Interest-free months in pre-sale: the hidden real cost

A payment plan that shows no interest line can still cost you money, and the Federal Consumer Protection Law has a name for that cost: the difference between what you would pay in installments and what you would pay upfront. It's not a hidden rate or an illegal charge. It's an amount that the law requires to be pointed out to you when it exists, and that you can convert into a percentage comparable with your own numbers.

An interest-free plan can have a cost and no stated rate

When an installment plan and the cash price are different, that difference must be disclosed. Article 66, section II of the LFPC states it this way: "In case there are discounts, bonuses, or any other reason why payments on credit and cash differ, such difference must be pointed out to the consumer." The law doesn't call it interest. It calls it a difference. And that name matters, because a plan can have no interest line and still have a difference from the cash price.

So the question "Do the developer's interest-free months really not charge interest?" is poorly framed. A plan with no interest line is not necessarily a plan with no cost. There can be a lower cash price than the total of your monthly payments — and that gap is the real cost, whether or not it carries the interest label.

The same applies to the choice between paying cash with a discount or installments without interest. Which is better is not decided by opinion: it's decided by two amounts that the law requires you to have. Article 7 BIS mandates informing "the total amount to pay," and its second paragraph clarifies that this amount applies "whether it is cash or credit." With the cash price and the total amount in installments in hand, the comparison stops being a discussion and becomes a calculation.

For you as an investor, this changes the starting point: before forming an opinion about which plan makes sense, demand that you be given both figures. Without them you're not comparing, you're guessing.

The three places in your file where that difference lives

The cost of an installment plan doesn't appear labeled as "cost." It lives in three places in your file, and it's worth opening all three before signing.

The first is the cash price column in the price list. Many lists show the installment price prominently and the cash price in another column. The difference between the two is exactly what article 66, section II calls a difference. If your list doesn't show the cash price, you're missing half the comparison — and article 66, section I gives you the right to have it disclosed beforehand: "Inform the consumer beforehand about the cash price of the good or service in question."

The second is the price step by stage or construction progress. In pre-sale, price typically moves as construction advances. That movement is not intrinsically a charge for financing you, but when your payment plan is calendared against those stages, the price you end up paying may differ from what you saw on day one. Here the lever is article 66, section IV, which requires "the price originally agreed upon in installment or conditional sale transactions to be respected, except as provided in other laws or by contrary agreement." Read that caveat carefully: the agreed price is respected except by contrary agreement. What that agreement says is what determines whether the step affects you.

The third is the payment method addendum, which is often not the contract you reviewed. The payment schedule, charges, the calendar against construction: that frequently lives in a separate annex. And that's where the real cost is written. Article 66, section III requires disclosing the total amount to pay "which includes, where applicable, the number and amount of individual payments, interest, commissions and charges applicable, including those set for early payments or cancellation." If the schedule is in the addendum and not in the main contract, the addendum is the document you need to request and read with the same rigor.

That's why it's important to review the complete package before signing any payment form; for what to examine clause by clause you can refer to what to review in the contract before signing. The practical consequence: ask for all three documents at the same time, because the payment form is signed at the beginning and then the price is already locked in.

The calculation you can do with your own numbers

Calculating how much it costs you to pay in installments instead of cash requires only two amounts, and the law requires you to have both. The first is the cash price (article 66, section I). The second is the total amount to pay from the installment option (article 7 BIS and article 66, section III), which should already include interest, commissions, and charges.

The idea behind the calculation is straightforward. The implicit rate is the rate that makes the value of your future payments, brought to today, equal the cash price. If discounting your monthly payments at a certain rate gives you exactly the cash price, that rate is the annual cost of your plan expressed as a percentage. It's the same language you'd use with a bank, and that's why it works for comparison.

An example with round numbers, hypothetical and chosen only to show the mechanics — it's not a real case nor what any developer charges: if the cash price were $1,000,000 MXN and the total amount to pay in installments were $1,120,000 MXN, the difference would be $120,000 MXN. That's the starting point. Converting that difference into an annual rate depends on the payment schedule: it's not the same to pay that gap in twelve months as in thirty-six. The longer the term for the same difference, the lower the implicit rate; the shorter, the higher. That's why the final number is yours and comes from your payment table, not from a market figure.

What do you compare the result against? Against credit that you could actually obtain. If your implicit rate is lower than a mortgage you have access to, the developer's plan is cheaper than borrowing elsewhere. If it's higher, paying cash — or financing another way — makes sense. The direction of the conclusion flips depending on what alternative rates you have available, so there's no universal winner: there's a winner for your case.

For this exercise the useful indexed unit of comparison is the CAT, which the LTOSF defines as "the total annual cost of financing expressed in annual percentage terms that, for informational and comparison purposes, incorporates the entirety of costs and expenses inherent to credit." Your implicit rate serves that same comparison role against the CAT of the alternative credit they offer you.

What the law lets you request in writing before signing

The amounts you need for the calculation are not a favor: they are documents the provider must make available to you. In pre-sale, article 73 BIS, section IX, requires delivering "the payment options the consumer can choose, specifying the total amount to pay in each of the options." That section is what allows you to put cash and the installment plan side by side with each total.

When the transaction is on credit, section X of the same article asks for "the type of credit in question, as well as a projection of the amount to pay that includes, where applicable, the interest rate to be used, commissions and charges." And if the rate is variable, that same section requires specifying "the reference interest rate and the formula for calculating that rate."

On top of that, article 66, section III gives you the right to a breakdown: number and amount of individual payments, interest, commissions and charges, "providing you with a proper breakdown of corresponding concepts." That breakdown is your raw material.

The document you have the right to request before signing the payment form is not just one: it's the set of payment options with their total amount (article 73 BIS, section IX), the credit projection when applicable (section X), and the breakdown from article 66, section III. Request them in writing at the same time. With them you build the calculation; without them you sign blind.

Making early payments, and keeping the agreed price stable

You can make early payments, and the law regulates what they can charge you for doing so. Article 66, section I requires informing you of "your right to pay off the credit early with the corresponding reduction of interest, in which case no charges other than credit renegotiation fees, if any, may be imposed." Read it carefully: the law requires informing of that right and limits charges to renegotiation fees. In a plan that charges no interest there's no interest line to reduce, so what matters there is that the only permitted charge when paying early is a renegotiation fee, and only if there is one.

As for whether they can raise the price if construction delays: article 66, section IV requires "the price originally agreed upon in installment or conditional sale transactions to be respected, except as provided in other laws or by contrary agreement." The agreed price is respected — that's the rule — but the caveat of "contrary agreement" is exactly the clause you need to find. If the agreement allows adjustments, that's where it's written.

And if the rate were variable, article 66, section II sets a clear limit: the adjustment rule "may not depend on unilateral decisions by the provider but on variations in an interest rate representative of the cost of consumer credit, which must be easily verifiable by the consumer." In the adjustment clause look at two things: that it doesn't depend on a provider decision and that the reference rate is one you can verify. Consequence: before signing, locate the adjustment clause and the early payment clause, because they're what decide whether the number you calculated today is still the same tomorrow.

The scope of this piece: who the law you just read protects

All of the above rests on your transaction being subject to the LFPC, and that's governed by a phrase. Article 73 says that acts regarding real estate are subject to the law "when the providers are developers, builders, promoters, and other persons intervening in the advice and sale to the public of dwellings intended as primary residences, or when they grant the consumer the right to use real estate through the timeshare system, in the terms of articles 64 and 65 of this law."

The boundary is at "dwellings intended as primary residences." This piece doesn't classify your case: it doesn't say whether a unit you buy in pre-sale to rent falls inside or outside that phrase, because that's a legal determination that depends on specific facts and isn't resolved by reading the definition. If your case falls outside, the disclosure obligations explained here don't work as leverage — and that's a big difference.

So the question for your attorney fits in one sentence: Is my pre-sale purchase subject to the LFPC under article 73? Everything else depends on that answer.

Frequently asked questions

What is the CAT and why doesn't my developer give me one sometimes?

The CAT is, according to the LTOSF, the total annual cost of financing in annual percentage terms that incorporates all costs and expenses of a credit, for comparison purposes. That same law empowers the Bank of Mexico to set by general provisions which credits it applies to and who must calculate it. Whether a direct plan with the developer falls into that universe is a legal determination not resolved here; that's why it's useful to compare with your own implicit rate.

Does it help that the contract is registered with the Procuraduría?

Article 73 of the LFPC requires registering contracts related to those real estate acts with the Procuraduría: "they must be registered with the Procuraduría." That's verified. The registration is an obligation of the provider; it's not by itself a guarantee you'll recover your money, nor a price review, nor an endorsement of the project. It confirms it exists, but don't interpret it as insurance on the transaction.

Are my credit card interest-free months the same as the developer's payment plan?

They're not the same instrument. Interest-free months on a bank credit card and a direct payment plan with the developer are governed by different rules and don't compare one-to-one. This guide covers the direct plan with the developer: the difference between its cash price and its total amount in installments. For the bank instrument, its own terms apply, which you should review separately with your bank.

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This content is informational and does not replace professional advice. Before signing a payment form, an attorney specializing in consumer protection and real estate contracts should review your case, with support from an accountant or tax specialist for the financial cost layer.

At Propyte we can help you read your payment options and build the comparison with your own numbers. Schedule with an advisor to review your file before signing.