Can I Borrow For The 20% Downpayment For Property Purchase?

By PAUL HO

You can borrow money from your friends and relatives. However a bank is not allowed to disburse money or any credit facility for the purchase of residential property (i.e. the 60% or 80%, whatever the Loan-to-value requirements is) if you cannot pay for the cash portion of the downpayment from your own source of funds.

Put in another way, if you qualify for a 80% loan, you have to fund the remaining 20% (minimum 5% cash and 15% CPF) of the purchase price yourself.

A bank is prohibited from disbursing or lending you the 80% if they are aware that you have borrowed from any financial institution (regulated by the authority or moneylender or any vendor’s loan) the required 20%.

All these is defined under MAS Notice 632 – 28 June 2013

“Purchaser’s Contribution
5. A bank shall not disburse funds under any credit facility for the purchase of Residential Property until the Borrower has paid, out of funds not obtained through any credit facility granted by any financial institution regulated by the Authority or moneylender, or any Vendor’s Loan, at least the difference between:
1. (a) the purchase price of the Residential Property; and
2. (b) the Relevant Amount,
which difference shall include a minimum cash payment of Cash% as referred to in paragraph 17(n).”
(Source: MAS Notice 632 – 28 June 2013)

However, corporations are not bounded by this rule, in other words, some corporations can lend you the downpayment. But then they will be contravening another act as they are not licensed money lenders or financial institutions, they cannot lend out monies.

So, strictly based on this definition, the only way to get a loan to bridge this downpayment is to tap on informal lenders – parents, relatives, friends.

So what is your only recourse?

It is possible that staff loans do not fall under this category of “financial institutions” and they are not lending to the public at large, and hence do not need a license if they lend to their staff.

But how many corporations are so generous to lend to their staff the 20% downpayment?

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