The Central Bank published a mortgage rule to protect borrowers

The purpose of the rule is to reduce risks in mortgage lending and ensure that borrowers are as informed as possible about loan terms and potential risks. In particular, the Central Bank intends to prevent the use of mortgage funds for other purposes, when the money is not sent to an escrow account, but to a letter of credit.

According to the document, the amount of the down payment will not include the funds that the buyer will receive back after purchasing the apartment (cashback). If the borrower pays the bank a fee for a reduced mortgage interest rate, the bank must report the difference in the total loan cost (FLC) so that the customer can evaluate the benefit. In the event of early repayment of the mortgage, the bank is obliged to return the unused part of this remuneration.

The standard also defines the principles for calculating the terms of a mortgage contract: it specifies what the bank must take into account when determining the loan amount, term, fees and other parameters.

In particular, it is recommended to enter into mortgage contracts for a period not exceeding 30 years and for an amount not exceeding 80% of the “reasonable value” of the property. The bank is also obliged to answer all the borrower’s questions about the conditions of the mortgage loan and related services, and inform him about the right to mortgage holidays.

In August, Russia tightened the requirements for issuing preferential mortgages with state support. Now, if the transaction does not meet the new criteria, the bank will not be able to grant a preferential loan. This was a response to the plans of the developers who used shareholders’ funds before the completion of construction due to lack of own funds.