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What is the Acceptable size of the Mortgage Payment?

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In order to calmly pay on a mortgage loan, the monthly payment should not exceed a quarter of the borrower’s income, says Deputy Finance Minister Mikhail Kotyukov.

The size of the mortgage loan payment should not exceed 25% of the family budget; borrowers must determine the specific amount on their own, taking into account the peculiarities of their financial situation. This was stated by the Deputy Minister of Finance of Russia Mikhail Kotyukov at the “Mortgage Marathon”, reports “RIA Novosti” .

“About a quarter of the budget is in the zone of what is called the acceptable risk. More is, of course, quite difficult for any family, probably”

Each family has its own characteristics, the deputy minister noted.

“Someone can deny themselves the expenses, for someone it is extremely difficult to do it,”

He explained, noting that there are examples when people take on too large obligations to service a mortgage loan.

The National Bureau of Credit Histories determines the level of “comfortable” for servicing the size of the mortgage payment at one third of the borrower’s income. In July, the bureau calculated that the size of the recommended family income, comfortable for servicing an average mortgage loan, increased by 11.3% compared to December 2020 and amounted to 78.2 thousand rubles.

“To the greatest extent, the indicator was influenced by the growth of the average check of a mortgage loan, due to the increase in the cost per square meter,” the credit bureau noted.

Due to the preferential mortgage program and the rise in housing prices, the average mortgage loan in Russia in June for the first time during the observation period exceeded 3 million rubles, follows from the data of the United Credit Bureau (OKB), which has information on about 97% of Russian borrowers. This is an increase of 27% over the year.

The average size of the mortgage for the year increased by 652 thousand rubles (+ 27%).

For comparison: in June 2020, Russians took on average RUB 2.3 million on loans for the purchase of housing, and compared to June 2019, the growth was 35% (then the average mortgage loan was RUB 2.2 million).

In general, the debt burden of Russians (taking into account not only mortgages, but also other loans) increased by 11.7% from April 2020 to April 2021 and reached its all-time high, the Central Bank reported in April. The average level of payments of Russians on unsecured loans reached 9.8% of total income, and on mortgages – 1.9%. Debt growth accelerated in the second half of 2020.

The preferential mortgage program, which allows you to buy housing at a rate of 7% per annum, was launched in 2020 as an anti-crisis measure due to the COVID-19 pandemic. In early July, the government extended it on new terms. The maximum loan amount for it for all regions is 3 million rubles. The down payment, as before, must be at least 15% of the cost of housing. The difference between the preferential rate and the market rate is reimbursed by the state. The program is valid until July 2022.

In mid-August, Prime Minister Mikhail Mishustin also announced the extension of the preferential family mortgage program until the end of 2023. The preferential rate of 6% per annum can now be used not only by parents of two or more children, but also by families where the first child was born.

In total, in the first half of 2021, mortgage programs with state participation – preferential mortgages for new buildings and family mortgages were used by 292 thousand Russian families, the total amount of loans amounted to 959 billion rubles.