How does installment plan from a developer work when buying an apartment in 2020?

The installment mortgage program is designed specifically for people who want to purchase housing under construction and rent an apartment. A loan significantly increases the cost of citizens, so not everyone can afford to burden the family budget with a mortgage loan for many years. The banking system aims to develop various types of lending applicable to all segments of the population. Sberbank is a leading financial institution in Russia, successfully cooperating with the state and developers. This allows us to offer clients the most profitable and convenient conditions for providing funds for the purchase of living space. Below we will consider in detail all the pros and cons of the concept of deferred payments.

What does an apartment on installments mean?

Content

Installment is a method of paying for real estate in which the buyer makes payments within the established time frame according to the contract. First, an initial payment of 10% is usually required, then the rest of the amount in installments.

Most often, installment plans are used when purchasing an apartment from a developer, and less often from individuals. This is because most sellers need money right away to purchase a home. Construction companies make money from this, and it is profitable for them to sell apartments in this way.

Types of installments

There are several types of installment plans for the purchase of real estate:

1. Interest-free when the buyer does not overpay.
2. Interest, when an interest rate is charged on the balance of the debt, like in a bank.

Interest-free installments are more profitable. It is most common among developers who need to sell apartments faster.

Note! Installment plans are provided by agreement of the parties under any agreements: agreement of shared participation in construction (DDU), sale and purchase agreement (PSA), assignment of the right of claim. The DDU is concluded when the house is under construction. DCP – when it has already been put into operation. An agreement on the assignment of the right of claim is drawn up by a shareholder who has bought an apartment that has not yet been built, but wants to sell it to another person.

Other installment terms

The remaining conditions for 2020 are the same as in the case of obtaining a housing loan with a one-time disbursement of funds, that is:

Who is suitable for installments for an apartment?

Before purchasing an apartment in installments, you need to familiarize yourself with the nuances of the transaction. This purchase option is suitable only for those who have a consistently high income:

1. Installment plans from the developer are issued for a limited time, usually 1-3 years. During this period, you need to completely repay the debt, the payments will be impressive.
2. Installment terms for individuals are more flexible. If we can reach an agreement, we can arrange it for 5 years. But the payments will still be large compared to a mortgage.

Example. A man bought an apartment in installments from a developer using a policy for 5,000,000 rubles. The debt must be repaid in 36 months. Initial payment – ​​500,000 rubles. (10%), balance of debt – 4,500,000 rubles. The monthly payment will be:

4,500,000/36 = 125,000 rub.

There is also an advantage - in any case there will be no overpayment on interest-free installments.

Note: buying apartments in installments is beneficial for the self-employed and individual entrepreneurs. Banks are less willing to approve mortgages for them than for those working under employment contracts. Developers have more flexible requirements.

Mortgage

The ancient Greeks knew about the meaning of the word. This is a form of loan where the lender takes your real estate as collateral in exchange for a large sum of money. That is, a mortgage agreement must be concluded with a financial institution - a bank.

Not everyone can get a mortgage, because before concluding an agreement, the bank will carefully check your credit history and solvency.

At a minimum, you need a solid official source of income. But you don’t have to worry about tricks on the part of the builders - they are also subject to inspection.

The term of the mortgage loan can be as long as desired, even up to thirty years, while monthly payments are quite affordable for people with an average (but stable) income. The amounts of overpayments can reach 100 percent or more of the purchase price. In addition, the client is forced to insure his property all this time.

What is the difference

So, what is more profitable – a mortgage or installments? Calculating the funds, we can conclude that an agreement with builders will allow for lower costs than a bank mortgage. But it should be taken into account that sometimes construction companies include a certain amount in advance in the price of housing sold in installments. That is, a small overpayment cannot be avoided in this case.

You can draw up a mortgage agreement at almost any bank, while not all construction companies practice installment plans. In addition, by taking out a loan, you can buy any home, including on the secondary market. The choice when buying a home in installments is limited to houses under construction or newly built ones. In practice, this means that while your house is being built, you must rent housing, or continue to live with your parents. And by taking out a loan from a bank, you can move into your apartment immediately - “come in and live.”

Installment plans will also be available to those buyers who do not have a very good credit history or do not have a salary certificate. However, the payment amounts must be much higher than with a mortgage. And in order to take advantage of the interest-free installment plan, you need to make a significant down payment (up to 50 percent).

When purchasing a home in installments, read the contract carefully. The developer has the right to transfer ownership of the apartment to you only when you make the final payment. If something goes wrong, he will simply sell your apartment again. If you are unable to pay the bank, you may also lose your property - because it will be pledged.

Advantages and disadvantages

In order to determine which is better – a mortgage or installment plan, answer the following questions for yourself:

• What kind of housing do you want to buy: new building or secondary housing?
• Can you quickly pay the developer or would you prefer to pay small amounts over a long period of time to the bank?
• Are you ready to submit all the necessary documents to apply for a mortgage loan?
• Is your credit history good enough?

The table will help you decide on a mortgage or installment plan:

To summarize, we can say that installment plans are ideal for those who have the funds to pay off their debt quickly enough. They don’t need a mortgage – it’s a waste of time and money. And if your budget is limited and large income is not expected, you cannot do without a mortgage.

How does an installment plan differ from a mortgage?

There are big differences between a mortgage and an installment plan:

What it is

Installment payment for the purchase of an apartment is a phased payment of the cost of the apartment, which is divided into equal parts depending on the period for which the buyer completes the transaction and the remaining amount after making the first payment. Installment means monthly or quarterly payment of payments in equal amounts.

As a rule, installment plans are drawn up when signing an equity participation agreement (DPA), which implies the purchase of real estate before it is put into operation. Simply put, the house has not yet been built or is at the construction stage. In this way, the buyer can save money due to the fact that such a purchase will be cheaper than ready-made apartments, and the buyer will also pay off the debt for the purchase of the apartment in installments.

Registration occurs less frequently if the installment plan is drawn up already at the conclusion of the contract for the purchase and sale of real estate. Sellers do not want to participate in such procedures and often refuse the deal. Such points should always be discussed at the very beginning.

Installment plan when buying an apartment in a new building: conditions, procedure

First, the buyer needs to find a developer and check official registration, availability of a building permit, and design documentation. It is important to review installment plans carefully.

What to do next:

1. If you are satisfied with the developer and the apartment, enter into a DDU or DCP and register everything with Rosreestr.
2. Receive a final package of documents from Rosreestr.
3. Make payments under the contract on time.

When construction is completed, you need to check the quality of the delivered apartment and sign a transfer deed, then register ownership.

Contents and sample agreement

The DDU or DCT with the developer must contain all the information about the transaction and installment plan:

1. Name, INN, OGRN, full name head of the selling company.
2. Full name, date of birth, passport details of the buyer.
3. Information about the property: area, number of rooms, cadastral number (if assigned).
4. Information about the installment plan: cost of housing, size of the down payment, installment period, amount of mandatory payments and payment deadline.
5. Liability for failure to fulfill obligations by the parties.
6. Rights and obligations of the parties.
7. Signatures of the parties to the transaction.

Documentation

To conclude a transaction with the developer, the buyer will need a passport. The seller must provide design documentation and a construction permit.

Expenses

When purchasing an apartment in installments from a developer, there are usually no additional costs. You only need to pay the state fee for registering a preschool educational institution - 350 rubles. Transfer of ownership under the DCT will cost the buyer 2,000 rubles.

Construction companies prepare documents themselves, so there is no need to spend money on lawyers.

Decor

Documentary registration of obtaining an apartment in installments does not cause any special problems.

The buyer will need the following documents:

1. Buyers' passports;
2. If the buyer is married, the consent of the spouse to the transaction with certification by a notary.

Documentary execution of agreements between the seller and the buyer is preceded by the study of materials on the property.

These include:

• Documents confirming the developer's rights to the land plot on which the object is located;
• Project documentation for the facility;
• Conclusion of the examination of design documentation;
• Construction permit (and commissioning permit, if available).

Purchase of real estate in installments from individuals

Purchasing an apartment in installments from an individual owner is a more complicated procedure than from a developer. In the first case, you will have to negotiate an installment plan, and not everyone will agree to this. Companies are focused on selling real estate as quickly as possible, and most of them already have installment plans.

How to buy real estate from an individual:

1. Find a suitable apartment, agree on installments and other terms of the transaction with the owner.
2. Conclude a contract by transferring a deposit as a down payment.
3. Submit documents to register the transfer of ownership to the MFC or directly to Rosreestr.

Ownership will be transferred to the buyer within 7-9 days. The DCT specifies an installment plan, so until the debt is fully repaid, the housing will be pledged to the seller. The new owner will not be able to donate, sell or exchange it. When the debt is repaid, you need to take a receipt from the seller and submit it to Rosreestr, then the restrictions will be lifted.

Contents and sample agreement

The contract for real estate in installments with an individual must contain the same information as with the developer. But instead of the organization’s details, the seller’s full name, passport details, date of birth and registered address are indicated.

What other information will you need:

1. Guarantee that the apartment is not mortgaged.
2. Methods and procedure for installment repayment, amount of payments, validity period.
3. Information about the transfer of the object as collateral to the seller until the debt is repaid.
4. Signatures of the parties.

The DCP is drawn up in at least three copies. One each remains with the seller and the buyer, the third is transferred to the registrar.

Documentation

To buy an apartment in installments, the buyer only needs a passport. The seller presents a full set of documents:

• extract from the Unified State Register of Real Estate;
• passport;
• the document on the basis of which he registered ownership.

You will also need an extract from the house register and a certificate of absence of debts for housing and communal services.

Expenses

The seller pays a state duty of 2,000 rubles. for the transfer of ownership of it. There may be other costs:

1. If the DCT is certified by a notary: 0.5% of the cost of housing, maximum 20,000 rubles.
2. If the DCP is drawn up from a lawyer – from RUB 2,000. Notaries charge more - from 3,000 rubles.
3. If notarized consent of the seller’s spouse is required for the sale – 500 rubles. for a certificate, from 1,000 rubles. for registration at a notary office.

Lawyer's advice: to be on the safe side, it is better to entrust the transaction to a lawyer. Unlike a notary, he will fully check the transaction for legal purity. Notaries, for the most part, only check submitted documents.

Installment principle

How exactly does installment work? It consists of stage-by-stage payment for the purchased residential premises. The main share, as a rule, falls on the initial payment, which can be up to half of the total cost of the apartment. The remaining funds must be transferred to the seller on the terms specified in the agreement.

This method is well suited if it is not possible to pay the entire amount at once, but there is reason to believe that the buyer’s financial situation will improve in the near future. For example, he plans to sell his old apartment or withdraw money from interest-bearing deposits, but the time for this has not yet come.

Installment programs are:

• short-term (for a period of up to one year). They are usually interest-free, but the down payment sometimes exceeds even 50% of the total cost,
• long-term (more than one year), which sometimes includes a small percentage.

The terms of the installment plan depend on the developer company, however, the transfer of ownership, as a general rule, occurs after full payment of the cost of the residential premises. If a share participation agreement was concluded, then this happens when the house is put into operation. It is worth paying attention to the debt repayment schedule: it is better if it is tied not to a specific date, but to the construction stage.

Selling an apartment in installments: risks

The seller has quite a lot of risks when selling an apartment in installments:

1. If it is likely that the buyer will stop making payments or will be constantly late in making payments.
2. If the buyer decides to terminate the deal, there is no guarantee that the property will be returned in its original condition.
3. If the buyer stops paying under the DDU, it will have to be terminated through the court.
4. If the installment plan is interest-free, before full repayment, part of the money will be “eaten up” by inflation.

The buyer's risks are minimal. He may face problems if he loses income and the ability to pay in installments, or the seller refuses to remove the encumbrance after paying off the debt. But sellers generally take more risks.

How to buy a new building in installments from the developer - procedure

Buying an apartment in installments without overpayment in a new building is carried out according to the DDU. A payment schedule is attached to it. This document reduces the likelihood of selling the property again. Potential buyers are offered real estate constructed on the basis of a full package of permits. The construction company has ownership rights to the land under the new building. The developer complies with current urban planning norms and rules. The buyer is protected from the sale of illegal items.

The law does not provide a list of papers for purchasing an apartment in installments for 15 years or another period. You must take your passport and tax identification number. The developer has the right to require papers confirming financial solvency, but in most situations they are not needed.

The down payment is at least 20-50% of the cost of housing in a new building or 80% of the price of an apartment in installments between individuals. Payments can be made monthly or quarterly. Before completing the transaction, it is recommended to calculate your own solvency, taking into account the first and subsequent payments. The conditions are specified in detail in the agreement for the purchase of an apartment in installments. It is recommended to provide:

• features of transfer of rights to the investor;
• the possibility of moving into an apartment in installments from the owner until the debt is fully repaid;
• fines for regular and one-time delays;
• early payment of the entire cost of housing;
• conditions for termination of the transaction if the parties fail to fulfill their obligations;
• the procedure for calculating interest, if provided for in the contract;
• down payment, installment period, payment schedule, cost of a secondary apartment in installments.

Important! Penalties are imposed on the buyer only on the basis of a court decision. It is permissible to collect a fine by order of a notary if this condition is present in the contract.

You should pay attention to points that allow for the possibility of increasing prices per square meter, payment currency, the specifics of returning money to the client if the company fails to fulfill its obligations, as well as overpayment. The document is signed by the parties and sealed with the company's seal. When selling an apartment in installments, unlike a mortgage, it is not necessary to take out insurance.

It should be remembered that payment in installments is not provided for the final cost of the property. It involves a phased purchase of square meters. For example, if the area of ​​the apartment purchased in installments over 5 years is 60 m2, then the first payment of 50% will be 30 m2. The investor buys the remaining 30 m2 in equal installments within the specified period. Many developers tie the cost per square meter to the dollar exchange rate, so when the currency fluctuates, the price increases.

Buying real estate in installments: advantages and disadvantages

For the seller, the main advantage of installments is that he will sell illiquid real estate faster. If the apartment is in good condition and located in a convenient area, there is no point in agreeing to such a deal with a stranger.

There are still more disadvantages for the seller, and they are directly related to the risks mentioned earlier.

For the buyer, installment plans are beneficial, especially interest-free, if the entire amount is not available for the purchase of real estate. If he stops making payments, he may be subject to liability in the form of fines and penalties provided for in the contract.

Advantages and disadvantages

Having analyzed the main differences between mortgages and installment plans, we can highlight their attractive sides and disadvantages in order to more clearly imagine all the differences between these types of real estate purchases.

With the development of the system of buying an apartment in installments and increasing competition between developers, an increasing number of developers are providing installment plans for square meters in their new buildings, so that buyers have an increasingly wide choice.

Today, installment plans are still in demand among wealthy buyers and those who hope to receive large funds in the near future. Such buyers are quite happy with a short deferment of payment - for 6-18 months, during which they can slowly start selling another property, free up funds used in the business, wait for the bank deposit to expire, and so on.

For most Russians, a mortgage looks more attractive precisely because of the long loan term and the resulting reduction in monthly payments. Such buyers understand that they will overpay a very significant amount for a new apartment, but they do not see any other way, since they simply “cannot afford” installment payments.

Anna Sedykh, rmnt.ru

Welcome! Today we will find out what is more profitable: a mortgage or an installment plan. Using a specific example, you can compare both of these options for purchasing an apartment in a new building. We’ll also talk about how a mortgage differs from an installment plan and what are the pros and cons of these methods of purchasing a home.

Responsibility for late payments

The contract may provide for liability in the form of fines and penalties for the buyer in case of late payments. Based on Art. 332 of the Civil Code of the Russian Federation, the seller has the right to recover a legal penalty from the buyer, even if it is not specified in the contract - 1/300 of the refinancing rate of the Central Bank of the Russian Federation for each day of delay.

Based on clause 2 of Art. 489 of the Civil Code of the Russian Federation, in case of violation of obligations, the seller has the right to demand the return of real estate, refusing to execute the contract.

An exception is the situation when the buyer has already paid half the cost of the apartment: in this case it is not returned, but to resolve the issue you will have to go to court.

What is installment plan

Installment is a solution for people who currently do not have the full cost of the apartment and can afford to pay 50-70% of the price in 6-12 months. This type of deferred monthly payment is chosen by people who do not want to pay huge mortgage rates.

In legal terms, this is a form of payment in which the goods (in this particular case, an apartment) are provided to the buyer immediately, and payment is made in equal installments for the period specified in the contract. In the legal field, 489 of the Civil Code of the Russian Federation is responsible for installment payments. In order for a purchase and sale agreement to be legally considered an installment loan, in addition to the basic contractual information, it must describe the amount of payments, the procedure and timing of their payment.

To put it simply, the installment plan for an apartment looks like this:

1. You choose a developer, an apartment and sign an agreement;
2. Make a down payment;
3. You pay the payment amount specified in the contract monthly.

All. If you purchased real estate in a facility under construction, you move in immediately after it is put into operation. If the new building has already been built, you can settle in immediately after making the down payment.

Personal income tax when selling an apartment in installments

If the property has been owned for more than 5 years, there is no need to pay personal income tax. When receiving housing under a gift agreement, as a result of privatization or as an inheritance, the minimum tenure is reduced to three years. In other cases, you will have to pay tax.

Note: if there are documents confirming the costs of purchasing a home, the amount from the sale can be reduced by the amount of the costs. In this case, personal income tax is paid on the difference. For example, if an apartment was purchased for RUB 5,000,000 and sold for RUB 5,500,000, only RUB 500,000 is subject to personal income tax.

You can declare income and submit 3-NDFL in any tax period. For example, if an apartment costs 3,000,000 rubles, and the payment is divided into two parts of 1,500,000 rubles each. (in 2020 and 2020), you can report first in 2020, and then in 2020 for the specified amount. Or submit a declaration in 2020 after the buyer has completely covered the debt (Letter of the Federal Tax Service dated February 11, 2020 N BS-4-11/2049).

Installments are not always interest-free

Development companies often offer interest-free installments for the purchase of housing, especially when there is a need to sell apartments under construction as quickly as possible. It turns out that interest-free installments are possible only for a short period, when there are from 6 months to a year left before the completion of construction or full commissioning of the object.

For longer installment plans, developers already provide interest rates - usually they range from 5 to 18% per annum. If the loan term increases, then the loan rates also increase. Naturally, in this situation, it is more profitable to pay the developer as quickly as possible. However, each buyer decides for himself what suits him best: a regular bank loan or an installment plan from the developer. But it is clear that housing will be cheaper if you buy from the last of them. Even with maximum installment periods, an apartment will cost less than buying it with a mortgage.

Lawyer's answers to private questions

Is it possible not to pay installments for an apartment if construction is stopped?

No, otherwise the developer will be able to demand a penalty for non-payment. Failure to fulfill obligations by a company is its sole responsibility. The shareholder will also be able to collect a penalty if the apartment is not delivered to him on time.

Is it possible to conclude a contract for an apartment in installments with the employer, so that he can then deduct the obligatory payments from the salary?

Yes, this is not prohibited by law. But if the buyer quits, this will not relieve him of his obligations under the policy.

Is it possible to buy an apartment with installment payment if it belongs to a child?

No. The transaction requires permission from the guardianship authority, and no one will approve the installment plan.

Is it possible to terminate a contract with installments concluded a year ago if I want to sell the apartment and move to another place?

Yes, but the seller will demand full repayment of the debt, and only after that Rosreestr will remove the encumbrance. You can also agree with him to cover the debt using a large deposit from the buyer.

Is it possible to get a property deduction if an apartment is purchased in installments?

Yes. To do this, you must annually submit a declaration and documents confirming the repayment of payments for the tax period.

In the video about choosing a method of purchasing housing

Not every buyer will be able to purchase an apartment by simply paying the entire required amount at once. In light of the constant increase in the cost of square meters, purchasing housing on credit for most Russians remains the only opportunity to afford the purchase of a new apartment or house.

Sydney Harper. Piggy Bank

However, the current bank mortgage interest rates are still too high for the majority of residents of our country, so a mortgage loan remains an “expensive pleasure.”

Not long ago, a new offer appeared on the real estate market - purchasing an apartment in installments. To an uninformed buyer it may seem that both of these proposals are almost identical, meanwhile, it is unlikely to consider installment plans as an alternative to a mortgage - these types of home purchases have a number of significant differences that should be taken into account when choosing between taking out a loan or installment plan.

Final conclusion

To summarize, we can confidently say that installment plans are more profitable, because the overpayment on it is much lower than on a mortgage; moreover, if a citizen is unable to make payments on time, the contract will be terminated and the money will be returned to him, while due to non-payment of the mortgage, financial losses will be much higher.

It is important to take into account the size of the first installment and the amount of monthly payments, which are much higher. That is why, if the monthly installment payment exceeds 50-60% of the total income of all family members, it is more advisable to consider the option of mortgage lending, even if the construction company has given consent.

If you still have questions or need specialist help, we recommend that you sign up for a free consultation with our lawyer or leave questions below.

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You will also be interested in learning how to buy an apartment in installments using a Sberbank mortgage, as well as what mortgage holidays are. These two programs can be an interesting alternative to buying an apartment in regular installments or with a mortgage.

Despite the fact that real estate prices in Russia are tired of rising, even now not everyone can buy an apartment in one fell swoop. Mortgage loans in this situation are not a panacea. After all, by paying off the debt for fifteen to twenty years, you will pay two or even three times the cost of your home. Therefore, many will be interested in a relatively new way of purchasing an apartment - installments. How does a mortgage differ from an installment plan, what are their advantages and disadvantages?

Mortgage in the classical sense

A housing loan is a housing lending program in which the collateral is the purchased property (if the borrower does not own any other valuable property).

The advantages of such loans:

1. The minimum amount is 15-20% of the cost of living space or no advance payment. This contribution can also be paid with maternity capital; in some social programs of state support it is completely absent.
2. Long payment period – up to 30 years. This allows the borrower to choose the optimal monthly payment amount without putting an excessive burden on the family budget.
3. Possibility of living in the purchased apartment. Housing is registered in the name of the client, he can register his family there and live as an owner. Until full settlement with the bank, a restriction is imposed on the housing, which does not allow the owners to sell, donate, exchange, bequeath - to perform any legal actions with the apartment.
4. Early repayment is possible at any stage - the bank does not have the right to charge commissions and fines.
5. Unlimited choice of options. Housing loans are provided for any housing – both from the primary market and from the secondary market. It is only important that the house was built no more than 30 years ago. You can choose not only an apartment, but also a private house, cottage, penthouse, and objects under construction.
6. The minimum risk of the transaction is ensured by bank guarantees: the security service checks the loan object and the reputation of the developer (investor), if the apartment is located in a building under construction.
7. Loyalty programs. For conscientious clients, the lender may offer a preferential rate (if the mortgage partner is the state or the developer).

The disadvantages include:

1. Serious requirements for applicants - age restrictions, solvency, financial reputation, citizenship and registration, region, marital status, work experience, etc. The more favorable the loan terms, the more difficult it is to obtain approval of the application. All points must be documented. Often banks also require co-borrowers with a similar list of papers (the client’s spouse automatically becomes a guarantor).
2. High cost of credit. Mortgage rates are set individually: depending on the down payment, loan terms, collateral, and insurance policies. On average, this is 10-14% per annum, but if you compare a mortgage with consumer and other types of loans, then this interest rate seems profitable (if you do not take into account the timing of payments and the general overpayment).
3. Maximum formalities during registration. To obtain a mortgage, you need to be patient: on the website you can only get advice and preliminary approval of the application. You must go to the bank’s office, prepare documentation, and go through all approvals in person. The lender does not make a decision in one day: he needs to check both the authenticity of the documents and the collateral. Registration of the transaction may take up to two months.
4. Additional expenses. Banks do not charge a commission for applying for a loan, but additional costs cannot be avoided. Appraisal of an apartment, notary services, insurance (1% of the loan body), state fees for registering property rights, and other banking services (money transfer, locker rental) together constitute a serious expense item.