Loan deals and payment schemes in Singapore are always helpful for buyers struggling to complete their purchase. In this article, learn about a payment scheme that has been proven valuable to thousands of individuals in the past – the so-called Deferred Payment Scheme (DPS). This pay scheme is meant for people who only have enough money for a down payment but would want to buy some time to save up for the payment of the remaining cost. It is popular in the real estate industry, where people would need to shell out a large amount of money to afford a property.
Understanding the Deferred Payment Scheme
In order to understand DPS, you must first understand the progressive payment scheme (also known as normal payment scheme), which is a popular type of payment when it comes to big purchases. Here, buyers need to pay a certain amount every time a specific milestone is achieved or attained. Property developers would ask buyers to give payment until the project is complete.
The good thing about this option to purchase is that you do not need to pay fully until you can move into the unit or property. Another good thing about this is that if the developer fails to reach the target deadline, buyers only need to pay what was indicated in the purchase agreement. The buyers do not need to worry about the loan payments going up.
On the other hand, a deferred payment scheme (DPS) refers to the payment arrangement where the buyer only has to give a certain percentage (usually 20 percent) as a down payment. After paying this initial fee, the next payment is deferred. The next payment maybe months later or even two years or more, depending on the agreement with the developer. Many calls DPS a buy now, worry later scheme because people could just pay the downpayment now and then have time to save up for the next round of payments.
Aside from appealing to Singaporeans who do not have a lot of cash, landlords, and property, investors favor this scheme. They can make a profit when they rent out the unit while the fee is deferred. If they are given three years, for example, to defer their fee, they can make the most out of the property.
This option is also favored by those with outstanding home loans. The loan-to-value ratio (LTV) limit set by the Monetary Authority of Singapore for an outstanding home loan is only about 25% to 45%. The owners still have to pay a big chunk in cash, and they also have to pay for an additional buyer’s stamp duty (ABSD). Given all these necessary fees, buyers would prefer to prefer DPS.
Advantages and Disadvantages of Taking a DPS
It is important to realize that taking a deferred payment scheme is not really for everyone. Before choosing the DPS option, you also have to be familiar with the advantages and disadvantages of this scheme. Weigh on which of these factors are more relevant and significant to you. Then, decide if the disadvantages of DPS actually outweigh its advantages.
Advantages
- With DPS, you can own a property with very limited cash flow or cash outlay.
- You are not required to pay for stamp duties, property taxes, maintenance fees, and other charges during the deferred period.
- You do not need to worry about the interest rates or an interest cost because you do not need to apply for a housing loan during the deferred period.
- You get the option of home upgrades. If you get a deferred payment scheme, you can move into a new house early, and you have enough time to sell your other property to qualify for a full loan.
- Earn rental income. You can find properties or projects that offer guaranteed rental for years. This means that you can make money by purchasing properties through DPS.
Disadvantages
- The deferred payment scheme would increase the price of the property by around 5% to 10%. This is totally understandable as developers have to be compensated for the delay of payment.
- Your Loan to Value (LTV) can be lower. The loan you get from lenders is based on the adjusted purchase price. Here, they would deduct the rebates, benefits, and discounts.
- If you are a first-time buyer, a normal payment scheme could grant you a bigger loan amount than taking a deferred payment scheme. For people who do not have a lot of money, this is bad news.
Example of a 12 Months DPS Schedule
If you choose to take a DPS, you have the option to take 12 or 24 months. Here is an example of 12 months DPS schedule. Remember that property developers have their own schedule they follow. It is best that you inquire about their terms, deals, and promos.
| Stages | Timeframe | Percent of Purchase Price |
| 1. Granting of Option to Purchase (OTP) or Booking fee | Start date | 5% |
| 2. Signing of Sale & Purchase Agreement (S&P) | 8 weeks from OTP | 15% |
| 3. Completion of the Property Foundation | 6 months | – |
| 4. Completion of the Property Superstructure | 6 months | – |
| 5. Completion of Brick Walls of the Property | 3 months | – |
| 6. Completion of the Property Roofing or Ceiling | 3 months | – |
| 7. Completion of the Property Wiring and Plumbing | 3 months | – |
| 8. Completion of the Property Car Park, Roads, and Drains | 3 months | – |
| 9. Notice of Vacant Possession | Temporary Occupation Permit (TOP) | 65% |
| 10. Legal Date of Completion | Certificate of Statutory Completion | 15% |
Some Major Condos in Singapore Offering DPS
If you believe that DPS is the best choice for you, know that some major condos and real estate properties in Singapore offer this payment scheme. Choose which among property and location is preferable to your background and situation. Aside from the properties mentioned here, you can also Google units made or created recently, so you have a wider option of properties to choose from.
OUE Twin Peaks is probably of the most popular condos in Singapore. It is a 99-year leasehold development located along Leonie Road. To buy a unit here, aspiring home owners just have to pay a 20% down payment. Buy the unit as soon as you can as the company is nearing to sell all of the units in its condo.
This property is popular for having great amenities, and being located in a prime Singapore spot offers deferred payment schemes. Its developer, Keppel Land, has made many of the units of their condo available for buyers who cannot afford the normal option to purchase. It is located at Keppel Bay View.
Capitaland, the developer of these two properties, offers a ‘stay then pay’ scheme. You just have to pay the 10% down payment and then pay the remaining 90% of the property price after a year. This condo is located along Depot Road in District 4 in Singapore. Home buyers who have children or planning to have children prefer this location because of its proximity to good schools.
This one is located at 65 Lloyd Road, Singapore which is close to Somerset and Dhoby Gaut MRT Stations. Units of this condo are preferred by many because of its good location on Orchard. Under the DPS option, you just have to pay 10% of the purchase price as a downpayment and 2.5% of the security deposit. After two years, if you decide to buy a unit, you will be refunded for the security deposit.
For deferred payment schemes, a buyer has to pay 15% of the purchase price two months from the OTP date. After 18 months of the OTP, you will then pay 30%. And, after 24 months of the OTP date, you have to pay the remaining 50%. Note that the prices of the units in this condo has gone down through the years. If you plan to be a buyer of their units, be sure to ask for deals and discounts.
Conclusion
Surely, the deferred payment scheme is beneficial for certain types of buyers. Those who do not have enough cash or those considering making money in real estate though being a landlord would find DPS the better choice over a normal payment scheme. This does not mean, though, that DPS does not have a downside. For some buyers, the added cost or the property is too heavy to bear.
All of these indicate that DPS is not for all. You have to make sure that your financial capability best suits this option. To make the right decision, you can consult individuals or families who have taken the same payment option in the past. Also, read online articles and other resources explaining how DPS is different from others. It is important that you know all the details about DPS before trying to get one.
Also, remember that developers have their own processes, terms, and deals. Identify condos that you believe are right for you and your loved ones. Talk to their representatives to know the latest news and updates. Inform them regarding your plan to take DPS and ask if they have good deals meant for you as a possible buyer.
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