Mortgage or developer payment plan: which is actually cheaper

Nigerian mortgage rates make developer payment plans look attractive, and the marketing leans hard on the phrase no interest. There is almost always interest. It is just expressed as a price difference rather than a rate.

Find the implied rate

Ask for two numbers: the price if you pay outright today, and the total you will pay across the instalment plan. The gap between them, spread over the plan's term, is the interest. Converting it to an annual rate takes a minute and is frequently the single most useful minute in the whole purchase.

A twelve percent price premium over an eighteen month plan is not a twelve percent rate. It is considerably worse.

Where each one wins

• Payment plans win on access: no credit assessment, no perfected title required up front, and speed.

• Mortgages win on cost when the implied rate on the plan runs above the mortgage rate, which it often does on shorter plans.

• Payment plans carry completion risk that a mortgage on a finished unit does not.

• Mortgages carry the requirement that the title is clean enough for a bank, which is itself a form of due diligence you get for free.

The point most buyers miss

A bank refusing to lend against a specific unit is information. It usually means the title, the developer or the valuation did not survive scrutiny by an institution with money at stake. A payment plan asks none of those questions, which is exactly why it is available.