Mortgage vs installment plan when buying an apartment: what’s the difference

Key difference

The main difference between a mortgage and an installment plan lies in the source of financing and the payment terms: - **Mortgage** — the bank provides the money, and you repay it with interest.
- **Installment plan** — you pay the developer directly in parts.

1. Payment term

• **Mortgage:** long term — usually **10 to 25 years**.
• **Installment plan:** short term — most often **1 to 3 years** (sometimes up to **5**). This affects the size 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 usually better 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 shorter. 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 confirmation An installment plan is easier to arrange.

5. Where you can buy an apartment

Mortgage:

• new buildings
• secondary market

Installment plan:

• mainly only new buildings
• directly from the developer

6. Ownership rights

• **Mortgage:** the apartment is registered in the buyer’s name immediately (but pledged to the bank).
• **Installment plan:** ownership often transfers after full payment. This is an important legal point.

7. Flexibility of terms

• **Mortgage:** terms are fixed by the bank.
• **Installment plan:** terms can be negotiated with the developer.

Summary: the key difference

• **Mortgage** is a long-term loan with interest, but with more comfortable monthly payments.
• **Installment plan** is a faster way to buy without interest, but with a higher monthly burden.

What to choose

• If a low monthly payment matters most: **mortgage** is better.
• If avoiding overpayment matters most: **installment plan** is better.
• If you don’t have official income: **installment plan** is often more suitable.