understanding building-under-construction (buc) loans in singapore
DESCRIPTION
Find out the gist of under-development home loans in this presentation. Read the full article at http://www.icompareloan.com/resources/understanding-building-under-construction-buc-loans-in-singapore/TRANSCRIPT
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
Understanding Building under Construction (BUC) Loans in Singapore
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
The Pros and Cons Of Buying Building Under Construction(BUC)
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
The Pros:
•Grabbing the best units with regard to beautiful views, etc.
•Early purchases come with incredible savings like the absorption of stamp duties, a per-square-foot discounts, or other administrative discounts
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
The Cons:
•There are risks involved in purchasing an uncompleted house versus a completed one.
•The developer may go bust before the property sees the light of day
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
Whether you are buying a BUC or completed house, it is likely you will
finance it with a loan
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
What are BUC loans?
How are they useful?
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
Even with a loan, there are upfront payments
1. Buyer's stamp duty in cash and/or CPF 2. Down-payment of 20% of the transacted
price
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
For a first property purchase, the next flowchart summarizes the upfront payment
at the different stages .
Signing of Option to Purchase
Option Fee (Booking Fee) = 5% - 10% of Purchase Price(Cash only)
1. Sign and return S&P to developer
2. Down payment less booking fee (Some developer may allow this payment to be made within 8 weeks from the signing of Option to Purchase instead)
(Cash and/or CPF)
75% of booking fee is refunded
If option is not
exercised
S&P* will have to be delivered to buyer or his lawyer within 14 days from date of option
Option to Purchase becomes valid for 3
weeks after delivery of S&P
Within 14 days from the signing of S&P
1. Buyer's Stamp Duty = S$5,400 + 3% of (purchase price - S$360,000)
2. ABSD = 5% of purchase price or valuation, whichever is higher (PRs)
OR
ABSD = 15% of purchase price, whichever is higher (Foreigners and non-individuals)
(Cash and/or CPF)
* S&P stands for Sales and Purchase Agreement
If option is exercised within the validity period
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
What is a BUC Loan ?
A BUC loan has a progressive* payment schedule. Meaning, a particular percentage of the loan is paid out at each stage of the property construction.
*Unlike a completed property loan which is 100% paid out at one time
What is a BUC loan?What is a BUC loan?
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
Purchase Price: S$2,000,000
Loan Quantum: S$1,600,000
Example 1
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
Stage Month Disbursed Ratio Interest Rate Disbursed Balance Monthly Installment
Completion of Foundation 1 10% 1.250% S$200,000.00 S$666.50
Completion of Superstructure 7 10% 1.250% S$397,243.81 S$1,342.32
Completion of Brick Wall 13 5% 1.450% S$491,658.14 S$1,731.45
Completion of Ceiling/Roofing 17 5% 1.450% S$587,100.42 S$2,086.91
Completion of ElectricalWiring/Plumbing
21 5% 1.450% S$681,580.43 S$2,445.75
Completion of Roads/CarsParks/Drainage
25 5% 1.450% S$775,079.97 S$2,808.04
Issuance of Temporary OccupationPermit (TOP)
29 25% 1.450% S$1,267,580.46 S$4,637.19
Certificate of Statutory Completion 40 15% 2.750% S$1,534,842.41 S$6,759.05
Table 1: Disbursement Schedule for a BUC LoanSource: www.iCompareLoan.com
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
•At the first disbursement, the repayment of the loan starts
• The disbursed ratio is the percentage of the purchase price, not the loan quantum
• In the first month 10% is disbursed and in the seventh month, another 10% is disbursed, and so on.
•This schedule is only a guide, the actual completion time for each stage may vary in reality,but the amount payable at each stage should be the same.
Table Interpretation
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
What Are The Types Of BUC Loans?
• Fixed Rate Package• Variable (Floating) Rate Packageo Board rate (bank’s internal reference) – peggedo SIBOR-peggedo SOR-peggedo Combo SIBOR/SOR [recently introduced by Australia and New
Zealand Banking Group Limited (ANZ)]
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
Notes:
•The Government cancelled interest-only loans since 14 September 2009
•For fixed rate or variable rate package conversion, if allowed, is usually after TOP
• In case of loan redemption, be ready to pay a cancellation fee,normally 1.5 - 2.0% of the un-disbursed amount
•If the redemption is during the lock-in period, you will have to bear the cancellation fee on top of the lock-in penalty.
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
Interest rates for BUC loans are not necessarily higher than loans for completed properties
Hence buying under construction homes with a BUC loan has an advantage
During the initial few years, the loan amount is smaller
interest payment will be smaller
Join us | Login for Financial Advisors | SMS us at +65 – 9782 - 8606Home Loan | Commercial Loan | Refinance Loan | *Financial Planning | *Insurance
About Property Buyer Mortgage Consultants
Property Buyer Mortgage Consultants is a research focused independent mortgage broker. We emphasize a consultative approach where we match our client’s financial situation with the best fit mortgage loan, not simply a cheap loan.
We also help property buyers in their buying process helping them avoid pitfalls from unscrupulous property agents. (We are not property agents, therefore there is no conflict of interests.)
We also developed our proprietary home loan reporting tool which provides amongst other things, 23 years Sibor history as well as 6 years worth of SOR.
Our service is free to you as banks pay us a commission on loan deals completed. Banks in turn save on staffing cost as we are not on their payroll. www.PropertyBuyer.com.sg/mortgagewww.SingaporeHomeLoan.netwww.iCompareLoan.com/consultant/