Can a loan be paid using maternity capital?

Purpose of maternity capital

The allocation of maternity capital in Russia is regulated by Federal Law No. 256-FZ "On Additional Measures of State Support for Families with Children". According to it, all women who gave birth to or adopted a second or subsequent child starting from January 1, 2007, or a first child starting from January 1, 2020, are eligible for additional state support. The law also applies to adoptive fathers.

Maternity capital funds can officially be spent only on the following needs:

1. For improving housing conditions. Maternity capital funds can be directed toward purchasing an apartment or a house, or carrying out repairs or reconstruction.
2. For paying for children's education. Maternity capital funds can be used to pay for higher education if the child is under 25 years old. In addition to university tuition, parents are allowed to cover expenses for kindergarten or any paid preschool clubs.
3. For building the funded part of women's pensions. Maternity capital funds can be directed toward increasing the mother's pension payments by contacting the Pension Fund. By the way, if desired, parents can redirect maternity capital funds to any other purpose permitted by law.
4. For paying for goods and services intended for the social adaptation of disabled children. A child's treatment and adaptation can be compensated only if all checks and receipts are available. Without confirmation of actually incurred expenses, the Pension Fund will not approve the application.
5. For receiving a monthly social payment from maternity capital. In 2021, the amount of the monthly payment equals the living wage in the region where the service is received. You can apply for state assistance directly at the Pension Fund, at a multifunctional center (MFC), or via the Gosuslugi portal.

Conversely, it is legally prohibited to use the capital to pay for current expenses—such as food, utility bills, transportation, clothing, and so on—or to purchase a vehicle, land plot, or dacha. In addition, cashing out the certificate is prohibited.

Can a loan be paid off using maternity capital funds?

Despite the fact that the purpose of family capital is strictly defined, the law also allows it to be used to pay off a loan. We will pay more detailed attention to this point, since the certificate cannot be spent on just any credit or loan.

Lending programs

It is permitted to spend money from the maternity certificate on the following types of loans:

1. Mortgage. It does not particularly matter when the loan was taken out: before the birth of the child, before they turn three years old, or after. Capital funds can be directed toward fulfilling obligations under any mortgage, provided it is issued in the names of the child's parents. They can be used to pay the down payment, pay interest, or make early loan repayments.
2. Targeted consumer loan. The Pension Fund will approve the use of maternity capital only if the loan was taken out to improve housing conditions. Therefore, this point must be clarified directly before taking out the loan.
3. In rare cases, the maternity certificate can be used to pay off a debt to a microfinance organization. For refinancing, the institution must have a license and at least 3 years of experience in mortgage lending. In other cases, the Pension Fund refuses to cooperate with MFOs due to frequent cases of fraud.

When the Pension Fund may refuse to transfer money

Family capital cannot be used for the following types of loans:

1. Car loan. Despite the fact that large families express their support for allocating maternity capital toward purchasing vehicles as well, the Pension Fund does not currently support this initiative. The point is that a car can easily be sold and the money spent on personal purposes.
2. Non-targeted loan. The Pension Fund will not approve the use of maternity capital for this type of loan. The reason is the same as in the previous case—the money could be spent on current needs, and the child's rights would be infringed.

Additional conditions

The terms of maternity capital allow spending money on purchasing an apartment or a house. However, it is forbidden to purchase dilapidated or hazardous housing. In addition, you must keep in mind that the area of the purchased apartment must not be smaller than the previous one. When purchasing real estate, keep in mind that every underage family member must receive a share in the purchased housing.

It is also permitted to use maternity capital funds to pay off a loan obtained under a social program for the treatment of a disabled child. To receive approval from the Pension Fund, parents must keep all checks and receipts related to the child's treatment and adaptation.

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How to pay off a loan with maternity capital

As mentioned above, maternity capital can be used to pay off the interest part of the debt, reduce the loan term, or pay off the loan early. The bank itself decides exactly which option will be offered to the borrower. For example, at Sberbank, in the case of early repayment, the contributed amount goes first toward paying interest, and only then toward the principal. Therefore, the first thing that needs to be done is to clarify the terms of using the certificate with the servicing credit organization.

After that, you can contact the Pension Fund. Along with the application for the disposal of maternity capital, you must have:

• passports of the borrower and co-borrower;
• application for early mortgage repayment;
• certificate of the remaining balance on the maternity capital account;
• children's birth certificates;
• marriage certificate;
• copy of the mortgage agreement;
• extract on the real estate from the Unified State Register of Real Estate (USRN);
• notarized obligation to allocate shares to the children after the encumbrance is removed from the mortgage property.

There are several ways to submit an application to the Pension Fund. You can do this in person at the local Pension Fund branch, at an MFC, via Gosuslugi, or by sending certified copies of documents by mail. In any case, the application must be submitted by the person in whose name the capital is issued. Usually, this is the mother.

Note.

Please note that not all banks allow taking out a mortgage with the option of partial repayment using maternity capital funds. Therefore, we recommend taking care of this issue in advance and clarifying the lending terms with the organizations you have chosen.

What changed in 2022

In 2021, alongside other areas and sectors, changes also affected maternity capital:

1. When the payment is granted, parents are no longer issued a paper certificate as before. Confirmation is now sent electronically.
2. The review period for applications has also changed. The Pension Fund is now required to provide a response within 10 working days from the date of application.
3. Starting in 2021, responses from government agencies to Pension Fund inquiries must be provided within 1 working day.
4. The processing time for maternity capital has been reduced to 5 working days. If additional checks are necessary, this may be extended up to 15 days.