Financial loan rules clarified for deferred home payment

Buyers of private property taking up deferred payment schemes will not be able to borrow as much as they thought they could, following a clarification in loan guidelines.

The Monetary Authority of Singapore (MAS) issued a circular to banks last week saying such schemes should be taken into account when calculating how much a buyer can borrow.

Under deferred payment schemes, introduced for completed projects such as OUE Twin Peaks in March, buyers can move into their new homes once they have exercised the option to purchase and made a small down payment. They will then have to pay all of those other sum, generally through a financial loan, within 1-3 years, with regards to the developer’s guidelines.

Buyers in standard buys of finished properties need to pay the full total within seven to twelve weeks.

Nevertheless MAS stated deferred repayment schemes ought to be treated being a benefit for the purpose of the buyer and, therefore , be used into account when ever computing a home loan. As “the borrower may use the deferred amount for the purpose of other needs during the deferment period, for instance , investing the deferred sum for a revisit… MAS looks at this an advantage to the borrowers”, it stated.

Financial institutions need to now take these advantages from the purchase price in calculating how large a real estate loan an individual may take, added MAS, which in turn provided a formula for the purpose of banks to account for the significance of such rewards. Under existing rules, if, perhaps an 70 per cent loan-to-value ratio, a buyer will take out a $1. six million financial loan for a $2 million residence. But beneath the deferred repayment scheme, assuming 90 per cent of the purchase price is deferred for a 12 months, buyers can borrow only $1, 587, 328, said MAS.

MAS added that rental guarantees, where developers give buyers the certainty of rental income for a set period, should also be treated as a benefit and be similarly accounted for when calculating loan amounts. This would apply, for example , to Hilltops, being developed by SC Global, which offers two-year guaranteed rental returns intended for the luxury Cairnhill project.

An OCBC spokesman said home buyers should be aware that banking institutions will grant a loan based on the adjusted purchase price – that is, the price after the deduction of any discounts, rebates or benefits.

Borrowers buying under the deferred payment scheme “should be aware that their loan amounts will be reduced… (and) must be prepared for a bigger amount intended for down payment”, said Ms Tok Geok Peng, DBS Bank’s executive director of secured financing.

Said a CapitaLand Singapore spokesman: “Our stay-then-pay program remains desirable as it gives upgraders time to remove their existing residential property just before taking up a home loan for the private residence, in which case the money required will be smaller. inch

Many potential buyers in Tower system 2 equipment at Cal king Peaks currently have opted for the deferred repayment scheme although most have never yet requested loans.

In spite of the benefit charged in, the scheme nonetheless gives great returns about investment in the event the buyer rental prices the unit away, said a salesman. Some potential buyers who delay payment can be anticipating loan-to-value changes as time goes on.