What are the main issues Russians should consider before taking a mortgage? "Of course, the interest rate is most important. Logically, the lower it is, the better it is for a client. Even a 0.25% cut of an interest rate will result in a significant overall saving -given the period of payments. I`d also pay much attention to the currency you are going to take a mortgage in. It`s a really important question, because today there is a wide choice and some companies offer credits even in Japanese yen. For those who get their salaries in roubles my advice for today would be to take a mortgage in roubles - this is to avoid the affects of possible shocks from currency fluctuations. In fact, there is no a universal formula, and if someone understands how to hedge currency risks, that`s ok. And the last thing that really matters is the option to pay back money in advance partially or in full. Some banks introduce a moratorium on this or significantly limit this ability either in terms of time or by means of additional charges and fees. In a mortgage contract a bank can ban making advance payments during the first 5 years, for example. Or it can limit a sum of a payment - say, one may not be allowed to pay less than $5 thousand. And the last alternative is that a bank can allow payment in advance, but with a charge for that. It`s important to clearly understand that mortgage contracts are good for banks, as it`s a long term arrangement that enables a bank to calculate its profitability for a long period of time. And it`s logical that a bank wants to get compensation for possible unexpected losses." RT: What "surprises" do Russians usually face when they conclude a mortgage contract? MG:"Something that is important that often becomes a surprise is that they aren`t allowed to sell a flat as well as rent it or redesign it without the bank`s written permission. In reality people sometimes rent a flat at least partially to cover their expenses on a monthly mortgage payment. But one should clearly understand that if the bank banned renting in the mortgage contract and got to know about the violation, it has a legitimate right to either charge some kind of a fee or claim the debt in full and in advance. The need to annually pay additional insurance fees also often becomes an unpleasant surprise for a person, though it`s usually stipulated in a contract. Basically, there are 3 types of insurance: life and health insurance of both the client himself and his co-borrower, insurance against the risk to loose a proprietary right and one against the risk of any damage to a flat, which can become a result of, say, an earthquake or any other disaster. There can be either 3 separate contracts or a single one, called a contract of complex insurance, which usually involves a lower interest rate. Generally speaking, the sum of insurance payments is, as a rule, no lower than 1.5 - 2% annually of the money borrowed. That`s a significant sum and should certainly be considered. Also, it`s highly important to carefully check the legal status of a flat, to make sure there`s nobody else claiming it. There was one case in Russia, when a young couple concluded a mortgage contract, and started to make payments, and later some other people appeared, who certainly had a legal proprietary right for a flat. For some reason the insurance company refused to pay and the bank wanted its money back. The legal process can take about a year and a half, but meanwhile those young people are in the situation, where they need to pay both mortgage fees to the bank for a flat they don`t really have and a rent for flat they are living in now." RT: Isn`t it the duty of a bank to clearly explain the main issues of a mortgage contract and put all the emphases correctly? MG: "If we lived in a perfect world - yes. But, given all the different products and lenders that we have today in the market, personally I believe, that in our country those who decide to use such a complicated financial tool as mortgage need to make the effort and try to understand all its mechanisms and study all possible scenarios. To fully rely on somebody else, the Government, a bank or a realtor, isn`t an option in Russia, I think." RT: What are the effects if a client finds himself unable to pay back his debt to a bank? MG: "Here it`s important to understand that in the case with a mortgage a bank is a partner to its client, not his opposition. There`s nothing extraordinary if a person finds himself unable to bay back his debt. It`s essential not try to conceal the fact from the bank, better to discuss the options with it. In fact, a bank can restructure payments or cut the rate or offer a delay in payment, provided some fee is charged later for that. The worst possible scenario is when a bank exercises its legal right to sell a flat compulsorily. But actually I don`t remember any actual examples of such cases - banks are usually amicable and leave the opportunity to sell to a debtor." RT: What`s your general perception of a mortgage in Russia? MG: "Mortgage is a really highly risky instrument that requires financial competence and experience of operating with other financial instruments - at least bank deposits. Taking a mortgage means that a person calculates his expenses, that he has some money in reserve to be able to make payments for at least 3-6 months, that he keeps an eye on the market situation. Taking mortgage really requires high level of financial discipline. Also, in my view a mortgage makes a person significantly less mobile and limits ones freedom, since it`s long-term and involves a lot of obligations."