Navigating the purchase of an Executive Condominium (EC) in Singapore involves understanding the different payment schemes available. This guide explores the deferred payment scheme for ECs — also known as DPS — and compares it with the normal payment scheme.
We'll delve into their mechanics, benefits and drawbacks, empowering you to make informed decisions when choosing the EC payment scheme that best suits your financial situation. Read on to discover which option better aligns with your homeownership goals!
2 Types of Payment Schemes for New Executive Condo Buyers
The two types of payment schemes for new EC buyers are:
The Normal Payment Scheme / Progressive Payment Scheme
This is the standard payment scheme, also known as the Progressive Payment Scheme (PPS). You pay for the property in stages, typically with a 20% down payment followed by progressive payments as construction progresses, with each payment aligned with specific milestones. If you'd like to learn more about the PPS, click here to read our latest blog post.
The Deferred Payment Scheme
The Deferred Payment Scheme (DPS) is a special payment arrangement for buying new launch ECs in Singapore. It allows you to defer a large portion of the purchase price until the project is completed. This means you can secure the purchase of your new EC first, and settle the financial matters related to your existing property (if any) during the deferred period.
How the EC Deferred Payment Scheme Works
The schedule for the Deferred Payment Scheme for Executive Condominiums offers a unique payment structure that can be particularly appealing to certain buyers. Here's a breakdown of how it works:
- Initial Payments: Similar to the Normal Payment Scheme (NPS), you'll typically make an initial down payment of 20% of the purchase price. This is usually paid in stages: 5% upon booking the unit and 15% upon signing the Sales and Purchase Agreement.
- Deferred Payment: The remaining 80% of the purchase price, which includes the loan amount and accrued interest, is deferred until the project obtains its Temporary Occupation Permit (TOP) and Certificate of Statutory Completion (CSC). This means you don't have to start making significant payments until the EC is ready to move into.
- Loan Disbursement: Once these are issued, the bank disburses the loan to the developer, and you'll start making your regular mortgage repayments.
This staggered payment structure can significantly improve your cash flow, especially if you're currently servicing another mortgage or have other financial commitments. However, it's important to consider the potential for higher interest costs due to the deferred payment.
Stages of Payment for Deferred Payment Scheme vs. Normal Payment Scheme
| Stage | Deferred Payment Scheme | Normal Payment Scheme |
|---|---|---|
| Booking Fee | 5% of purchase price (Cash) | 5% of purchase price (Cash) |
| Downpayment | 15% of purchase price (Cash or CPF) within 8 weeks of booking | 15% of purchase price (Cash or CPF) within 8 weeks of booking |
| Construction Stages | No payments during construction | Progressive payments, typically in installments of 5-10% at various milestones (e.g., foundation, superstructure, etc.) |
| TOP/CSC | Remaining 80% (including loan amount and accrued interest) upon TOP and CSC | Remaining 40% payment |
| Monthly Mortgage Repayments | Start after TOP/CSC, based on the full loan amount and accrued interest | Start after the initial downpayment, with the repayment amount gradually increasing as more of the loan is disbursed during the construction stages |
Comparing The Different Stages of the Deferred Payment Scheme Vs. Normal Scheme with Real Examples
To better understand the financial implications of each payment scheme, let's consider the example of two individuals purchasing an EC priced at $1,000,000:
| Stage | Buyer A (DPS) | Buyer B (NPS) |
|---|---|---|
| Booking Fee | $50,000 (5% of $1,000,000) | $50,000 (5% of $1,000,000) |
| Downpayment | $150,000 (15% of $1,000,000) | $150,000 (15% of $1,000,000) |
| Construction Stage Payments | No payments | Progressive payments totaling $800,000, typically in installments of 5-10% at various milestones (e.g., foundation, superstructure, etc.) |
| TOP/CSC Payment | $800,000 (remaining 80%) + accrued interest | No further payments |
| Monthly Mortgage Repayments | Start after TOP/CSC, with monthly installments based on the full loan amount and accrued interest (e.g., around $4,200 for a 25-year loan at 3% interest) | Start after the initial downpayment, with installments gradually increasing as the loan is disbursed (e.g., starting around $1,800 and reaching around $4,200 by TOP/CSC for a 25-year loan at 3% interest) |
Note: This table is based on an illustrative example of a $1,000,000 Executive Condominium (EC) with an 80% loan amount ($800,000), an interest rate of 3%, and a loan tenure of 25 years. The actual payment amounts and monthly installments may vary depending on the specific EC project, loan package and prevailing interest rates.
Pros and Cons of the Deferred Payment Scheme
The Deferred Payment Scheme for ECs offers a unique set of advantages and disadvantages compared to the Normal Payment Scheme. Understanding these pros and cons is crucial for making an informed decision.
Pros
- Improved Cash Flow: The Deferred Payment Scheme allows you to defer a significant portion of the purchase price until the project is completed, freeing up your finances during the construction phase. This can be particularly beneficial if you're currently servicing another mortgage or have other financial commitments.
- More Time to Save: The Deferred Payment Scheme provides you with more time to accumulate funds for the final payment, allowing you to better prepare for the financial obligations of homeownership.
- Potential for Capital Appreciation: If the property value increases during the construction period, you could benefit from capital appreciation by the time you make the final payment.
Cons
- Higher Purchase Price: Developers typically charge a premium for units offered under the Deferred Payment Scheme, which can increase your overall cost.
- Limited Unit Selection: The Deferred Payment Scheme is often offered for a limited number of units within a development, reducing your choices.
- Potential for Higher Interest Costs: Interest accrues on the deferred payment, which can lead to higher overall costs compared to the Normal Payment Scheme.
Payment Scheme for Resale ECs in Singapore
Since resale ECs are considered private properties, the payment scheme is similar to that of buying a resale condominium. This means you'll need to secure a bank loan for financing. Here's a quick overview:
- Down Payment: You'll typically need to make a down payment of 25% of the purchase price. At least 5% of this must be paid in cash, while the remaining 20% can be paid using your CPF Ordinary Account (OA) savings.
- Bank Loan: The remaining 75% of the purchase price can be financed through a bank loan.
- Monthly Repayments: You'll start making monthly mortgage repayments to the bank once the loan is disbursed.
It's important to compare different bank loan packages and choose one that suits your financial needs and goals. You can also use a mortgage calculator in Singapore to estimate your monthly repayments and overall costs.
What Payment Scheme Should I Use for My EC?
Choosing the right payment scheme for your EC purchase depends on your individual circumstances and financial goals. Here's a quick guide to help you decide:
Consider the Progressive Payment Scheme If:
- You're comfortable with a longer payment timeline and want to spread out your financial commitment.
- You prefer lower initial payments to manage your cash flow more effectively.
- You're willing to accept the potential risks of construction delays and interest rate fluctuations.
Consider the Deferred Payment Scheme If:
- You need to significantly reduce your upfront costs and defer the bulk of the payment until the project is completed.
- You're comfortable with potentially higher overall costs due to accrued interest on the deferred payment.
- You're willing to accept a potentially higher purchase price and limited unit selection.
Need help deciding? Contact our mortgage specialists in Singapore at Mortgage Master today for a consultation! We can help you navigate the complexities of EC financing and choose the best payment scheme for your needs.
