Taking out a second mortgage without paying off the first: is it possible to do this?

What should you consider?

Any bank strives to increase its client base, but obtaining a second mortgage loan is a high risk for the bank, so the client’s data will be considered more carefully.

Before making a decision to apply for a second mortgage, you should first take into account your income and evaluate your solvency for a long time, since the presence of a second loan significantly increases the financial burden - for a positive decision on applying for a second mortgage without repaying the first, late current payments are unacceptable.

How to take out a second mortgage without paying off the first

The registration process itself will be completely similar to applying for a regular housing loan, only the package of documents will be expanded with documentation for an existing mortgage. If you contact a new bank, it may require a certificate from the first bank: it reflects the status of the debt, how much remains to be paid, the size of the monthly payment, the borrower’s assessment, whether he is in arrears.

Initially, it will be decided whether a second mortgage can be given if the first one is not repaid. The borrower provides documents on marital status and income. The bank analyzes the documentation, assesses the applicant's financial situation and determines whether he will be able to pay off two home loans at the same time. If a positive decision is made, the borrower begins searching for a property.

Important! If you are approaching retirement age, it is unlikely that you will be able to get approved for a second mortgage. Keep in mind that you will have to pay off the new loan for at least 10-15 years. Banks will consider borrowers no older than 50 years.

Second mortgage availability criteria

It is not legally prohibited to issue several loans for one individual, including mortgages, but it is necessary to determine the main points:

Solvency: obtaining a second mortgage is possible if payments on both loans amount to no more than 40% of the client’s total income (co-borrowers can be attracted to increase income levels).
Credit history: to obtain approval for an application for a second loan, you must have an absolutely clean credit history and not be in default on an existing loan.
The need for a down payment: some banks allow the use of maternity capital in this capacity.
Qualitative characteristics of the property: after preliminary approval of the client’s application, the bank provides the borrower with 3 months, during which he must select the property purchased using borrowed funds. The bank's appraiser analyzes the selected object and only after that the bank makes a final decision on approving the mortgage and conducting the transaction. If the client becomes insolvent, the property is put up for auction and its market value will have to cover the loan amount.

Availability of a second mortgage and requirements for the borrower

Banks do not want to suffer losses, and therefore strive to minimize all possible risks that may be associated with a mortgage. To be sure that the funds issued to the client will not be lost, but will generate income, bank employees carefully check each applicant who applies for a mortgage for the second time. This is why the processing time for a second loan is much longer (if you compare it with the first application).

The main feature of a mortgage is that it is issued for a long term. During this time, any circumstances in the family may change. In particular, families are growing, and this means the need for more spacious and comfortable housing. This means you will need to apply for a mortgage again. This is exactly how a question arises that interests many families: is it possible to take out a second mortgage loan from Sberbank without waiting for the existing one to be repaid?

The requirements that the bank imposes on a borrower who wants to get a second home loan without waiting for the current one to be repaid are quite serious. Situations where a client fully complies with them are rare, but it is still quite possible. The process of paperwork in this case is very complex and somewhat confusing, and therefore this work is entrusted only to those employees who have significant experience in such matters.

In principle, a second mortgage is a reality for every client. If only he was able to make a down payment, had a good income and did not make late payments. If the family as a whole has a good income, then the chances increase greatly.

Here are the main criteria that a client wishing to apply for a second loan must meet:

Solvency. To assess it, the bank requires the provision of documents confirming the amount of all income. These figures must be presented in special papers, endorsed with seals and signatures. The main thing is that the amount of available income should be enough for contributions. And this is the most important condition for approval of the application.
Good credit history. For the bank, the seriousness and integrity of the client who wants to get a second mortgage is important. A history of late payments, violations and fines during the period of use of the current mortgage is the most common reason for refusal.
Presence of dependents in the family. The possible size of the monthly payment depends on this, and therefore the amount that the applicant can count on.
The balance of the first debt. The second loan will be given only if the first one is repaid by at least 70%.
An initial fee. If the borrower has 10-15% equity, then a second mortgage can be obtained.
Possibility of providing collateral. Insurance of collateral is mandatory, and its value must be sufficient to completely cover the debt in the event of an unpleasant situation.

These criteria are a priority for the bank if the client applies for a new mortgage without having yet paid off the previous debt.

Second mortgage terms

In most cases, the second mortgage is arranged as a separate loan agreement under standard terms.

Something to keep in mind! Preferential categories of borrowers, for example, those who signed up for the first mortgage agreement under the state program for young families, will not be able to take advantage of state support a second time.

Documents for registration:

Passport or other identification document (mortgages are available to citizens of the Russian Federation and foreign citizens working in the country);
application form, which indicates the basic data of the potential borrower, information about family composition, monthly income level and other essential data;
proof of income (2NFDL or a certificate issued in the bank’s form - you can print it on the official website or take a sample at the territorial branch of a banking institution).
confirmation of the availability of a down payment;
a certified copy of the work book with a note indicating that the employee is currently working;
in some cases, the bank may require a certificate of no arrears on an existing loan, but, as a rule, most banks verify this information by sending the client’s data to the credit history bureau.

Something to keep in mind! Some banks put forward a requirement for the maximum amount of the client’s current obligations; these conditions should be clarified with the credit institution itself.

The application can be filled out at any territorial branch of the bank or a preliminary application can be completed online on the official website. A bank specialist checks the received documentation and contacts the client and employer to clarify the data. Then a preliminary decision is made.

Sberbank PJSC offers an additional service for submitting an electronic application, which allows you to receive approval remotely and upload documents to evaluate the selected property without visiting the office.

Conditions for obtaining a second mortgage loan

Conditions for registration depend on:

From the policy of a particular bank.
From lending purposes.
Depending on the status of the borrower - individual, individual entrepreneur or organization.
From the selected product.

The selection of a particular remortgage product does not depend on the fact that there is an outstanding current mortgage loan. All offers of a certain bank in this area are combined into one direction - mortgage lending. They are very diverse but, mainly, are of a specific target nature - for the purchase of a house, apartment, housing under construction, parking space, garage, suburban real estate, etc. True, today, albeit in limited quantities, banks separately offer non-targeted lending secured by real estate. Such a solution is available for both citizens and businesses, and for businesses the variability of solutions is greater - depending on the status (individual entrepreneur, legal entity, small business, medium, large, etc.).

What requirements do banks usually impose on citizen borrowers:

Citizenship of the Russian Federation.
Having a permanent place of residence in Russia.
Age – from 21 to 65 years (under certain conditions from 18 to 75 years).
Availability of a permanent official source of income.
Employment, a certain length of service at the current place of work and a certain total length of service.
Positive credit history.
Solvency - determined according to the parameters of a particular bank, requires documentary confirmation.

There is another fundamentally important, but hidden factor in approving a second mortgage. Compliance of expenses for covering new and all current loans (credit cards, loans) with a certain acceptable level - a certain share (percentage) in the total income of the borrower. It is unlikely that a second mortgage will be approved if the first is not yet paid off, when the costs of these two loans will be more than 60% of the borrower's income. At the same time, for calculation purposes, expenses for dependents (the cost of living for each) will also be previously deducted from income. In this regard, each bank has its own policy and criteria - they are not advertised, so it is extremely difficult to independently calculate the approval of a second mortgage in advance. The situation can only be affected by the high cost of the collateral, which will more than cover the requested loan amount.

Additional requirements, as a rule, are always presented to the borrower’s current loans, but the problem is that they are also not officially stated by banks on their websites or in other publicly available sources. Banks never name all the criteria, believing that this will lead to the disclosure of the borrower assessment system, which constitutes a commercial secret.

Restrictions may apply:

by the number of current loans, including loans from microfinance organizations and credit cards;
by the total volume (amount) of current loan obligations;
by the degree (percentage share) of repayment of the current mortgage loan;
by the age (in years or months) of the first mortgage;
prohibition on current encumbrances of the pledged object.

The availability of a down payment and its size depend on the selected product. Other conditions also vary: minimum and maximum loan amount, term, interest rate, possible collateral objects, ratio (percentage) of the loan amount to the estimated value of the collateral, insurance conditions.

For example, a non-targeted mortgage loan from Sberbank (current as of August 2020):

Any goal, no need to confirm.
Loan amount – 500 thousand – 10 million rubles.
Rate – from 11.9%
Duration – 1-20 years.
There is no down payment required.
Available collateral options are an apartment, a house, a residential premises, a plot of land, a garage. The ratio of the loan amount to the estimated value of the collateral is up to 60%.
The borrower cannot be an individual entrepreneur, a member of a farm, hold a leadership position, be a chief accountant, founder or participant in a small enterprise.
Required documents: for the application - passport, confirmation of financial status and employment, after approval - documents on the pledge.
If there is a spouse, he is automatically recognized as a co-borrower and must meet the same requirements as the borrower, except in cases of a prenuptial agreement.
Life insurance is not a requirement, but compliance with it reduces the interest rate by 1%. An additional discount is provided if the borrower has a salary project with Sberbank.

Since we are talking about a second mortgage, you will have to inform the bank about the existence of a current mortgage. The bank will still find out about this during the audit, and if you don’t report it yourself, the loan will most likely be denied.

For the first mortgage, if requested, you will need to submit a copy of the loan agreement and a bank certificate about the situation with loan repayment.

Probability of approval

All incoming applications are considered by the banking institution on an individual basis; in some cases, to minimize risks, the bank may approve a second mortgage at higher interest rates or a shorter loan term. In conditions of high competition among banks to attract clients, if the borrower has sufficient own funds to make a down payment and confirm high levels of income, there are fairly high chances of approval of a second mortgage without repaying the existing loan obligation.

How to increase?

In order to increase the chances of approval for a second loan agreement if you have existing obligations to the bank, you can provide documentary evidence of additional income, for example, a lease agreement for your own real estate (not pledged by the bank) or additionally attract co-borrowers: in this case, the bank will estimate total income.

In addition, to reduce the bank’s risks, the client can additionally provide his own property as collateral.

Who can get approval

Any bank considers issuing a mortgage loan profitable, as it ensures good profits over a long period of time.

People who meet certain requirements can apply for a second such loan:

high income, which will allow you to cope with payments without problems, and at the same time all cash receipts must be documented;
absence of delinquencies on the first mortgage or other loans in the past;
work experience exceeding six months at work.

Scheme for obtaining a mortgage.
It is taken into account that even when submitting an application to the same bank where there is already a mortgage, the borrower will be carefully checked again, since there is a possibility that he has changed jobs or his income level has decreased.

How is a borrower assessed?

The main important assessment factors include:

High solvency. All family income is assessed, which can be not only basic, but also additional. After determining the total family income, it is calculated what share of it will be occupied by two loan payments. Exceeding 60% of this amount is not allowed.
Credit history. The bank must be sure that its funds will actually be returned. Therefore, second mortgages are provided exclusively to bona fide borrowers who have no past arrears. There are no fines or other violations allowed for current debt obligations. In this case, you can not only count on approval, but also on reduced rates.
Number of minor children and dependents. The maximum amount that can be allocated by the borrower to repay mortgage loans depends on them.
The remaining balance on the first mortgage. It is advisable that at least 70% of this loan be repaid, which will increase the likelihood of approval of the next loan.
The size of the initial investment. Typically, banks require from 10 to 30 percent of the cost of housing, but the higher this amount, the greater the likelihood of getting a mortgage.
Providing collateral. Typically, the property being purchased itself acts as collateral, but borrowers may offer other values.

If the borrower meets all of the above criteria, you can expect bank approval for a second mortgage.

What documents are needed

To apply for a second mortgage, you will need the same documents that are needed for the first loan.

This includes:

income certificate;
passport and TIN;
documents for the chosen housing;
documentation for guarantors and co-borrowers;
first mortgage agreement;
a certificate from the bank where the mortgage was issued, which indicates the balance of the debt.

How to apply for a mortgage without leaving home? The answer is in the link.

The bank may require other documents if necessary, as it must ensure that the borrower meets all requirements.

What are the additional requirements?

All citizens applying for a second mortgage must be Russian citizens. Their age should not be more than 65 years, and they must also have permanent registration in the region where the bank branch is located.

Should you take out a second mortgage without paying off your first? Answer in video:

Work experience is also taken into account. All these factors may vary slightly from bank to bank.

What to do if you refuse?

When receiving a refusal to issue a second mortgage agreement, a potential borrower has several options:

submitting a repeated application after a certain time (re-application is available no earlier than after 2 months);
contacting third-party banks;
sale of the first property. Since it is pledged to the bank, written permission will be required. You can agree with the buyer to contribute part of the funds to fully repay the obligations to the bank, remove the encumbrance on the property and complete a standard purchase and sale transaction;
applying for a consumer loan to repay an existing mortgage: a high-risk method of repaying obligations, since the rates on consumer loans are higher than on mortgages.

Increasing your chances of approval

When deciding whether the bank will give you a second mortgage if you already have one, you should think about how to make yourself an extremely positive borrower in the eyes of the bank. In practice, it is difficult to get a new loan if you have an existing one; the probability of refusal is higher than with a standard deal.

What will help the borrower:

Documentary evidence of all additional income: alimony, pensions, benefits, from a second job, from part-time jobs, etc. If a family takes out a second mortgage, this applies to both spouses.
Attracting guarantors with good solvency.
Make as big a down payment as possible. The ideal option is more than 40-50%. But this does not mean that it is impossible to get approval with a contribution of 10-20%.
It is more realistic to get a second mortgage before the first one is paid off if you join the insurance programs offered by the bank (personal, title, comprehensive).
Close all existing debt obligations before contacting the bank.
Wait until the child reaches adulthood. For example, if he is 17 today, it is better to wait a year. When calculating the level of solvency, the bank takes into account the presence of dependents - minor children.
Good work experience, at least 1-2 years in the current position (the more, the better). If you change jobs before submitting your application, you may not be able to get approval.
Choose longer terms for concluding a contract: the monthly payment will be lower, the likelihood of approval is higher. If necessary, you can always close the loan early if necessary in the future.

Which bank to get a second mortgage from?

With the increase in demand for mortgage loans, competition among banks is increasing, and more and more new mortgage programs are appearing under which it is possible to sign an agreement at reduced rates in comparison with the existing agreement.

Note! Sberbank PJSC offers its clients special conditions for reducing interest rates when taking out life and health insurance for the borrower, as well as when completing electronic registration.

Old or new bank?

To reduce the time required to assess the borrower’s identity and solvency, it is more advisable to contact the bank with which the first mortgage agreement was concluded. The bank will evaluate the history of interaction with the client, calculate the risks and make a decision in a short time based on the information studied. Reduced interest rates can also be provided to reliable customers.

If the bank refuses to provide a loan, you can submit applications to third-party lending institutions, since different banks have their own criteria for assessing potential borrowers. In addition, third-party banks may have more favorable lending conditions.