Home Equity Loans

Secured loans have undeniable advantages over standard unsecured loans—larger loan amounts and longer terms, a lower interest rate, a high loan approval probability, and more. However, not every property can qualify as collateral.

Is it possible to get a home equity loan in 2024?

Not every house can be used as collateral when taking out a loan. Banks generally impose the following requirements on collateral property:

• good condition of the house—it must not be dilapidated, and its layout must not pose a threat to the lives of the residents;
• the house must be a capital structure, located in an easily accessible area, and connected to all utilities;
• the appraised value of the house must exceed the loan amount requested by the borrower;
• the house must not be encumbered or owned in part by third parties (unless all of them are included in the agreement and consent to the property being used as collateral).

When we say that a house must not be encumbered, we mean the following:

• The property must not be under arrest for any debts, such as unpaid alimony, taxes, loans, and so on.
• The house must not be pledged to another bank either. For example, this can happen if the borrower purchased the property with a mortgage and has not yet paid it off.
• The property must not be subject to a annuity agreement (life lease), etc.

Who can get a home equity loan and what documents are required?

Borrower requirements may vary slightly depending on the financial institution. In general, the client must meet the following criteria:

• be over 18 years old;
• be a citizen of the Russian Federation with permanent registration in the country;
• have an actual place of residence and employment in the region where the bank operates;
• have a work history of at least three months at their current job;
• have a monthly income sufficient to make the payments.

In most cases, providing just a passport of a citizen of the Russian Federation is sufficient to apply for a loan. To increase the chances of a positive loan decision, you can also submit documents confirming your income and employment. Banks usually request the property documents themselves.

How to get a property-secured loan in 2024: a step-by-step guide

Applying for a home equity loan involves several stages:

• First, the borrower needs to gather all the necessary documents. We recommend checking the checklist in advance on the website of the chosen financial institution.
• Next, submit a loan application. This can usually be done either at a bank branch or online. To apply, you will need to fill out a short application form providing your full name, date of birth, passport details, registration and actual residential addresses, employment and monthly income details, marital status, mobile phone number, and email address.
• If the application is approved, sign the loan agreement and arrange property insurance.
• Registering the transaction with Rosreestr.

What to look for when choosing a bank?

We advise against applying to the very first bank that offers property-secured loans. First, you might miss out on genuinely profitable offers. Second, you could run into an unscrupulous lender.
To avoid this, we recommend:

• Checking whether the financial institution has a license to operate. You can verify this on the official website of the Central Bank of Russia.
• Reading reviews from other borrowers—this will help you learn about potential pitfalls. You can find this information on relevant resources.
• Reviewing loan programs across different banks, paying attention to minimum and maximum interest rates as well as potential fees.
• Reviewing borrower requirements. It makes no sense for a client to apply to financial institutions whose criteria they do not meet—they will be rejected anyway, and the inquiry will be reported to the Credit History Bureau.
• Contact a bank consultant. If you have any questions regarding loan terms or collateral, it is best to consult a credit specialist rather than searching for answers on your own.

Best banks for a house-secured loan in 2024

You can take out such a loan at almost any major bank. We recommend paying attention to the offers from the following credit institutions:

Sravnim24 recommends!

Offer

Min. amount

Max. amount

Rate

Term

Rating

Property-secured loan at BJF Bank

Min. amount

5 000 000 ₽

Max. amount

20 000 000 ₽

Rate

From 9.9 %

Term

up to 25 years

Rating

3.5

Real estate-secured loan for any purpose from Alfa-Bank

Min. amount

1 000 000 ₽

Max. amount

15 000 000 ₽

Rate

From 13.5 %

Term

up to 10 years

Rating

2.5

Property-secured loan at T-Bank

Min. amount

200 000 ₽

Max. amount

30 000 000 ₽

Rate

From 15.9 %

Term

up to 15 years

Rating

2.5

Pros and cons of the loan

The advantages of this type of lending include the following:

1. Large loan amount and term. Since the lender has a guarantee in the form of a mortgaged house, they can be confident that the loan will be repaid in any case—either by the borrower themselves or through the sale of the property. Due to this, the credit institution can afford to approve a large amount for a long term.
2. High approval probability. Again, due to the presence of collateral, banks can be sure that the loan will be repaid even if the borrower stops making monthly payments.
3. Small monthly payments. The longer the loan term, the smaller the amount that needs to be paid each month. This is convenient if the borrower has a low salary or if they want to make early repayments.
4. Mandatory property insurance. Until the loan is fully repaid, the house will be insured against any force majeure circumstances, such as fire or flooding.

Among the disadvantages, we can note:

1. Longer processing time. This is due to the need for property valuation, registering the pledge with Rosreestr, and so on.
2. High total overpayment. Since a house-secured loan is often issued for a long term, the total overpayment is higher than for a loan lasting a couple of years.
3. Restriction on almost any real estate transactions. Until the loan is fully repaid, the borrower cannot rent out, sell, gift, pledge the housing to other creditors, and so on.

Conclusion

To sum up. It is possible to get a house-secured loan. However, it should be borne in mind that far from any real estate can act as collateral. First of all, it must not be dilapidated or uninhabitable, it must be located within accessible distance from the city and be connected to utilities. In addition, the house must not be encumbered—it must not be under arrest due to debts and must not be pledged to another bank.