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The difference between a mortgage and an installment plan when buying an apartment
Mortgage and installment payments are two popular ways to buy an apartment. Despite their similarities, there are fundamental differences between them. We explain what exactly the difference is and which option to choose.
The main difference The main difference between a mortgage and an installment plan lies in the source of financing and payment terms:
Mortgage — the bank provides the funds, and you repay them with interest
Installment plan — you pay the developer directly in installments
1. Payment term Mortgage: a long term — usually from 10 to 25 years
Installment plan: a short term — чаще from 1 to 3 years (sometimes up to 5)
This affects the amount of the monthly payment
2. Overpayment Mortgage: interest applies: the total overpayment can be significant
Installment plan: often interest-free or with minimal overpayment
An installment plan is more выгоднее in terms of the total amount, but not always
3. Monthly payment Mortgage: lower, due to the longer term
Installment plan: higher, because the term is short
An installment plan requires a higher financial burden
4. Buyer requirements
Mortgage: income verification
credit history
official employment
Installment plan: minimal requirements
often without income verification
An installment plan is easier to arrange
5. Where you can buy an apartment
Mortgage: new builds
secondary market
Installment plan: mainly only new builds
directly from the developer
6. Ownership rights Mortgage: the apartment is immediately registered in the buyer’s name (but pledged to the bank)
Installment plan: ownership often transfers after full payment
This is an important legal point
7. Flexibility of terms Mortgage: the terms are fixed by the bank
Installment plan: the terms can be negotiated with the developer Conclusion: the key difference
A mortgage is a long-term loan with interest, but with comfortable payments
An installment plan is a fast way to purchase without interest, but with a high payment burden What to choose
If a low monthly payment is important: a mortgage is better
If it is important not to overpay: an installment plan is better
If there is no official income: an installment plan is more often suitable
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