Why I decided to get a mortgage during wartime

Ukrainian article of the week published in the 4th edition of the "What about Ukraine" newsletter on October 26th, 2023. The article was written by Veronika Masenko for The Village and was translated for n-ost by Tetiana Evloeva.

Check out the complete edition of this week's newsletter. You can access the original article in Ukrainian under this link. It was first published on October 10, 2023.

A first-hand experience in finding a home, signing a contract with a bank, and monthly payments

In the autumn of 2022, Ukraine launched YeOselia, a national subsidised mortgage programme, available for applicants from August 2023.

To qualify, one has to be a Ukrainian national aged 18 to 70, and not be a homeowner. This mortgage is given out for up to 20 years, with a seven percent interest rate and a minimal down payment of 20 percent.

Real estate experts branded the programme as “the most favourable conditions since mortgages were introduced in Ukraine”, yet the high demand made the task of approval for such a mortgage a long-drawn out process.

We spoke to a Kyiv resident, 33-year-old intellectual property specialist Myroslava Slobodianiuk, who managed to buy a home under YeOselia, with an annual interest rate of seven percent. We asked her about the procedure of finding a flat, how long it had taken her to do the paperwork, and the cost of her instalments under the mortgage programme.

Why I Decided to Finance a Home Despite the Risks of War

I moved to Kyiv from the Odesa Region in 2007 when I enrolled at a university here, and I’ve been living in the city ever since. After I graduated, I started renting with several roommates. Every apartment I’d lived in was rented.

While I had thoughts of buying my own home, it was never anything specific, as my priorities were different — for instance, I liked travelling. I was totally fine with renting and having the freedom of moving from one neighbourhood to another and choosing different options depending on my budget at any given moment. However, the mortgage option with YeOselia really got me hooked.

It caught my eye back in November 2022 when it was launched for a limited demographic. In August 2023, it became available for everyone who didn’t own a home, so on the 8 August I had an appointment with PrivatBank and asked them if I could get approved for a mortgage with them.

Initially, only the military, law enforcement, researchers, medical workers, and educators were eligible for the subsidised mortgage rates of three percent. In August 2023, the programme was expanded, offering affordable mortgages to anyone. One can get a three percent mortgage rate on an apartment in a building under construction or less than ten years old (in Kyiv and regional capitals), or one can get a seven percent mortgage rate on an apartment in a building under construction or less than three years old.

In my case, the launching of this programme urged me to buy an apartment. While my friends have been keen on the idea of buying their own home and often talked about it, I had no solid plans until YeOselia came up.

I’m usually a person who trusts people easily (despite facing the consequences of this every now and then) [laughs, — ed.], and it’s the same for trusting my country. So I never questioned the conditions of the programme, and I was fairly certain when filing my application. When I later showed my contract with the bank to my lawyer, he uncovered that should I fail to comply with any provision of said document, or should the programme be cancelled for any reason, my rate would go up from seven to 12 percent. In fact, 12 percent is also fine with me, and my income allows that adjustment, so I decided to take my chances anyway.

Upon learning that I was financing a home, one of my friends was surprised as to why I was doing that, with the risk of my property getting destroyed. I can say that that risk is unlikely to go away anytime soon and that one has to live in the meantime. I’m not planning on relocating anywhere, despite the war. I want to stay in Ukraine, specifically in Kyiv.

Besides, should anything happen to my flat, I would be eligible for assistance under the YeVidnovlennia [renovation] programme, which also covers homeowners whose homes are financed.

Homes bought under YeOselia are also subject to mandatory insurance, and the annual rates should be under 0.25 percent of the mortgage approved by the lender. Should the owner want to have coverage for additional war-related risks, the insurance should be under one percent.

How I Found My Dream Home in Kyiv

First and foremost I inquired if PrivatBank was willing to open a mortgage line for me at all. I went to a branch, and we updated my salary, marital status, and additional income, and right there and then I filed an application through the DIYA mobile app. After that, PrivatBank sent me an offer which I accepted, and from that moment, I had 60 days to find a flat and return to the bank to seal the deal.

I contacted my real estate agent at once. We set up a meeting, and I filed a request for an apartment under YeOselia, with certain conditions to be met, and he started looking for options. In the meanwhile, I was contacted by the bank’s mortgage manager, and she offered me some counselling on the conditions of my mortgage and the necessary paperwork. I mostly avoided getting into all the details: my agent dealt with all the financing and paperwork, and I was just the one who paid the money.

At first, the agent offered me one flat near Feofania [a town near Kyiv surrounded by a national reserve]. I wanted to buy a home in the Holosiyivsky district in Kyiv, because that’s where I spent my first six years in the city, on the campus of Kyiv National Taras Shevchenko University on Yuliia Zdanovska [previously Lomonosov] Str. Besides, it’s in the general direction of Odesa, and I’m very fond of my native region. Furthermore, the Holosiyivskiy district is a convenient transportation hub: it takes just 20 min. ride on the subway to get to Maidan Nezalezhnosti, or ten to 15 minutes by car if the traffic isn’t dense. Another feature of the district is its parks, namely Holosiyivskiy and VDNG.

The apartments I’d rented earlier were mostly in the Holosiyivskiy district, too. As of today, I’m staying at my acquaintances’ flat in Pechersk [an expensive neighbourhood in downtown Kyiv], which is convenient and near my job, however, I have no wish to buy a home here: it’s too fancy, has too few green areas, and one can hardly find a place where one can’t hear the motorcycles racing along the Lesia Ukrainka Blvd.

The flat near Feofania was perfect: one bedroom, one living room, a closed kitchen, two bathrooms, high ceilings… It was beyond my budget, but I was eager to somehow make it work.

The national subsidised mortgage programme covers buying a flat or a share in a flat situated in a residential building. The flat has to be up to 52m2 per applicant plus an additional 21m2 per family member. Should the total cost of the flat, or cost per m2, be higher than the limit for the programme, one can still apply for YeOselia, however, they would have to cover the difference by increasing their downpayment.

So we filed an application for this flat with the bank, however, it turned out that it was just one month over the age limit and thus wasn’t covered by the programme.

Flats that qualify for scheme “may run out” in Kyiv

According to LUN analysts, as of August 2023, most of the preowned flats aged below three to ten years that were for sale were located in Kyiv. Flats built up to three years ago make up seven percent of the market, while flats built up to ten years ago make up 22 percent of the market. Oleksiy Hnuchikh, an agent from Kyiv, believes that the capital city may run out of flats that qualify for the programme in the nearest future, possibly even before the new year [2024], due to their low supply.

When that option fell through, it got me thinking that it wasn’t the best idea to buy a home that’s just shell & core, as that way, I would have to pay my mortgage while simultaneously renting and doing renovations. So I emailed my agent to say that I was changing my request and that the flat was supposed to be in either Kyiv or the closest towns nearby and have at least preliminary renovation works finished.

At first, he told me that the most realistic case would be finding such flats near the Livoberezhna subway station or in the Vidradniy neighbourhood, which I wasn’t happy about, but alas. The next evening, however, I downloaded the Dim.Ria app and tried searching for an apartment in the Holosiyivskiy district that would qualify for YeOselia. I was offered 11 options, and I chose the one I ended up buying.

I already have an experience of taking a loan: I borrowed money from my aunt to buy myself a car, and I only finished repaying her last year. I also made some savings without even knowing what I wanted to spend them on. I ended up investing them in my flat, besides, my parents helped me out.

How to Seal the Deal with the Homeowner

The owner wrote in his ad that he was willing to sell his apartment under the YeOselia programme, so I took the case to my agent. Besides, it seemed pretty convenient in terms of logistics, as even during rush hour, it only took 30 minutes by car to get to my workplace at the Lybidska subway station.

The agent and I went to see that flat, and I decided that I wanted to buy it. That evening, I even contacted a furniture maker about equipping the kitchen.

During the viewing, the flat had a finished bathroom and floors, with its ceiling and power outlets were in the process of installation. As of today, the place has wallpaper put up and doors and washboards installed. The kitchen is to be finished in a short while.

There was some difficulty with valuation. We did the paperwork and submitted it to PrivatBank, however, we had some difficulty with independent valuation, as the apartment already had some refurbishments, besides, kitchen furniture and a bed were included by the owners. However, the bank was only interested in the “bare” shell of the apartment itself, because basically, that’s what the mortgage sum was going to be. After that was over, I paid 20 percent and the bank covered the 80 percent, however, I had to pay the difference between the mortgage and the price that the owner initially asked out of pocket.

According to the agent Oleksiy Hnuchikh, every bank sets up their own requirements as for the down payment they want to get. PrivatBank, due to getting a lot of applications recently, asks for a larger down payment. Besides, PrivatBank is unwilling to take part in deals where homeowners are currently staying abroad. Thus, according to the expert, one should apply to several banks to increase their chances of getting approved.

That additional payment didn’t bother me in the slightest, as what I got was a kitchen, a bed, and finished renovation works. I won’t have to do anything more, be it hammering nails or installing doors. Even my bathroom mirror came pre-installed!

After I submitted all the paperwork along with the valuation, it took the bank only two days to approve my mortgage. We sealed the deal a week ago, on the 4 October. The overall process, counting from my initial visit to the bank, took me two months.

I guess I’ve been lucky in a way, in particular in finding a homeowner who was fine with selling their property through YeOselia, because most sellers wanted to get their money in cash and in US dollars, while under the programme, one gets their money in their bank account, and withdrawals are limited to UAH 100,000 [EUR ~2,574] a day.

According to agent Oleksiy Hnuchikh, not every homeowner is willing to sell their property through participation in YeOselia, as most of them want to be paid in US dollars. “That’s what they are used to, besides, they use those US dollars to buy themselves some other real estate from another owner. This is how the real estate market operates. With YeOselia, banks transfer the funds to the owner's account, and after that, they have to withdraw that money, and exchange it into US dollars, and only then are they able to buy themselves some new property. It takes some time, and in the meanwhile, the desired flat may be sold to someone else.”

The contract stipulates that the flat must be insured. I will have to pay 0.25 percent of the mortgage sum in insurance premiums yearly. The bank officials also warned me that the insurance company has the right to make inspection visits on the property every five years.

The Flat I Bought and My Instalment Details

I bought this flat for myself, so I didn’t really need closed-off spaces for a bedroom, a living room, and a kitchen — however, I did get all that. The building was readyin 2022. It’s a 20-storey residential building, and part of the units are already occupied. My flat is on the third floor, besides, the building is equipped with a car park and a bomb shelter. There’s a wood and a field nearby, though I believe the latter will be developed soon.

In general, the flat exceeded my expectations. There’s an enclosed bedroom and a kitchen connected to a living room via a corridor, besides, I have a heated loggia sunroom that I can turn into an office or a lounge area. Besides, the price covered a small storage unit on the ground floor.

Some may view the location far from downtown as a disadvantage, to me, however, that’s not important.

What is important is that the building itself is a nice place to live. I often had rentals where the flat itself was ok, but the lobby and the elevators weren’t, and the neighbours were not that nice. Here we have a neat lobby with a reception area, with indoor plants and that makes me happy.

I have 20 years to pay off my loan in instalments, however, there’s an option to pay it off faster. My monthly payment is UAH 12,600 [EUR ~325] which to me is quite reasonable. I can pay for it and still have some money left for furnishing my flat. I guess that’s what I’ll be doing for the first two years.

According to the LUN Project, for a 20 percent down payment and monthly instalments of UAH 10,000 [UER ~258], one can get a shell & core pre-owned flat in a building up to three years old somewhere in the outskirts or Akademmistechko [the westernmost neighbourhood of Kyiv] or Troyeshchyna [one of the northernmost districts of Kyiv with inadequate public transport communication].At the same time, monthly instalments of UAH 20,000 [EUR ~516]can buy a small yet fully renovated one-bedroom-no-living-room place on the right bank of the Dnipro River, two or three bus stops away from a subway station.

As soon as my apartment is fully furnished, I’ll do my best to pay larger instalments to pay off my loan ASAP; maybe, I’ll even spend half of my monthly income on that. However, I’m not planning on living extremely frugally to pay off my mortgage. As I’ve said before, my priorities are different: I like travelling, going out with my friends, and buying gifts. If I manage to have it all — fine. For if the choice is between doubling my monthly instalment or going on a trip to Rome, I'll definitely opt for going to Rome and paying my regular instalment. My parents, for instance, would double their payment. While I do understand them to some extent, I want to live a full life, not just slave away for my mortgage. I want to keep it simple, keep it light — otherwise, I’ll bite the dust, which kills the whole purpose of owning a flat.

As of now, I don’t quite understand the advantages of owning vs. renting. I guess there’s a certain advantage of not having to deal with the homeowners, which you have to do while renting. I was lucky to always have cool landlords, however, my friends had their share of unpleasant experiences. Now it’s my home, my rules.

Besides, I view it as an investment. If there comes a day I want to rent another apartment, I can rent this one out, or sell it altogether and move somewhere else. Therefore, nothing deterred me from seizing this opportunity.