Mortgages

At present, the vast majority of people who wish to purchase real estate have to make use of so-called external sources of finance in the form of a mortgage in order to purchase their own flat or home, or to be part of a housing cooperative.

In general, a mortgage is no different from any other long-term obligation to make repayments to a bank which has helped in part or in full to finance the purchase of a flat or house. What it looks like in practice is that the credit institution or bank transfers the credit sum directly to the account of the seller of the flat or the developer of the home in exchange for the purchase of our indebtedness, which we have to pay off over at least 10, 20 or even more years.

There are a number of criteria which must be taken into consideration when making a decision about the type of mortgage to take out and where to obtain it from. We need to bear in mind that a mortgage agreement will be our obligation throughout the majority of our lives, and so the decision relating to the choice of bank offering credit should be that we painstakingly analyse the costs of the mortgage, the currency the credit is taken out in, the possibility of early repayment of the mortgage, as well as other stipulations of the agreement which for people not connected with the business may consider trivial or irrelevant.

In our academic work as well as during lectures and training with students we frequently encounter situations in which people have a perfectly clear “theoretical” choice of mortgages make fundamental mistakes in appraising offers to borrowers.

As experience constantly shows us, the choice of a mortgage is a difficult and complicated decision, which should be subjected to thorough analysis and discussion with representatives from a number of financial institutions.

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