deferment in the event of the birth of children or increase the terms of the loan.

Despite the provisions of the Civil Code of the Russian Federation and laws on mortgage lending, there are also local regulations that apply to both parties. Thus, Decree of the Government of the Russian Federation No. 1050 “On the federal target program “Housing”” stipulates that all subjects of the Russian Federation that participate in the implementation of the subprogram “Providing housing for young families” of the federal target program “Housing” are obliged to provide the young family that is a participant in the subprogram social payment. The amount of such payment must be at least 5% of the average cost of economy class real estate. Payments are provided to repay part of the loan that was provided for economy class housing. These conditions also apply to residential mortgage loans.

According to Government Resolution No. 373, citizens who cannot independently repay the principal debt on a mortgage loan have the right to restructure their existing debt. The maximum amount of compensation provided under the program is 20% of the balance of the loan amount (but not more than 600,000 rubles) if the applicant has minor children. Compensation of 30% of the balance of the loan amount (but not more than 1.5 million rubles) is applied if the applicant has disabled children or is a trustee or guardian of two or more minor children.

It is also mandatory to comply with such a condition as a change in the debtor’s income, according to (clause “b”, part 7 of the Resolution). It is possible to claim compensation if the total income of the debtor’s entire family, after deducting all monthly mortgage payments for three months, is less than two times the subsistence minimum for each person in the region where the debtor and his family live.

Thus, provided that the above requirements are met, a family can receive a write-off of 20% of the mortgage upon the birth of a child.

Which banks refinance

To refinance a mortgage upon the birth of a 2nd or 3rd child, it is advisable to contact the bank where the loan was issued secured by real estate, or other lending organizations. Due to the approval of the policy of issuing housing loans to families with children at the state level, preferential mortgages are issued by all major Russian banks, including Sberbank, VTB 24, Bank DOM.RF, Raiffeisenbank, Rosselkhozbank and many others.

Citizens interested in participating in the state program of preferential mortgage lending should take into account that refinancing involves obtaining additional banking services, including personal health and life insurance, as well as collateral on the terms specified by the lender. The need to repay additional obligations increases the actual cost of the “children’s” mortgage, and for some clients the very idea of ​​refinancing, after a careful analysis of all parameters, loses its attractiveness.

If the need to refinance a mortgage for a family with two or more children raises questions and doubts, before submitting an application to review the terms, you should contact a mortgage broker, who will assess the real debt load and assess the feasibility of changing the loan agreement. Specialists are well versed in current banking products and procedural features, offering interested borrowers with children the most profitable refinancing options, taking into account the acceptable payment burden and personal preferences.

What are the real mortgage repayment conditions for a young family?

Please note that the family can pay off the mortgage upon the birth of a second or third child in 2020 using maternity capital. Capital is received for the third child if capital has not been received for the second.

It is possible not so much to write off part of the mortgage debt at the birth of a child, but to provide special conditions that can reduce the financial burden on the family. In practice, the following methods are used:

• receiving financial assistance;
• reduction in the interest actually paid on a mortgage loan;
• repayment of debt on borrowed funds at the expense of maternity capital.

Repayment of the mortgage upon the birth of the third child is carried out in accordance with local regulations. In some cities and regions, fixed amounts are established (for example, repayment of a mortgage loan amount of 1 million rubles), while in others a share (for example, repayment of 30%) of the mortgage amount is repaid upon the birth of a third child.

Deferment of mortgage payments upon the birth of a child is possible in some banking organizations. For example, VTB and Sberbank offer the following benefits for the birth of children: the birth of the first child allows you to extend the mortgage for three years, the birth of the second allows you to extend the mortgage for another five years.

Is it possible to refinance the loan if the first, second or third baby is born?

We will tell you in what cases it is possible to refinance a mortgage at a rate of 6%.

1. At the birth of the first child. If there is one child in the family, you cannot count on participating in the program at a reduced mortgage rate.
   Conditions are offered only to those families with 2 or more children. Please note: it was originally assumed that the benefit would be provided if there were two to three children in the family, but then this condition was revised.
2. For the second one. If the baby was born between January 1 and December 31, 2020, or subsequent children will be born before the end of 2022, you can write an application for refinancing.
   The maximum period of state support is three years. Once the term expires, the current interest rate will be set. The period can be extended to eight years if another baby is born before 2022.
3. For the third and subsequent children. For families with four or more children, preferential mortgage refinancing at 6% is extended to five years. The period can be extended for a further three years if two more children are born between 2018-22.

What conditions are imposed on program participants?

State support for a mortgage upon the birth of the first child in 2020 is only possible if the family meets a number of requirements. Help is possible if:

1. Parents' age is up to 35 years.
2. The family has the right to claim preferences from the state (under special conditions provided for by law).
3. The area is calculated in accordance with the standards established by regional regulations.
4. The family is on a state waiting list to receive assistance to normalize living conditions under state or regional programs.
5. Some nuances should be taken into account when recalculating the loan at the birth of each child. In fact, the amount of mortgage debt for the square footage of the apartment intended for children is written off.

Borrower categories

To take advantage of the offer, you must meet a number of requirements that the state imposes on applicants. An interest rate of 6% will be valid for the entire period of repayment of the mortgage by a family where a second or subsequent child was born after 01/01/2018. The decision to make the preferential mortgage rate permanent was announced by Maxim Topilin, who holds the position of Minister of Labor and Social Protection of the Russian Federation. This significant event took place on February 13, 2020, at the “Healthy Society” forum, held in Sochi. Previously, there were restrictions - the maximum duration of the benefit was 8 years.

Only families that meet the following requirements can take part in the state subsidy program for family mortgages:

• they purchased an apartment from a developer, refinancing the mortgage for a second child and subsequent ones is permitted in a situation where the apartment was purchased at the construction stage;
• within the prescribed period (from the beginning of 2020 until 2023), the 2nd, 3rd or next child was born;
• the cost of the purchased housing was no more than 12 million rubles for families living in Moscow or St. Petersburg, no more than 6 million rubles for other Russian regions;
• borrowers took out insurance when taking out a mortgage, and the down payment amount was at least 20%.

To obtain mortgage refinancing for a second child at 6%, you must provide a mortgage loan agreement concluded no earlier than August 1, 2020. Russian citizenship is a mandatory requirement for children and parents.

When the 2nd, 3rd, 4th or subsequent child is born between January 1, 2020 and December 31, 2022, his parents can apply to refinance their loan issued no later than March 31, 2023.

Important! If a family is in arrears on an existing loan, then it may not count on refinancing.

As a down payment, it is allowed to use not only the family’s own savings, but also a subsidy issued at the place of work. Also, the initial contribution can be government support from the federal or local budget. The most common option is to use maternity capital as a down payment.

Previously, it was possible to obtain approval for an application to refinance a mortgage after the birth of a second child, provided that the family did not apply for restructuring of the existing mortgage loan. This condition is now no longer valid. If the applicant fully meets the established requirements, then he resolves all issues regarding receiving the service with his bank, which issued him a home loan. In this case, it is necessary to refer to the Decree of the Government of the Russian Federation of March 28, 2019, which contains current changes as of the current moment.

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The conditions for refinancing a mortgage if a second child is born after 2020 are as follows:

• the period for fulfilling obligations under the mortgage agreement ranges from 12 months to 30 years;
• rate 6% per annum and 5% for residents of the Far Eastern Federal District;
• Mortgage currency is Russian ruble.

Borrowers will be able to obtain a mortgage with government support both to purchase an apartment in a new building and to repay an already issued loan. An interesting innovation is permission to purchase a home on the secondary market. However, this opportunity is available only to residents of the Far Eastern region. They also have a preferential rate of 5% per annum.

How to apply for mortgage repayment?

The state program stipulates that in order to obtain a mortgage, you must contact government authorities with the following documents:

• passport or other identification document of the parents;
• children's birth certificates;
• document confirming family composition;
• information about place of residence;
• proof of solvency as evidence of ability to pay a mortgage;
• mortgage agreement;
• technical documentation for the premises.

Please note that it is possible to obtain complete write-off of mortgage debt in the event of the birth of a third child - in this case we are talking about programs in certain regions of the Russian Federation. To clarify the information, we recommend contacting the Pension Fund at your place of residence. The mortgage can be written off if the following documents are provided:

• maternity capital certificate;
• birth certificates of all children;
• Marriage certificate;
• a valid loan agreement;
• an agreement confirming ownership of premises purchased on credit.

The originals are provided to the Pension Fund office, from which copies are made. After verification, all documents are sent to the banking or credit organization, further clarification is made, and after that all funds are credited to the account.

To fully clarify the information on exactly how mortgage repayment occurs at the birth of a child in your region, we recommend that you familiarize yourself with the materials and legislation on social mortgages in the regions of the Russian Federation.

Does paying off a mortgage work in practice?

To date, the social program has been implemented in many regions of the Russian Federation. Thus, in Mordovia, at the birth of the third child, the mortgage from Sberbank or another credit organization is written off in the amount of 30% of the debt, and at the birth of the fourth child, the mortgage is repaid in full. A similar scheme operates in Tatarstan, where at the birth of the first child, part of the mortgage is written off by providing a subsidy based on the cost of 18 square meters of housing. Similar programs operate in other regions of the state. Thus, you can apply, for example, for a reduction in your mortgage at Sberbank upon the birth of a child.

Legal basis

Under the new law, many families will now be able to receive a reduced interest rate on mortgage loans, which is 6%.

However, there are several important nuances that you need to know about before applying.

Mortgage benefits are regulated by Presidential Decree Pr-2440, clause 2 and Decree of the Government of the Russian Federation No. 1711 “On approval of the Rules for the provision of subsidies from the federal budget to Russian credit organizations and the joint-stock company “Housing Mortgage Lending Agency” for compensation of lost income on issued (purchased) housing ( mortgage) loans (loans) provided to citizens of the Russian Federation with children”

According to current regulations, the validity period of a preferential mortgage is 3 years, starting from January 1, 2018 until December 31, 2020.

However, there is a possibility of its extension if successful. It is too early to draw conclusions now, since this measure of social support does not last long. The first results can be seen only after a year.

The law does not only apply to biological parents. People who have adopted children may receive a reduction in mortgage rates. But in this case, it is not the date of birth of the baby that plays a role, but the moment of his transfer to the family.