All You Need To Know About Deferred Payment Scheme
People across Singapore and the entire world are worried about how to take care of their loved ones, put food on the table and repay their debts as they try to cope with the ‘new normal’. Since many people have found themselves in difficult situations thanks to the impact of the Coronavirus pandemic, any cash flow relief programs available can provide the much-needed financial safety net.
If you are one of those people looking for financial relief in these difficult economic times, programs, like the Deferred Payment Scheme (DPS), come in handy.
If you have been looking for investment properties in recent times, chances are you have come across various condominium developers providing DPS, a widely acclaimed marketing program that was formerly abolished by the Monetary Authority of Singapore (MAS) due to the uncertainties in the economy and the real estate market.
In recent times, developments such as OUE Twin Peaks, the Boutiq@Killiney, the Crest at Prince Charles Crescent, the Interlace, and d’Leedon have all been providing different types of the Deferred Payment Scheme Singapore that is cleverly titled Preferential Payment Plan, Stay-Then-Pay, or Reserve-and-Stay payment schemes, to mention but a few.
What Is Deferred Payment Scheme (DPS)?
The Deferred Payment Scheme refers to a method offered by many property developers to sell unsold units in properties that have received the Certificate of Statutory Completion (CSC) or the Temporary Occupancy Permit (TOP). 
It is a private agreement between the property developers and the potential buyers that enables the buyer to pay only 20% to 30% downpayment and reserve the unit. The remainder is due after two to three years. In the meantime, the buyer can assume possession, move into, or rent out the condo without taking out any home loans.
Keep in mind that only completed projects (i.e. those that have attained their TOP or CSC) are sold under the deferments scheme. In other words, the controller of housing doesn’t manage the project any longer, so the sale is done privately.
Therefore, the buyer can move into the unit immediately and then pay for it later. Once you pay 20 to 20 percent upfront, in addition to the stamp duties payable after exercising the option to purchase, you’re given the keys and you can decide to either move in or rent it out.
You are not required to pay any monthly payments to lenders or bank groups until the agreed deferred period, which is typically 24 to 36 months, lapses. In other words, your interest cost or financing cost is subsidized by the seller or developer. Buyers would not even need to take out a housing loan or pay property tax or monthly maintenance fee during this period.
Condos That Offer Deferred Payment Scheme
OUE Twin Peaks
OUE Twin Peaks offers two payment schemes: the normal DPS and an alternative whereby you pay 20 percent upfront and start paying the rest only one year later. Units offered under the normal DPS normally cost much more, while units offered under the alternative scheme do not have an additional cost.
OUE Twin Peaks is conveniently located along Leonie Road. This 99-year leasehold property is almost near its limit for the QC (Qualifying Certificate), so the developer is doing everything possible to sell the remaining units. Prices average about $2,600 per sq. ft., but are dropping thanks to developer discounts.
This property would be a good fit for prospective property investors or landlords. The availability of an EC deferred payment scheme, along with the fully furnished residential units, implies that you can start collecting rental income almost immediately and save on interest repayments.
Although the rental market is a bit weak at the moment, chances are that it will fully recover before you start making payments one to three years later.
The Boutiq@Killiney is situated along 145 Killiney Road in prime district 9, just a short drive away from Orchard Road. It is actually one of the few deferred payment scheme EC developments in such a convenient location. Its payment scheme is much more sophisticated than others.
Buyers receive their OTP for 1% upfront (booking fee) and then settle the remaining 4% within 2 weeks. The remaining amount is paid as follows:
- 2 months from the date of getting the OTP: 15%
- 18 months after getting the OTP: 30%
- 24 months after getting the OTP: the remaining 50%
Although this payment scheme seems a bit complicated, the general idea is just the same: deferred payments in order to make it much easier to purchase.
Over the last few months, prices have fallen from around $5,555 per sq. ft. to about $2,480 per sq. ft, so it’s clear that the developers want to speed up the sales process. As you can see, there are some great developer discounts to take advantage of and that’s quite rare in a condo in district 9.
The Crest is another popular deferred payment scheme condo in Singapore. This freehold condo at Prince Charles Crescent has a deferred scheme known as the Preferential Payment Plan. Here, buyers pay an initial seven percent of the property price prior to moving in. The next 8 percent is paid the following year while the remaining five percent is paid in the year after that.
As with the Stay Then Pay Scheme, this payment plan is ideal for buyers looking to purchase a second house since it gives them more time to build up their savings via rental returns.
The Interlace And d’Leedon
Both the Interlace and d’Leedon have the same payment schemes since they are both developed by the trusted developer CapitaLand. The majority of the units in both developments are available at a 15 percent discount, no matter whether they are bought under the normal payment scheme or the DPS scheme.
The DPS for the two properties is called Stay Then Pay scheme. Singapore permanent residents and Singaporeans enjoy different payment plans from foreigners.
Any Singapore permanent resident and Singaporean who buys units at any of these two properties pay 10 percent of the purchase price upfront. They are then required to pay the remaining 90 percent a year later. On the other hand, foreigners are required to pay 15 percent of the property price up front and the remaining 85 percent one year later.
The Stay-Then-Pay scheme can be a good choice for individuals looking to buy a second property. This can give them time to build up their savings so as to pay the remaining balance. Buyers can spend this time managing their assets, including selling any existing houses and managing any outstanding loan.
This new launch condo development is located a short distance from both the Dhoby Ghat MRT station and Somerset MRT Station.
Its DPS is very common in other countries and different amounts are paid at each stage. The potential buyer is required to pay a down payment of 10% of the purchase price as rent, along with a 2.5% security deposit. Thereafter, the buyer can move in as soon as the property is complete. The monthly rent amount is $6,750 for a one-bedroom unit.
After two years, the security deposit is refunded and the rental amount is channeled towards paying for the property. If you opt not to purchase, you are refunded the despot only. This is known as the Experiential Leasing Scheme.
4 Benefits Of Deferring Mortgage Payments
Although some individuals may not consider deferring mortgage loan repayments if they are not facing financial difficulties, there are certain benefits of deferring your home loan repayment even if you are able to continue paying.
1. Lowering Initial Cash Outlay
Deferred payment schemes allow you to buy a second property with just a small down payment, greatly reducing your initial cash outlay. With staggered payment schemes, you are putting down just 20% of the purchase price in the beginning. Under the traditional payment methods, you are required to pay at least 25% upfront.
In the typical property market, for example, the 5% difference can easily translate to anywhere between $50,000 and $60,000. That’s not a small change, especially in these COVID-19 times when many people are struggling financially.
2. Accumulating Emergency Savings
The Coronavirus global pandemic has had far-reaching ramifications, both in Singapore and across the world. While we toil every day for our families, many people don’t have emergency savings if we were to lose our jobs or face a reduction in our monthly incomes, even if it is just for a short period of time.
Accumulating emergency savings is important during such times. By deferring your mortgage repayment for some time, you can get some money that you can put aside for a rainy day.
3. Upgrading Homes With Outstanding Loans
DPS schemes are also beneficial since you could invest your cash elsewhere and enjoy a good return. For instance, you could upgrade existing properties with an outstanding loan and even lease the units out even when you are not paying off the loan.
4. Allowing Buffer Time For Property Investment
The saying ‘cash is king’ is most accurate in a global crisis. Having cash gives you the freedom and flexibility you need to respond to rapid changes. If you’re considering taking a break from your mortgage repayment schedule, there’s no better way than taking advantage of the available DPS programs.
Now is a great time to have some buffer in your repayments. Deferring mortgage repayment will allow some buffer time for property investment and give you time to get your assets up and running again.
Despite any demerits, the DPS will be with us for a long time to come due to its flexibility and freedom when the condominiums are offered at reasonable prices. Potential buyers should do their research and find out if they are getting a good deal compared to a traditional payment schedule.
Most new launches have reduced discounts because of this scheme, and it’s important to exercise due diligence and compare the DPS with regular schemes before making the final decision. If the discounts make sense, it would be a good idea to go with the DPS instead of a normal payment.
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