You will be able to explain how payments are spread out for BTO flats and new private launches.
Hakim's sister Aisyah bought her condo from a developer, three years before it was finished. For the first year she barely noticed the loan. The instalments were a few hundred dollars a month. Then letters started arriving from her lawyer, each announcing that another stage of construction was complete and another part of the price was due, and the instalment crept up with every one. By the time the building was finished, she was paying the full amount.
A home that isn't built yet is paid for differently from one that is. This lesson covers the two common cases: a BTO flat from HDB, and a new launch from a private developer.
A BTO purchase has a long gap between booking and moving in, and the payments are bunched at the two ends.
At booking, you pay an option fee in cash to secure the unit. Some months later, you sign the Agreement for Lease with HDB, and at that point you pay part of the downpayment, from CPF, cash or both, depending on your loan. Stamp duty is due around the same time.
Then comes the wait, often years, while the flat is built. Nothing much is paid during it.
At key collection, you pay the rest of the downpayment, your loan is drawn, and the instalments begin. Legal fees and the fire insurance and Home Protection Scheme cover required for your loan fall due around then too.
HDB sets how the downpayment is split between signing and key collection, and the split depends on your loan type and on any staggered payment option HDB offers. The current details are on the HDB website. Big goals: wedding, home, car and kids, lesson 4.4, Build your downpayment plan, works through a BTO payment plan from the savings side, including checking that your CPF balance will be there at each date.
Because the dates are years apart, the risk with a BTO is a change in your life between them. A job loss or a drop in income before key collection can affect the loan you get when it is finally drawn.
A condo or EC bought from a developer before completion is paid under a progressive payment scheme. Instead of paying the price all at once, you pay it in stages, each one triggered when the developer reaches a construction milestone.
It starts with a booking fee when the developer grants you the option, paid in cash. You then sign the sale and purchase agreement and pay the rest of the downpayment, in cash and CPF, within a set period. After that, the remaining stages follow the building: the foundation, the structural framework, the walls, the ceiling, the doors, windows, wiring and plumbing, the roads and car parks, the temporary occupation permit, and finally the certificate of statutory completion. Each stage has a percentage of the price attached, set out in your sale and purchase agreement, which follows a standard schedule.
Once the downpayment is paid, the loan covers the stages that follow. When each stage is reached, the bank pays that portion to the developer, and the amount you have borrowed goes up.
Under progressive payments, you pay interest only on the part of the loan that has been drawn. Your instalment is worked out on that drawn amount alone.
Take an example new launch with an S$840,000 loan, at an invented 3% over 25 years. Once the whole loan is drawn, the instalment would be about S$3,983 a month. But if only S$200,000 has been drawn at some point during construction, the instalment is calculated on that amount, about S$948 a month. Each new stage raises it.
That is what Aisyah felt. The low early instalments are real savings, but they don't last, and the full instalment arrives with the keys, often alongside renovation, furniture and moving costs. Budget for the full figure from the start, and treat the lower early payments as a chance to build cash for that moment.
The same logic applies to the lock-in on a loan for an uncompleted property. Banks often structure it around the construction period, so read when it starts.
With a new launch or a BTO, the contract fixes the payment schedule and you follow it. The developer or HDB sends the notice when a stage is reached, and you have a set time to pay. If CPF is going to pay a stage, the balance has to be there. If cash is needed, it has to be in your account.
So before you sign, list every stage, its approximate date, its amount and its source. For a BTO flat, HDB's estimated completion date gives the key collection date. For a new launch, the developer gives an expected completion date, and the construction stages fall in between.
Farah and Hakim did this for the BTO option they had considered in module 1, even though they chose the resale flat. Seeing the cash needed at key collection, four years out, made the resale choice easier to explain to Farah's parents. In the activity below, write the payment stages for a BTO flat and a new launch, and the cash or CPF source you would use for each.
Write the payment stages for a BTO and a new launch and the cash or CPF source you would use for each.
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