How to compare banks and choose the rate

Ask each bank to provide a calculation of the total cost of credit and a full payment schedule for the same amount and term. Add up every payment over the term and subtract the principal. That is your real overpayment. Only that way can banks be compared honestly — advertised rates are not fit for this.

The origination fee, the account-opening fee, the valuation charge — one-off expenses that raise the real cost of the loan. Convert them into an 'effective rate add-on': divide the sum of every one-off fee by the loan amount and add the result to the annual rate.

By law you are entitled to choose the insurer yourself rather than take the one the bank offers. Insurers affiliated with banks are typically 20–50% more expensive than the market. Get a quote from 2–3 independent insurers before signing.

In Azerbaijan the state subsidises mortgages through MIKA for certain categories: young families, primary-market purchases, public-sector employees. The rates under such programmes can be half the market rate. Check mika.az — it takes 20 minutes.

Major developers often negotiate a reduced rate with a partner bank for their projects. It is important to check that the flat's price has not been inflated 'against the rate'. Compare the price of the flat at the same developer when buying for cash.

If rates have fallen by 1.5–2% or more since your original loan, refinancing may be worthwhile. Do the maths: the saving on the monthly payment over the remaining term minus the refinancing costs. If the figure is positive, refinance.

A good flat in Baku can be gone in a few days. Banks that give pre-approval in 1–2 days give you a real edge. Ask each bank how long it takes from filing the documents to signing the loan contract. The difference between banks ranges from 3 days to 3 weeks.

The standard pack: income confirmation (an employer's certificate or tax declaration), an employment history of 6–12 months, documents on the property to be bought. A good credit history affects the rate more than people expect.

Many people are afraid to apply to several banks, thinking it will 'damage' their credit score. In Azerbaijan, multiple mortgage applications within a short period are usually treated as a single enquiry — rate shopping is not penalised. Do not limit yourself to one bank.

All other things being equal, choosing a bank from the top 5 by assets or one with state participation lowers the risk of problems servicing your loan. For a 15-year loan the reliability of the bank matters.

Your deposits are protected by Azerbaijan's Deposit Insurance Fund up to the statutory limit. For a mortgage that is not critical, but if you hold both a deposit and a loan at the same bank, make sure the deposit does not exceed the insured limit.