How to buy an apartment with mortgage loan without a down payment?

In their choice, the buyers can focus on dozens of parameters: the number of rooms, the total area of housing, floor, city and district, whether it is secondary or primary market, etc. But it often happens that a person wants to buy a living space in a new house, although he does not have the entire amount. In this case, you should consider buying an apartment in instalments without a down payment.

What is "by instalments" and are there apartments that can be bought without a down payment? Why do developers agree to this and is it really profitable to buy living space on credit from a developer? What are the advantages and disadvantages of buying housing in instalments? We are going to answer all these and many other questions in our article.

What is down payment?

If a person buys an apartment in instalments, in most cases a down payment will be required. For a real estate buyer, this is a great opportunity to become the owner of an apartment without having the entire amount in hand. And for a developer who is selling an apartment, the down payment demonstrates the buyer's commitment.

The developer usually provides a loan for housing without a down payment during the construction phase. Moreover, both sides benefit. The buyer can not only buy an apartment in a new building, paying its cost gradually over several years, but also can choose one of the best apartments in the future buildings at the start of sales. This is an additional investment for the developer that it receives during the entire construction period. Some companies even provide the opportunity to purchase an apartment in instalments without a down payment after the delivery of the object. But you should bare in mind that the price of the apartment may increase, so the amount of the sum unpaid is likely to increase significantly. Despite this, in most cases it is still more profitable to buy housing in this way than to pay the full amount at once.

The apartment down payment amount

First of all, the amount of the down payment depends on the policy within the developer company. Some of them take from 5% to 15%, the rest do not enter into an instalment agreement if the buyer does not make at least 40% of the advance payment. But does it always make sense to look for an instalment purchase option with a minimum or no down payment?

A simple example of buying an apartment without a down payment. The cost of housing is $ 36,000, you can apply for an instalment plan for three years (36 months). The buyer does not make a down payment, but in this case, they will have to make a monthly payment of $ 1,000.

To find apartments in new buildings with a small down payment, it is better to pay attention to objects at the excavation stage. The cost of the apartment is low at this stage, because the investor (i.e., the buyer) bears certain risks. It is at the excavation stage that you can buy an apartment at an affordable price and with a minimum down payment.

Although it should be considered that in many situations, it is more profitable to make the down payment as large as possible. This is due to the fact that at the stage of construction, the demand for apartments will grow and prices will increase. For a person who buys housing in instalments, the cost of housing is not frozen, but also grows. Accordingly, the amount of the unpaid sum ever increases. In this regard, the experts recommend that you would better still make the down payment for residential real estate, if there is such an opportunity. And the more money you invest in the beginning, the cheaper the apartment will cost in the end.

To minimize the risks associated with buying a home in the early stages of construction, you should carefully choose the developer. Here are some helpful tips:

1. Turn to only those companies that have been on the market for a long time and have already put into operation quite a few objects. This will ensure that you contact a reliable company with a successful construction experience.
2. Read the reviews of other buyers on the Internet. Basically, such feedback is the most informative, there you can find out about all the subtle aspects of buying a home from a particular developer.
3. Make a request to the Unified State Register. Here you can get information about the founders of the company, review their types of activities, check the developer for outstanding debts and whether he is declared bankrupt.
4. Seek your family and friends’ advice. Perhaps someone from your inner circle recently bought an apartment in instalments and were satisfied with that. In this case, you can ask about the developer, review information about him and, if everything is in order, contact him.

If you are looking for new buildings with a minimum down payment, consider RIEL Real Estate Corporation’s  houses in Kyiv and Lviv. Since 2003, the company has been investing in large projects, and has built more than 50 houses, in which hundreds of families now happily live, throughout its existence.

Buying by instalments or a loan from a developer without a down payment?

Many people often confuse an instalment purchase from a developer with bank loans. In fact, these two concepts actually have nothing in common. The bank issues a loan at a certain percentage (at best, 20% of the cost of the object per year), and you can buy housing both in a new building and in the secondary market. The bank makes money on such clients, because the buyer pays for the loan service and in many cases he has to give the bank more money than he paid for the housing.

An instalment plan is an interest-free loan provided by a developer for a short period, mainly during the construction of a house, approximately for about two to four years. The buyer can purchase residential real estate without a down payment, but in any case they pay the full cost of the apartment. It's just that these payments are evenly proportioned over a certain period. However, as noted above, the apartment will rise in price, and along with the cost, the size of payments will also increase.

The advantages and disadvantages of buying with a minimum or zero down payment

Not all prospective buyers of residential real estate seem to understand this, but instalments with a minimum or zero down payment have not only advantages, but also some disadvantages. We will try to find out everything in more detail.

Benefits of buying:

• You can pay money for housing in instalments. This is convenient if you are short of money for an apartment, but you are sure to have the necessary financial capabilities.
• Minimal risks. If you take out a loan for an apartment without a down payment or with a minimum instalment, you reduce the risks of losing the entire amount at in case of building halt. For example, a buyer makes a down payment of 5% of the cost of housing, which means that in the event of an unforeseen situation, they only lose this 5%.
• Financial benefit. Buying housing in instalments at the initial stages of construction, you can substantially save. In most cases, this is more profitable than buying an apartment for the full amount at once in a house that has already been put into operation.
• There are no overpayments. Having ordered the purchase of an apartment in instalments, the buyer does not pay interest, but only the cost of housing, thus not having to spend extra money.

Disadvantages of buying:

• There is a high probability of an apartment price rise. If, at the start of sales, you buy housing for the full amount at once, it will be much cheaper than buying in instalments. This is due to the fact that square meters rise in price as the house is being erected. On the one hand, it is obviously more profitable to give the entire amount at once. On the other hand, this is always risky, so it may be better to overpay a little, but minimize the risks.
• The necessity to make payments on time. Instalment is always a huge responsibility. Buyers should surely be able to make recurring payments. It is necessary to foreseen all possible force majeure, have some money I store and only after that make a purchase in instalments.

An instalment plan for an apartment without a down payment or with a minimum payment is a good solution for those who do not have the entire amount to buy a home. Buying real estate in instalments is less expensive and the buyer is less worried about the risks, because there is no need to pay all the money at once.