Understand 3 stages of Progressive Payment Scheme you need to know when buying a new home project development successfully
1) Pre-booking! Your first little step to landing your dream house
You’ve been driving past this new condo development site every morning on your way to work, and every evening on your way back. And everyday it’s the same exclamation: “Sweetheart, doesn’t the artist impression look gorgeous? And this is the ideal location for us!” Your lunch partner finally tells you: “Why don’t you go online and register your interest, instead of drooling over it everyday?” You google, and find out that the project hasn’t launched in the market yet, and you duly fill up the online enquiry form for Pre-booking, registering your interest in attending their Preview Launch.
The developer sends you the e-brochure, and you eagerly anticipate the preview launch…
The day arrives for the VIP preview, and your spouse and you step into the showflat gallery, and oh yes! This is what you want! Although you will not be able to purchase the flat until the developer schedules an official launch, pre-booking has its distinct attractions: you are one step ahead and may get to book the unit of your choice (some call this the ‘priority invite’), and secondly, some developers may throw in a discount or other goodies during this preview launch.
Landing your dream house – THE Launch!
Finally the official new launch is here, and you book the unit you have been eyeing. Oh, beautiful, beautiful day! You have committed yourselves to buying a new home, but it will be some time before it will be completely built. You need to do your sums, and arrange for financing. Here’s the lowdown on how much you are expected to pay in cash, how much you can borrow, and when you need to make payments to the developer. We call this the Progressive Payment Scheme.
Progressive Payment Scheme
The progressive payment scheme applies to private properties which are in the process of being built. You as the buyer, will have to make instalment payments, in tandem with the construction progress – hence the term, Progressive Payments. The instalments are paid in stages, all the way until you receive your Certificate of Statutory Completion (CSC).
Let’s take it from the top….
Scenario: You are Buying a New Launch Property with an 80% Loan-to-Value (LTV) and a Loan Tenure of 30 years
2) Booking the property & Signing of Sale and Purchase Agreement (5% Booking Fee, Cash outlay)
Upon booking, you will have to pay a 5% booking fee, and you will be granted the Option to Purchase (OTP). The developer will then mail to you the Sale and Purchase (S&P) Agreement within 1 – 2 weeks so you must diligently check your mailbox for the S&P. Upon receipt, please check the date of the S&P as you will be given 3 weeks from this date to exercise the S&P.
Stamp Duty (3% less $5,400, Cash/CPF outlay)
Within 14 days of signing the S&P agreement (or within 30 days if the agreement is signed overseas), you will have to pay the Stamp Duty, which is 3% of the purchase price less $5,400. Under certain circumstances, such as when Singaporeans buy a third property (or beyond), you may have to pay an Additional Buyer’s Stamp Duty. Stamp duties can be paid using Cash or CPF.
Sales Completion Date (15%, Cash/CPF outlay)
8 weeks from the day the option money is paid, you will have to pay the remaining 15%. (Some lawyers may require you to pay this amount upon signing of the S&P Agreement). You can use your CPF to pay for this and any remaining shortfall will be paid for by Cash. You may want to take good note of this schedule especially if your CPF does not have enough to cover this outstanding and to prepare the necessary Cash needed to pay the shortfall.
Also do remember that this amount will depend on your LTV, e.g. if your LTV is 70% then the balance amount to be paid is 25%.
3) Progressive Payments using Housing Loan
From this point onwards, you can start using funds from your housing loan, which can be up to 80% of the purchase price. The tenure of the loan can be up to 30 years, depending on your age. You will have to make payments as follows:
- 10% upon completion of foundation work
- 10% upon completion of reinforced concrete framework of unit
- 5% upon completion of brick walls of unit
- 5% upon completion of roofing and ceiling of unit
- 5% upon completion of electrical wiring (without fittings), internal plastering, plumbing and installation of doors and window frames of unit
- 5% upon completion of completion of car park, roads and drains serving the housing project
- 25% upon receiving Notice of Vacant Possession and Temporary Occuption Permit (TOP), and
- The last 15% upon Completion Date, when you receive your CSC.
And there you have it, in a nutshell. Do go through our illustration, which provides mathematical calculations of the payments you have to make, based on the purchase of a $1 million property.
Progressive Repayment Schedule – Multiple banks – iCompareLoan.com
You can download the sample property buyer home loan report here.
Get your property agent to generate a report for you at www.iCompareLoan.com/consultant