How to purchase housing on deferred terms profitably

An apartment on deferred terms from the developer

The purchase of apartment in a new building becomes available from the moment the developer presents the project and announces the start of sales. Usually, a potential buyer is offered two options: to pay the full price immediately or to take advantage of an offer such as an installment plan from the developer. Such an offer is usually provided until the end of construction, i.e. for 2-3 years. However, there are cases when you can get an installment plan for up to 5 or even 10 years. Everything is individual and depends on the developer and its conditions.

To purchase an apartment in a new building, you need to make a down payment. It can range from 10% to 70%. Usually the amount depends on how much time is left before the building is commissioned. Sometimes you can even come across offers where the developer does not ask for a down payment, but do not forget that there are rarely options that allow you to move in if the installment amount is less than 30%.

Also, the developer cannot transfer the right to own the property to the investor until the installment plan is fully paid. But it is quite understandable that in such situations, the buyer also wants to have some guarantees when transferring a certain part of the funds. In this case, there are two options:

• Conclusion of preliminary agreement, which stipulates he developer’s intention to sell a particular apartment and the investor’s intention to purchase it as soon as the building is completed and commissioned.
• Entering into a deferred payment agreement for the sale of property rights. In this case, you do not purchase an apartment, but the opportunity to register a certificate of title after the acceptance certificate is signed and the newly built dwelling is commissioned, all conditions are met by the company, and the investor pays the full amount.

In both options of the agreement, details such as the amount to be paid to the buyer and the currency in which payments are made are specified. In most cases, the balance (after the first installment) is divided into monthly payments for the period of commissioning. The amount of such monthly payments depends on the developer and the agreements between the company and the investor: they can be equal parts or increase/decrease depending on how much time is left until the completion of construction. Such nuances should be discussed with a particular developer and decided on an individual basis.

It is important to understand how to buy a housing on deferred terms – how to do it correctly and safely. Therefore, you should approach this issue carefully: explore the information, analyse possible options, their advantages and disadvantages, calculate the amount of payments, and your potential for making monthly payments. Then purchasing a housing on deferred terms will not bring any unexpected surprises.

Advantages of installment plans in the primary market

Quite a few people prefer to purchase an apartment in Kyiv on deferred terms. This choice can be explained by the significant advantages that accompany this type of housing purchase in the primary market. The main advantages include the following:

• You have the opportunity to purchase an apartment and pay for it in stages, and you do not have to spend money on bank interest, which in some cases can be quite high.
• There are few requirements for investors, which makes it affordable for most people. Quite often, developers ask for a passport, an identification code, and a down payment. They do not ask for certificates of employment or income.
• The down payment is usually small and amounts to only 10% of the cost of the apartment, and if you look at possible alternatives and study them in detail, you will even find options with 0%.
• You do not overpay on the interest rate. Yes, some developers may accompany the installment plan with an interest rate, but this usually happens if the payment period is extended after the building is commissioned.
• The final cost of housing. If we take into account the average mortgage rate of 20% per annum for a five-year term, the cost of housing automatically doubles. The cost of an apartment in the case of an installment purchase will increase solely due to the increase in the square of the selected object. The contract specifies the cost per m2, and in this case, the overpayment will be minimal.

It can be concluded that housing on deferred terms is profitable, so it is relevant for most people and young families. After all, it is unprofitable to save for housing for years and pay rent at the same time. Choosing an installment plan for an apartment in a new building, you will understand that you are paying monthly for something that belongs to you.

Mortgage lending with eOselia

Real Estate Corporation RIEL has been operating since 2003. You can purchase apartments in new buildings in Lviv and Kyiv under the terms of the state program eOselia. In general, there are two options of the program. The first one is for certain categories of Ukrainian citizens, namely:

• military personnel
• medical workers
• teachers and educators
• researchers and academic staff.

The mortgage loan is provided at 3% per annum and can be issued for a term of up to 20 years. This program was launched at the RIEL on 1 October 2022.

The second type of the program (mass) is intended for the following categories of clients:

• war veterans and their family members
• internally displaced persons
• other citizens.

These categories are offered mortgages at 7% per annum for up to 20 years.

There are certain conditions that potential customers must meet. These include:

• only citizens of Ukraine;
• from 18 years of age at the time of execution of documents and up to 70 years of age at the time of the last payment
• solvency;
• do not own real estate larger than 52.5 m2 or 21 m2 per family member
• not participating in sanctions systems;
• do not participate in other government programs designed to provide housing.

Real estate located in the occupied territories or in the areas of military operations is not eligible.

Documents required to purchase a housing on deferred terms

Before paying the down payment when purchasing an apartment on deferred terms, you should carefully check the seller’s documentation. It will differ from that offered when purchasing real estate on the secondary market. Therefore, be sure to study everything in detail, even if you have already purchased housing in this way. First of all, this gives you the opportunity to familiarize yourself with all the rules offered by the developer. You need to know them in case you are not satisfied with something. If you find serious problems in the documents, it is better not to risk it, because you can lose money and the opportunity to use your own apartment.

In general, there are three options for purchasing an apartment in a new building:

• during the construction stage by signing an investment agreement;
• after the building has been commissioned
• buyout from the first owner.

To avoid falling for unscrupulous developers and sellers, you should check the following when buying a finished apartment on site or in a completed building

• Documents of the developer company. Their availability indicates the legal status of the company, its reliability, and legal operation.
• A lease agreement or title to the land plot where the construction is being carried out. It should clearly state that the land plot is intended for the construction of residential building, the number of floors allowed, etc. (this should be checked so that later the public authorities do not have any questions about the possibility of placing a building on that territory, its compliance with all the requirements/parameters).
• License and documents confirming that you have received permission from special structures and institutions for construction.
• Permission to finance the construction work.
• Document specifying the layout and architectural requirements.

If you purchase an apartment in a new building from a private individual, the list of documents to be checked will be identical to that on the secondary market.

If the provided package of documents does not raise any doubts, you can start the procedure for signing the contract. It all depends on what type of financing was chosen as the basis for the sale. Both parties sign an agreement:

• on payment of contributions;
• on joint activities;
• partial participation;
• preliminary sale and purchase agreement;
• investment agreement;
• sale and purchase of property rights.

Do not rush to put your signature, first carefully read all its clauses and pay special attention to those parts that are written in the smallest font. The document must contain all the information about the apartment: address, area, and technical specifications.

If you do not have sufficient legal expertise and are worried that you will miss something, you can enlist the help of the relevant specialists. They will additionally familiarize themselves with the document and its compliance with applicable law.

Now, as for the documents that the buyer must provide. Everything is quite simple here. You will need:

• passport;
• identification code;
• agreement with the developer.

As already mentioned, you do not even need to provide a certificate of your income. The main point in this case is to pay the down payment and make timely monthly payments in the future.

Purchasing an apartment is an important stage in the life of every person, and it happens that it is accompanied by various risks, including financial ones. In order not to waste time waiting for the move due to monthly savings and delaying the deadlines or money, or getting hooked by an unreliable developer, you should study everything in detail and understand all the nuances and details before making a deal. You can ask for the help of specialists (lawyers) who know how to draw up documents correctly and can eliminate the risks of this aspect and help you safely buy housing on deferred terms.