"Affordable Housing for Young Families" to become even more  affordable: Government reduces interest rate on mortgages

ArmInfo. The Armenian  government softens the terms of the program "Affordable Housing for  Young Families. The draft of the relevant decision of the Armenian  government, which is expected to introduce some changes in the  approved annex to the decision of the Government of the Republic of  Armenia N 98-N of January 29, 2010, was approved at the Cabinet  meeting on September 14.

As the Minister of Finance of Armenia Atom Janjughazyan stated,  according to the current procedure, a mortgage loan is granted at  10.5-11% per annum, of which 2% is subsidized by the state -  regardless of where exactly housing is purchased. Today it is  proposed to reduce the mortgage interest rate to the maximum 9.5% per  annum in Yerevan and the regions of the country (on the secondary  real estate market), of which 2% will be subsidized to purchase  housing in the capital, and 4% in regions. The loan can be granted  for at least 10 years, with a maximum maturity of 30 years. The  government also proposes to increase the aggregate age of spouses  from the current 65 to 70 years.

The document also sets the maximum cost of the purchased housing: in  case of buying an apartment on the primary market (from the  constructor), the amount will be 30 million drams, and on the  secondary one - 25 million drams. At the same time, the maximum  nominal mortgage rate for the acquisition of housing in the primary  market will be 7.5%. In this case, a subsidy from the state is not  provided. Deduction on income tax in the amount of interest from a  mortgage can be used in this case.  The next point of the proposed  innovations relates to the prepayment, which today is 30% for  "secondary housing" and 20% - for the primary market. If the project  is approved, the upfront payment will be reduced to the "cherished"  20% and 10%, respectively. The issue, as the minister pointed out,  will be solved by the introduction of the institute of prepayment  insurance. "In other words, it will be possible to pay 10% of the  cost of an apartment in cash and issue insurance for the difference,"  Atom Janjughazyan explained. The project also suggests applying the  insurance of an existing mortgage obligation - at a rate of at least  50% of the prepayment. Moreover, if the abovementioned requirements  met, the amount of the mortgage loan may exceed 20,000,000 drams. The  requirement for insurance ceases from the moment when the loan /  pledge ratio as a result of loan payments reaches 80%.

The pilot program was launched in 2010, on the basis of which the  state program was launched. According to the data provided by the  government, under the program, 19 financial organizations are  currently involved in lending: 14 banks and 5 credit organizations.  As of August 30, 2018, 3,466 loans (1814 loans in Yerevan and 1652 in  the regions of Armenia) were issued with a total value of 28 billion  524 million drams (18 billion 401 million in Yerevan and 10 billion  123 million in the regions). Within the framework of the medium-term  expenditure program for 2019-2021, according to the head of the  Armenian Ministry of Finance, in 2019, 785 million drams are  envisaged for the implementation of the program, but as a result of  the new order coming into force, an additional 75 million drams will  be required for its financing.