Updated: May 7, 2020
Things To Look Out For When Picking A Home Loan Package For Building Under Construction (BUC) New Launch
Building Under Construction (BUC) condos refers to properties that are still in the stage of construction. These properties can only be viewed though show rooms, pamphlets, and/or 3D models. Developers of the condos will aim to sell as many units as possible before it is completely built to avoid paying a substantial amount of taxes to the government. Since the units are not ready for viewing, potential buyers might not be willing to purchase it. In order to attract buyers, the developers will offer several incentives – absorption of Additional Buyer Stamp Duty (ABSD), lowered price per square foot, and/or other fees & charges. Despite all the incentives offered, buyers should understand fully what a BUC home loan package is before taking up one.
Maximum loan available ≠ price of property
The loan amount that you request will be of a percentage of the final property price (aka. after deduction of incentives offered). The maximum loan amount that you requested for will also be reviewed thoroughly by the financial institution to ensure that you are not borrowing over your repaying capabilities. In the following scenario, we are assuming that the price of property = $1M, total incentives offered = $70K, and your loan request = 70%. After deduction of incentives amount = $930K Hence, maximum loan amount = 70% x $930K = $651K (and not $700K)
Types of loan packages
There are 3 types of BUC loans – floating packages pegged to Sibor, board and fixed deposit bank rate. As the payment for BUC properties is on a progressive mode, home buyers can only take up floating rate packages. Lately, in view of the rate decline, home owners can take advantage to enjoy lower interest rates at more savings!
Lock-in period of BUC home loan
For most BUC loans, there is no lock-in period. Lock-in period prevents the borrowers from switching to another loan package within the set number of years. Without the lock-in period, it means that buyers will have more options if a loan package of a lower interest rate is being offered. However, do note that most banks may impose a cancellation fee if you choose to refinance or redeem your home loan when it is not fully disbursed yet.
Unlike a typical home loan, BUC home loan is not disbursed all at once. The disbursement schedule will follow the construction progress accordingly. The construction stages consist of: - Completion of foundation - Completion of superstructure - Completion of brick wall - Completion of ceiling/roofing - Completion of electrical wiring/plumbing - Completion of roads /carparks/drainage - Issuance of Temporary Occupancy Permit (TOP) - Certificate of statutory completion
Transferring of a BUC unit
In order to change the ownership or include more names into the property title, owners must seek for approval from the developers directly. This will be more inconvenient compared to changing the ownership of a resale private property. Buying a BUC unit involves a certain amount of risk as no one will ever know if the developer will crumble before the construction has been completed. However, the amount saved from purchasing an uncompleted property will be significant (partially due to a lower interest rate). Contact Mortgage Consultancy now to get the smartest financial bank loan advice specifically for your home. We are able to provide more than 100 loan packages from 16 banks for you to compare and choose from! Feel free to contact us at +65 8556 5271 so that we will be able to help you make an informed decision, suited to your needs.