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BUILDING UNDER CONSTRUCTION (BUC) LOANS IN SINGAPORE

New private properties in Singapore are divided into two categories: Building Under Construction (BUC) properties and completed resale (EC and condo) units. BUC properties refer to the projects that have yet to be completed or have not yet obtained their Temporary Occupation Permit (TOP). For individuals looking to purchase properties that are not quite done, applying for a Building Under Construction (BUC) loan may be worth considering.

WHY DO PEOPLE CHOOSE BUCs?

There are a few reasons that may motivate one to choose BUCs over completed resale units, with some of them being:

Better and more modern facilities, features, and designs

  • Early-bird discounts
  • Generally lower maintenance costs
  • Wider choice of units
  • More appealing to renters
  • Offers a “defects-free period” wherein the developer will bear the cost of any issues

CONSIDERATIONS TO NOTE

That said, there are a few considerations to note as well:

  • The developer may delay or even abandon the project if the sales do not meet certain quotas
  • Showrooms may be a poor reflection of the completed unit. You will only be certain of how it looks like once it’s finish
  • Rental income is less predictable since there is no historical data

 

TYPES OF BUC LOANS AVAILABLE

BUC loans typically comes in these forms:
  • Fixed Rate Package
  • Variable (Floating) Rate Package
  • Board rate (bank’s internal reference) – pegged
  • SIBOR-pegged
  • SOR-pegged
  • Combo SIBOR/SOR

Previously, buyers would opt for the interest-only BUC loans as they allow buyers to defer principal repayments till a later date, which significantly lowers the monthly installment. However, this only fuelled property speculation, which then prompted the Government to cancel interest-only loans in September 2009.

The terms of these BUC loans vary depending on the bank loan interest rates and special terms. At DollarBack Mortgage, we will recommend loans with terms that meet your specific needs, as well as negotiate with major banks to ensure that the mortgage package you receive will give you the best value in the long term.

Get in touch with our mortgage specialist to learn more!

FREQUENTLY ASKED QUESTIONS ABOUT BUILDING UNDER CONSTRUCTION (BUC) LOANS IN SINGAPORE

Will I receive the full BUC loan amount once my application is approved?

No, you will not. Unlike a loan for a completed party, a BUC loan has a progressive disbursement schedule, otherwise known as the Progressive Payment Scheme (PPS). This means only a certain amount will be disbursed at each stage of the property construction process. PPS works in this manner: 1. Pay the 5% OTP fee in cash 2. Sign the Sale & Purchase Agreement and pay off the remaining 15% down payment (CPF funds are allowed) 3. Settle any stamp duties (CPF funds are also allowed) Only then will your loan disbursal and monthly repayments begin.

What is the repayment schedule like for a BUC loan?

Repayment of the BUC loan commences at the first disbursement, which will be in the first month. Note that the disbursed ratio is the percentage of the purchase price of your private property rather than the loan quantum itself.

How much CPF will I need to put down as a down payment for my private property?

The amount of CPF savings you can withdraw to pay the initial down payment is dependent on the loan amount that you qualify for. Once you’ve covered a percentage of your purchase price with your loan as well as made payment for the mandatory 5% cash down payment, you may pay the remaining amount with your CPF funds in your Ordinary Account (OA).