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.