Ravi Chandran
If you are taking a private BUC loan, do you know what your financial liabilities are?
A Building-Under-Construction (BUC) unit is a unit that is in the course of being constructed. This means that you’ll have to wait for the property to be fully built before you can truly call the place your home. New condos – whether launched recently or a few years ago – are considered buildings under construction (BUC), which are by definition, projects that have not yet been completed or not yet obtained their TOP (Temporary Occupation Permit).
So, when you take a Private BUC Loan and opt for Progressive Payment Scheme, you make instalment payments in tandem with the construction progress.
Private BUC Loan refers to the payment by instalments, typically 5 – 10 per cent. When the construction works reach a specific milestone, the developer will call for the payment from the new launch condo buyers.
So if you want to purchase a private BUC, this 10-step guide will help you towards making the building that is being constructed your home – eventually.
1. Get you Approval-In-Principle (AIP)
An AIP is also known as In-Principle Approval (IPA) or pre-approval. An AIP for home loans, or mortgage prequalification, are conditional approval. AIP can be sought for loans of private residential properties or HDB flats. Such loans are known as pre-approved loans. The time between submitting an application for an AIP and knowing the outcome can be as fast as 15 to 60 minutes. The validity period of the AIP varies between 14 to 30 days. During this period, financial documents have to be submitted to obtain a formal offer. After which, a Letter of Offer will be issued if the loan is approved. If the required documents are not submitted within this period, you can still re-apply for the AIP.
Having an AIP lets you know the loan quantum you are eligible for and the monthly repayment amount.
If you a taking a private BUC loan know that an AIP is non-binding for both the applicant and the financier; therefore you are allowed to change financiers even after obtaining an approval-in-principle loan from the financier. You may even change loan package with the same financier that you have obtained the AIP from.
2. Shop for your house
To understand what is available in the market, you have to visit showflats and surf the internet. Alternatively, you can handpick a good property agent who will be able to guide you in making a choice that suits you best.
Before committing to a purchase, you should do some basic checks on the developer of the housing project and consider the costs involved in purchasing a private residential property.
If you are visiting a showroom, review the information on the housing project and specific unit(s) carefully before committing to a purchase. Developers have to ensure that the plans and models displayed, and show units erected are accurate and in accordance with the approved building plans as required under the Housing Developers (Show Unit) Rules.
3. Get an OTP
You will need to submit an Offer To Purchase to the seller. Commonly known as an OTP, this is a document that contains all the terms and conditions attached to the purchase, setting out the sale agreement between the seller and the buyer of a property. Putting down an option fee indicates an Option To Purchase (OTP). This is usually 1 per cent of the purchase price. The OTP allows the prospective home buyer to reserve the unit exclusively for the buyer for a short period of time (usually 2 weeks). The option fee will be forfeited if the buyer does not exercise the OTP before the end of that period. The developer is required to provide you with a set of mandatory information on the housing project and unit before accepting the booking fee from you. If you decide to proceed with the purchase of the unit after reviewing the information, you will then pay a booking fee for the issue of an Option to Purchase (OTP).
4. Getting the Sales & Purchase Agreement
Before you sign the Sale and Purchase Agreement (S&PA), know that the S&PA is a private contract between the developer and the purchaser for the sale and purchase of a unit. Licensed housing developers are required to use the standard form of S&PA in the sale of the units in a housing project. No amendment to the S&PA can be made except with the prior approvals. You should review the terms in the S&PA before signing it to take up a private BUC loan.
5. Exercise the S&PA
Buyers exercise the OTP if they wish to proceed with the purchase. The Option period is 21 calendar days (including Saturdays, Sundays and Public Holidays), from the date of granting the OTP (refer to Step 2). It expires at 4pm on the 21st calendar day. Usually, the sellers of a property may not back out of an OTP agreement and refuse to sell once the OTP is signed, while the buyers may do so.
6. Paying the Stamp Duty
In Singapore, Buyer’s Stamp Duty (BSD) is payable for both residential and non-residential property. The current BSD rate is up to 3% of the purchase price* for residential properties $1m and below, and up to 4% for residential properties that are more than $1m. BSD for non-residential properties are up to 3%.
ABSD: The Additional Buyer’s Stamp Duty (ABSD) was first introduced in 2011 as part of cooling measures, and is paid together with the BSD. This ABSD, which can range from 5% to as much as 25% of the purchase price*, is based on the profile of the purchaser, i.e. nationality and whether the purchaser already owns residential property in Singapore. Both BSD and ABSD are payable within 14 days of the date of purchase or acquisition of the property, i.e. exercise of the Option to Purchase, signing of the Sale & Purchase Agreement, or the date of transfer.
Current ABSD rates (for purchases after 6 July 2018)
Profile of buyer 1st property 2nd property 3rd and subsequent property
Singapore Citizen (SC)** N/A 12% 15%
Permanent Resident (PR) 5% 15% 15%
Foreigner (FR) 20% 20% 20%
Entity e.g. company** 25% 25% 25%
*Purchase price or valuation, whichever is higher.
**Under Free Trade Agreements, Nationals and Permanent Residents of Iceland, Liechtenstein, Norway or Switzerland and Nationals of the United States of America will be treated as Singapore Citizens for this purpose.
***A property developer will pay a further 5% ABSD upfront, which is not remittable.
Liability and calculation of ABSD
Where there is more than 1 purchaser, ABSD is calculated based on the higher rate applicable, e.g. a PR-FR couple purchasing their first property will be subject to ABSD of 20%.
ABSD is calculated based on the full purchase price, not the proportion property owned, e.g. if you are liable to pay ABSD, it is calculated on the full purchase price even if you only own 1%.
In addition, as long as you own any interest in a residential property, that property will be included in the count of properties owned by you. E.g. If you own just 1% of a property with your siblings and decide to buy another property, ABSD will be payable.
However, there are certain situations where BSD/ABSD may be remitted or is not applicable. Property purchasers should take note of any remissions that are applicable to their situation.
People who want to know more about Stamp duty for your property purchases and what a best BUC loan is, should read up more about them.
7. Loan-to-Value and Minimum Cash Downpayment
One factor that will have the greatest bearing on how much downpayment for a condo you need to pay is the Loan-to-Value (LTV) limit, which is based on the number of outstanding home loans you have. This will also affect your minimum cash downpayment.
| Outstanding Housing Loans | LTV Limit | Minimum Cash Downpayment |
| 0 | 75% or 55%* | 5% (for LTV of 75%); 10% (for LTV of 55%) |
| 1 | 45% or 25% | 25% |
| 2 or more | 35% or 15%* | 25% |
*Take the lower LTV limit only if the loan tenure exceeds 30 years (25 years for HDB flats), or the loan period extends beyond the borrower’s age of 65.
So for instance, if your LTV is 75% (loan tenure is up to 30 years and doesn’t extend past the borrower’s age of 65), this means you need to pay the 25% shortfall in cash and/or CPF Ordinary Account savings. If the condo you are buying is being sold for/valued at $1 million, this means your downpayment due is $250,000.
At least 5% of this 25% shortfall has to be paid in cash to fulfil the minimum cash downpayment. So out of the $250,000 due, you will have to pay at least $50,000 in cold, hard cash.
8. Progressive payments kick-in
Unlike a loan for a completed property which is 100% disbursed at one time, a BUC loan has a progressive disbursement schedule. In other words, a certain percentage of the loan is disbursed at each stage of the property construction. The following example illustrates this.
Example 1
Purchase Price: S$2,000,000
Loan Quantum: S$1,600,000
Table 1: Disbursement Schedule for a BUC Loan
| 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 |
Repayment of the loan commences at the first disbursement. That is in the first month. 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.
Do note that 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.
If you still need clarification on the payment schedule of a BUC loan, you can turn to a professional mortgage consultant who dispenses free advice and reports generated from Singapore’s most advanced loan analysis system.
9. Completion and Key Collection
As a BUC unit is a unit that is in the course of being constructed you will have to wait for the property to be fully built before you can truly call the place your home.
The Certificate of Statutory Completion (CSC) is the permit that’s granted once all of the building requirements have been met. In summary, it means everything about your new home is A-OK. But because it takes quite some time to get the CSC, developers can first apply for a Temporary Occupation Permit (TOP) that’s, well, temporary, as long as the key requirements such as sanitary and safety specifications are met.
Once the TOP has been obtained, you’re all set to collect your keys and move in to your new home. Normally key collection will be carried out in batches over 1 to 3 months after TOP obtained.
10. Inspect your New Home
Buying your property, getting your home loan is only the first part of your home ownership tasks. What happens when home owners collect their keys to their condominiums when it achieves Temporary Occupation Permit (TOP) status? Home owners will conduct new condominium defect inspection before the start of any renovation work. But what do I look for in defect inspection. Buyers should read up and equip themselves on this very important topic as well.
This 10-point kit is like a starter kit to getting the BUC loan. You do not become an expert just by reading this. You need to do a lot more preparation before you take up a private BUC loan. And if you do not have the time for proper preparation, then you should speak to a trust professional who can guide you in the A to Z of procuring the best BUC loans.
