While properties that are still under construction may have more risks than a completed property, developers often incentivize buyers with per-square-foot discounts, absorption of stamp duties or other administrative costs.
Besides the monetary savings arising from an early purchase, you might benefit from a lower interest rate as well! This is because BUC loan rates are not necessarily higher when compared with loans for completed properties.
This article will help you to make more informed financing decisions when considering a BUC loan. Here are some noteworthy points which you may or may not already know:
1. Minimum down payment
Some of you may be aware that resale private properties require 1% upfront cash in exchange for the Option to Purchase (OTP), followed by another 4% cash to exercise the OTP within 14 days. BUC properties, on the other hand, would need at least 5% of the purchase price — in cash — for the OTP. Should you choose not to exercise the option, 25% of this upfront payment will be forfeited.
Unlike resale private properties, buyers of a BUC unit are not allowed to transfer the right to someone else. You will have to seek the developer’s approval if you wish to change, or add more names to the property title.
3. Sale and Purchase (S&P) Agreement
Within 14 days from the date of option, the developer will deliver the S&P to you or your lawyer. However, it is recommended to opt for it to be sent to yourself. As the law firm has to be on the panel of the bank that you are applying the loan from, this will help you to save cost and protect your own interest.
4. Payment of Stamp Duty
Stamp duty is payable within 2 weeks after exercising the option. Instead of strictly having to make the payment of stamp duty in cash, as in the case of resale private properties, it is possible for buyers of a BUC unit to pay stamp duty directly from CPF account.
5. Order of Disbursement
A BUC loan follows the progressive payments scheme, in which a certain percentage of the loan is disbursed at different stages of the property construction. As with all loans, the total purchase price also has to be paid first by a certain percentage of cash, followed by CPF, and lastly bank loan.
Note that repayment of the loan and its interest rate will only commence upon the 1st disbursement.
6. Lock-in Period
Typically, a BUC loan comes with no lock-in period. This also implies that borrowers will have the flexibility to pay down, in partial or full, on their outstanding loan.
7. Cancellation Fees
In general, cancellation fees range from 0.75-1.5% for all types of properties. For a BUC unit, a cancellation fee will be charged if there is any undisbursed amount.
Upon the issue of the Temporary Occupation Permit (TOP), 25% of the purchase price will be disbursed by the bank. After which, the last 15% will be paid out in the following order: 2%, 8% and then 5% if the title is issued before Certificate of Statutory Completion (CSC), or 8%, 5% and then 2% if the CSC is issued before title.
8. Free Conversion
Buyers get to enjoy free conversion, which means they would be allowed to swap loan packages without incurring additional charge. This can either be at any point of time during loan disbursement, or some banks may restrict it to 3 months after obtaining the Temporary Occupation Permit (TOP).