Deferred payment scheme condos in 2021. Is Normanton Park one of them?
A property purchase, especially one that is private, can be a significant commitment and long-term. While buying a condo might make you envy others, the truth is that even the down payment can cost a lot. Property developers resort to a well-known trick called the Deferred Payment Scheme (DPS) in order to attract buyers and boost sales.
This article will explain the DPS and show you which condos offer it.
What is the Deferred Payment Scheme?
If property developers purchase land for new housing developments, they must ensure that all units are built and sold within five years to qualify for an upfront exemption of Additional Buyers stamp duty (ABSD). This is 30% of the land’s price. In order to avoid paying the 25% ABSD plus interest, developers must do so. The government will still have to pay 5%.
This basically requires them complete all units and sell them within five years or face a 24% penalty.
Developers are conscious of the potential penalties and want to increase sales. DPS allows buyers to pay a 20% down payment and then the balance is paid usually 2 to 3 years later.
Also, you can buy now and then worry later.
This sounds great, especially for landlords who can buy the unit first and then rent it out to earn rental income for years before the developer knocks on their door.
Upgraders with outstanding home loan debts can also benefit from the DPS. The current limit on the loan-to-value ratio for one home loan in Singapore is between 25 and 45 percent, according to Singapore’s Monetary of Authority. The minimum 25% must be paid in cash. The remaining 30% can either be paid in cash (or CPF) or cash. If the property is not sold within six months, upgraders will need to pay ABSD.
The DPS allows for a lower downpayment and a longer deferment period. This allows the upgraders to be able to move into their new home and sell their current home. They can also pay off any remaining home loans and avoid ABSD. Finally, they can get a new LTV.
But here’s the catch.
Developers will often mark up the price of a condo. If the condo’s sale price is $1,000,000, then the DPS will increase the condo’s value to $1.2 Million.
Buyers only need to pay 20% downpayment (5% option fees + 10% sale and purchase agreements)This is still attractive as the LTV limit may change over the next few years. They don’t have any interest payments for this time (provided they don’t take out a loan to pay the down payment).
Uncompleted units are exempt from DPS since October 2007 due to their contribution to rising property prices. DPS can only be granted to units that have been completed with a Certificate of Statutory Completion.
Unfortunately, Normanton Park does not offer deferred payment scheme. It does offer progressive payment scheme which does help buyers with cashflow. You may refer to to Normanton Park Price for more info on the latest promotions.
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