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Real estate financing: loan or mortgage?

Blog | Credit | Real estate loan

If a mortgage is the preferred solution to finance real estate, a loan can be a viable alternative in some rare cases. Which cases exactly, and how to choose between a mortgage or a loan? Explanation.

Mortgage: the most frequent solution

A mortgage is, and will always be less expensive than a personal loan. Indeed, the real estate is used as collateral and there is less risk for the bank. However, it is quite a long process to get a mortgage, and there are situations in which a loan can be an appropriate solution.

Loan: a solution for specific situations

A personal loan to finance real estate will cost more than a mortgage and looks less advantageous. Firstly, the maximum loanable amount is 250,000 CHF. Secondly, the interest rate is quite much higher. However, for small amounts, a loan provides certain benefits:

  • No equity capital needed: you don’t have to look for the 20% equity capital to finance your real estate project.
  • Simpler formalities: getting a loan is quite simple and fast.
  • Free use of the loan: use the money according to your needs.
  • Early repayment: is is possible to repay your loan ahead of schedule and save on the interest.

Which option should you choose?

Generally, you should go for a mortgage. A loan is an option to consider for small amounts, and only if you have the possibility to reimburse your debt quickly. Indeed, the total cost of a loan varies depending on the loan duration.

Ask for advising

Are you looking for a small amount real estate financing solution? Would you like to know more about your options? With Multicredit, you can get some expert advising from a real estate agency. Do not hesitate to call on an advisor if you need to figure out which solution to choose!