How to buy house on credit?

At the present time not expensive offers on the foreign real estate market are a big rare. If everything is clear about how to buy a flat on credit, then everything is harder with buying house with help of bank.

The main buyers of property in country side are families with monthly profit not less than $5-6 thousands where wife and husband are over 40-50 years old. They are intended to change accommodation in standard high-riser for house, or they need to enlarge their living square that is why they choose for this not several flats but big house.

Market of credit financing for buying houses is just forming. Only few years ago individual persons started to apply for credits for buying houses. For now such credit financing has episode character and in general package of mortgage credits has a tiny part.

Generally, by different estimations today for foreign real estate is just 10-20% of the whole volume of given loans. In that way, the part of the credits for buying cottages is yet not very high in mortgage package of banks. But customer demands move step by step from section flats to the section houses.

In principle, the procedure of the credit financing of individual persons for buying house or a flat does not differ. In this case the main differences are about financial condition of individual persons and location of houses. Credit financing of houses should be divided into 2 groups: credit financing of small houses which are by its functionality practically corresponds to the accommodations in block of flats and in spacious and prestigious cottages.

By credit financing of individual persons with the purpose of buying houses – “not cottages” there is no substantive problems. Usually, credit is given by standard scheme. In case of credit financing of cottage for bank it is very important to know the financial state of borrower, estimation of cottage and lot and questions of liquidity of affected property. Cottages in distinction from flats including class ”luxe” has lower liquidity. Selling the cottage which is in pledge of bank is a long procedure which needs additional financial costs.

There are variants

Buying of finished house for credit is optimum alternative of credit financing for borrower and for a bank, said bankers. In this case financial center has estimated the real cost of finished house, is quite fast give credit and by standard rates which are similar to rates of credit financing of buying the flat. Sometimes if there is a chance of liquidity of loan, bank could rise rate of credit on 1-2% or increase the sum of first payment from 10% till 40%.

Credit financing of building cottage the majority of bankers thing possible only in that case if in the process of building were made special obligations or was made a foundation of financing the construction.

In this case banks give credits to individual persons on security of special obligations or the certificate of participant of foundation of financing of construction, and borrower takes a responsibility after finishing the construction to form a pledge agreement for having finished cottage.

The credit financing of such type is made only after accreditation of the real estate developer of the cottage town in bank and making the contract between bank and real estate developer. Rates of credits of this sort can be higher than standard rates on 1-2% but could be ordinary. It depends on financing state of borrower. But usually, the sum of initial contribution by this kind of credit financing is not less than 30% of total cost of building cottage. Where the cottage should be built on 50% from planning amount of work.

Lately, spread the credit financing on buying lot. Credit in banks could be taken as for buying the lot as on security of having bought land.

The market of buy and sell of the land is very young and the right of property for plots quarrels very often. This disquiet the banks, because when argue appears, legal claims or non repayment the credit by borrower the bank does not have a subject of loan to compensate its losses. However, the variant of buying the plot on credit is possible but should be done careful examination of buying plot.

The procedure of the credit financing and rates by “land” credit does not differ from traditional mortgage credit financing of buying flat.
But we should take into account that banks give credits on sum which is not more than 50% from market cost of the land.

On practice it leads that the sum of receiving credit on security of the land is not enough for financing of house building. Bank could not take in pledged not finished and unexecuted building even if the bulk of constructive works finished on 90%.

In this case, finance centers as usual, ask for additional loan which flat could appear in a house or guarantee of another natural person, who has in property already built real estate.

In general, the model of financing here, as many bankers said, has not formed yet. And theory where said that house which possess private land id protect, is just a theory.

The credit for buying land with further building is considered to be the most problematic. In this case it is said about two objects of real estate – land and house. Problems of this kind of credit financing is forming the right of property for land and financing constructive works.

.Nevertheless, the clearer will be land market; more opportunities of buying land for building the accommodations on legal market will have citizens then faster come clear and simple mechanisms of bank financing. Now about effective form of financing where and seller and buyer and bank will be protect is not necessary to talk.

In general, prior consent of giving pledged for house or mention now give about 20 banks (“Ukrgasbank”, “Rodovidbank”, “Raifaizen Bank Aval”, Privatbank”, “Kreditprombank” and etc. ). The rate of interests hesitates from 15% till 20% annual in hryvnas and from 10% till 15% in dollars the USA. It should be mentioned, that in majorities of banks the rate is grows with increasing the term of credit financing. If for 5-10 years the loan in American currency it could be taken under 10-13% per year, then for 10-20 years the credit will cost 13-15% annual. There, where the term of credit financing does not influence on rate of interest of the credit, on it influence the size of the loan.

Terms of credit financing of private sector are still fall behind from duration of loans on flats. But some banks agreed to give loan for 25 years apart from location of the house but noticed that it possible in that case if the age of borrower on the moment of giving credit is not 35 years that to the moment of payment of the last pay, person does not reach the age of retirement.

Necessary documents for object of mortgage are:

- title document for property;
- documents confirming the right of property on the lot (mortgage of house or/and lot);
- technical passport on the object of real estate and certificate-characteristics BTI for expropriation of the real estate;
- certificate from Housing department about the quantity of registered people and absence of utilities debts;
- report about independent expert estimation of the cost of the subject of mortgage which was made by the evaluator who was approved by the bank;
- permission of agency of keeping and custody in case if children and young people are registered on this address or part-owner of the real estate what goes to the mortgage of the bank.


The process of receiving of the credit for buying real estate briefly looks the following way:


- The borrower applies to the bank for receiving the prior consent of bank for necessary sum of the credit.

- Borrower collects all necessary documents.

- Bank gives to the future customer preliminary advice about withdrawal of necessary sum of the credit.

- Selection of flats is carried out and forming the caution money.

- Collecting all necessary documents and certifications for receiving the credit.

- Credit committee of the bank makes the final decision about giving a credit on buying the concrete real estate (2-7 days).

- Signing of contract of sell and purchase.

- Forming the insurance policy.

- State registration of the deal.

- Forming the contract of pledged the buying real estate.

If you do not want to be in embarrassing situation while forming the credit you should know about follow-up expenditures for services:


1. Fee of the bank plus opening current account (about from 120 hryvnas till 2,0% from the sum of the credit);

2. Services of notary while forming contract of sell and purchase (about 250 hrn. + 1% from the sum of the contract – retirement fund, state tax);

3. Insurance of the property (from 0,2% ill 0,3% from the sum of pledged), insurance of life (0,35% from credit debts), insurance of the title (0,4% from the sum of the credit);

4. Independent estimation (from 250 hrn. Till 300 hrn.)

5. Services of notary while forming contract of mortgage (about 300 hrn.+0,1% state tax);

6. Registration of real estate in BTI (till 600 hrn.).

However, it should be mentioned that demands by separate parts by banks could be different. To outline some profitable bank for all is impossible – one client is interested in terms of withdrawal of money, another – interests of the credit, third one – services of execution, insurance and notary, the forth – absence of additional demands to his documents.

That is why, each situation should be seen separate and bank, realtor firm and scheme of credit financing should be chosen individually.