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Infonavit credit VS bank credit, which is better?

For many years, Mexican workers took it for granted that the Infonavit was their only option to get a loan to buy a house. Maybe you grew up believing the same thing, but this is not necessarily true, banks also lend and sometimes under better conditions, it all depends on the situation of each person.

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The first thing you have to consider is that there is no infallible answer: both the different types of Infonavit credit and the mortgage loans granted by banks have advantages and disadvantages, and all of them can be a good option or a disaster, depending on factors such as your salary, your financial status, your payment capacity, the time you have contributed to Infonavit, your credit history, your job stability, etc.

If you are about to buy a house, but don't know which is better, an Infonavit or a bank loan, don't worry, you have come to the right place. In this article we explain the pros and cons of each one to help you make a decision.

Buying a home can be one of the most important decisions in a person's life, as it represents a major financial commitment.

There are different options for acquiring a mortgage loan, two of the most common are through Infonavit and the bank.

Each of these options has different requirements and characteristics to be approved, so if you are about to make the decision to purchase your home, here is a list we have prepared for you to evaluate them and decide which is the best choice for your case.

Infonavit Credit

Infonavit is a Mexican government institution whose mission is to facilitate workers' access to decent and affordable housing.

Pros

  • It is not necessary to make a down payment to acquire a property, this is taken directly from the balance of the housing sub-account, only when it is not sufficient, then you must disburse the amount of your money.
  • You do not need to have a clean credit history in order to be granted a loan, although this may influence the final amount you will be lent. The reason you cannot be denied a loan is because it is a worker's right.
  • If the worker does not earn more than 12 thousand pesos per month, Infonavit manages a CAT (Total Annual Cost) which is managed by the banks and is 11%.
  • In the event that you become unemployed, the balance of the housing subaccount can be used as a guarantee of payment, which could help you pay off that debt.

Cons

  • To be able to buy a house you need to have 116 points, no matter how long you have been in your job.
  • The term to repay the loan is more than 15 years, it cannot be less time.
  • In case the worker's income is higher than 12 thousand pesos, the interest can increase up to 13%, which is higher than the 11% offered by the banks.
  • You cannot buy a home worth more than 1 million 600 thousand pesos, unless you take out an additional bank loan.
  • The debt may increase each year as a result of the increase in the Unidad de Medida y Actualizacion (UMA), resulting in the non-visibility of the decrease of your debt in the first years.

Bank credit

Currently, Mexican banks compete against Infonavit with significantly lower interest rates. However, banks face a higher risk when lending money because they have no collateral other than the house itself.

Pros

  • You can take out a bank loan to buy a house for a period of 10 years or less.
  • You can make early payments on your credit, which will allow you to pay off your debt sooner.
  • Loans can be up to 20 million pesos, and interest rates can range from 9 to 11% fixed, so you could see more advances when repaying your loan.
  • In case you do not use your Infonavit to buy a house, the contributions made by your employer go to the housing subaccount of your Afore, which could guarantee you a better pension when the time comes.

Cons

  • A down payment is required to purchase the home before the loan is approved, which is usually 10% of the value of the property.
  • In order to be approved for credit, you must have a clean credit history, which means that you must not appear in the credit bureau. If in your case you have never had a credit or departmental card, it is very difficult to be granted credit.

What do these two credits have in common?

These types of loans have some characteristics in common:

The first is that if you are approved for the loan, you must have at least one year of seniority in your job.

The second is that both loans can be requested in pesos, which is advisable to prevent your debt and payments from being affected by devaluations and economic crises.

Some recommendations

Before deciding on one type of credit or another, consider the total cost of your home. Calculate that, if you take out an Infonavit loan, each year you will owe more than the previous one, because each year the minimum wage increases more or less 4%. This does not mean that you will never finish paying for your house, but the first few years you will not see your debt reduced.

Also consider that the balance of your housing subaccount can be used to cover part of the cost of your home. If you have a considerable amount in that balance, you may want to use your Infonavit credit. Or you can simply request an Infonavit Support so that the employer's contributions are used to amortize your debt and, in this case, the balance of your housing sub-account remains as a guarantee of payment before the bank, in case you become unemployed and cannot cover some monthly payments.

Now, knowing that each one has its own characteristics, advantages and disadvantages, the conclusion could be that:

One loan Infonavit it is convenient when you earn less than 12 thousand pesos a month and have a bad credit history.

In the case of the bank creditis more advisable when you earn more than 12 thousand pesos a month and have a clean credit history.

Think and choose wisely. Remember that investing in your wealth is a very important decision and cannot be taken lightly.

When you invest in your assets, you make a smart investment.

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