Introduction
We will skip the usual cliche writer type intro and get straight to the point.
You are looking to purchase a new launch and you are looking for answers, specifically pertaining to how to finance the purchase through a progressive payment scheme.
The questions that you potentially have in mind ?
- How much down payment do I need when buying a new launch condo ?
- The different timeline in which I need to account for the down payment ?
- How will the remaining payment be disbursed via loan and what will my monthly mortgage look like ?
What is a progressive payment scheme ?
The progressive payment scheme is the payment scheme utilised to fund the purchase of a property that has yet to be constructed.
This comprises all new launch condo developments and new executive condo projects marketed by developers before its construction.
The progressive payment scheme is characterised by the partial percentage payment in accordance to targeted construction milestones to be accomplished by developers.
After accounting for the initial 20% down payment, the remaining 80% payment will be disbursed in accordance to stages of construction.
It is the opposite to the normal payment scheme that is commonly adopted for resale condo, HDB and other property that have been fully constructed.
As a side note, we have written a dedicated article on “How much do you need to invest in a new launch condo ?” , reckon it could relevant if you are in-market for a new launch condo.
Quick intro – Decoupling Expertise
Quick introduction, before you decide to commit the next 5 mins reading this article.
We are decoupling expertise, a team of specialist realtors that specialise in helping Singapore property owners derive the best strategy to purchase their second investment property without ABSD.
Aside from decoupling property, we specialise in property research. Helping client that values owning high capital return property, shortlist and identify worthy condo developments to look into
Drop us a text if you like to shortlist prospective properties or confirm your thoughts on a current property
Overview of new condo payment schedule
Stages to take note of
Down payment phase – Stage 1 to 5
This is the phase whereby you will have to tackle the downpayment by having the required cash and cpf on hand and not forgetting to account for transactional costs like BSD, ABSD and legal fee.
Foundation work completion phase – Stage 5
Specifically highlighting stage 5, this is the phase in which foundation work has been completed. What is unique about this phase is that, the 10% payment required during this phase, is to be drawn from 2 fund sources.
- 5% from Cash or CPF
- 5% from bank loan
Construction phase – Stage 6 to 10
This is the phase in which the majority of the loan is being disbursed, what you need to be mindful of is the monthly loan repayment amount.
Typically, the loan repayment remains very light or minimal in the first 2 years and starts to intensify in the 3rd and 4th year.
If you plan to fund your mortgage monthly by CPF you will need to account for the amount of CPF you will need monthly and the amount of CPF savings you have in your OA account.
Changes to your monthly CPF usage amount will also need to be made at each phase to cater for the mortgage requirement at each phase.
TOP to CSC phase – Stage 11 to 12
At stage 11, this is when your property has been fully constructed, you will be able to rent it out or live in it.
If you are renting it out, you will be looking at how much net cash you are generating from the property less mortgage payment.
The remaining 15% will only be disbursed at stage 12 when the property achieves its CSC.
| Key Payment Milestones | Timeline | % Payment | Source of Fund | Stage |
| Booking & Obtaining Option To Purchase | Day 1 | 5% | Cash | 1 |
| Buyer to engage a solicitor (~ $3000)Buyer to select the Mortgage Loan (Stamp fee ~$500) | ASAP | NA | Cash or CPF OA | 2 |
| Buyer’s Stamp Duty, Additional Buyer’s Stamp Duty | Within two weeks upon signing S&P | Subjected to property purchase price | Cash or CPF OA | 3 |
| Downpayment | Within eight weeks from Date of Option | 15% | Cash or CPF OA | 4 |
| Completion of Foundation Work | 6 – 9 months from launch | 10% 1 part – accounting for remaining 5% of 25% down payment yet to be paid – 5% via Cash or CPF 2 part – 5% to be funded by bank loan | 5% – Cash or CPF OA5% – Bank Loan | 5 |
| Completion of Reinforced Concrete | 6 – 9 months later | 10% | Bank Loan | 6 |
| Completion of Brick Wall | 3 – 6 months later | 5% | Bank Loan | 7 |
| Completion of Ceiling / Roofing | 3 – 6 months later | 5% | Bank Loan | 8 |
| Completion of Doors & Windows Frames are in position, the Electrical Wiring & Plumbing & Internal Plastering | 3 – 6 months later | 5% | Bank Loan | 9 |
| Completion of Car Park, Roads and Drains | 3 – 6 months later | 5% | Bank Loan | 10 |
| Obtaining Temporary Occupation Permit (TOP) | TOP Date | 25% | Bank Loan | 11 |
| Upon Production of the Certificate of Statutory Completion (CSC) | 10 – 15 months from TOP | 15% | Bank Loan | 12 |
How much cash or CPF is required for the downpayment for a new launch condo ?
Breaking out the new launch condo payment schedule into different phases. We will specifically focus on tackling the down payment required to purchase a new launch in this section.
We will simulate the entire payment process by using the purchase of a new launch condo at different price points.
Booking Fee, 5% to secure OTP – Day 1
As the first preparation step before participating in the ballot for a new launch condo. You will need to have at least 5% of the budgeted purchase value of the property ready in your bank account.
You will then need to prepare a cheque consisting of the 5% value and be ready to hand that over to the developer, if you successfully secure the unit that you shortlisted.
With the submission of the 5% down payment you will secure the option to purchase to be issued by the developer.
Booking fee cannot be paid by CPF
Note the 5% booking fee can only be paid via cash and CPF cannot be used.
25% Booking to be forfeited if OTP not exercised
At this point, it is important to note that once you have submitted the 5% cheque to the developer. You will be liable to forfeit 25% of the booking fee if you do not exercise the OTP within its validity period.
Engaging conveyancing lawyer and securing mortgage – after receiving OTP
After the OTP have been secured, you can start firming up the conveyancing lawyer to represent you in conveyancing the purchase transaction.
Legal fee will typically amount to $3,000. Legal fee can be funded by either cash or CPF from your OA account. At the same time you would want to secure the official letter of offer for your mortgage from your banker.
Receiving S&P from developer – within 14 days from date of OTP
Within 14 days of securing the OTP, the developer will send you the sale and purchase agreement.
OTP validity period
The OTP will expire within 3 weeks from the date of receiving the S&P document. Given that you do not exercise the OTP you will have to forfeit 25% of the 5% booking fee.
Pay Stamp duties – within 2 weeks upon signing S&P
Within 2 weeks from signing the S&P document, you will be required to pay the necessary buyer stamp duty and additional buyer stamp duty.
Similarly stamp duties can be funded by either cash or CPF from OA account
Pay remaining 15% down payment – within 8 weeks from date of OTP
Within 8 weeks from the date of securing the OTP, you will have to pay the remaining 15% down payment.
The amount can be funded by either cash or CPF from OA account
Pay 5% via Cash or CPF upon completion of foundation work – 6 to 9 months from launch
It is debatable whether this portion should be categorised within the downpayment phase. It is only required during the stage where by foundation work has been completed, 6 to 9 months from launch.
But for the sake of accounting for the total cash or CPF that you will need to set aside for the new condo purchase. We will cluster it under the down payment requirement phase.
So, 6 to 9 months from launch date, when the foundation work for the development has been completed.
You will be required to pay 10% of the purchase price to the developer.
This 10% payment is split into 2 portions based on fund source.
- The first part being 5% to be funded by cash or CPF that you have set aside as down payment required.
- The second part being another 5% to be funded by the 1st disbursement of bank loan.
Summary of the down payment required for buying a new launch condo
To provide richer context, we simulated the down payment required for purchasing a new launch condo at different price points.
Note, simulated down payment amount only takes into consideration buyer stamp duty payable and does not account for any additional buyer stamp duty.
| Milestone – Downpayment Phase | Time line | % Payment | Fund Source | 1.5 mil | 2.0 mil | 2.5 mil | 3.0 mil |
| Booking Fee to secure OTP | Day 1 – balloting day | 5% | Cash only | 75,000 | 100,000 | 125,000 | 150,000 |
| Securing lawyer and mortgage | Day 2 – right after securing OTP | ~ $3,000 | Cash or CPF | 3,000 | 3,000 | 3,000 | 3,000 |
| Receive S&P Document | Within 14 days from OTP | Not Applicable | Not Applicable | NA | NA | NA | NA |
| Pay stamp duties (BSD and ABSD) | Within 2 weeks from signing S&P | Prevailing tax rate on purchase price of property | Cash or CPF | 44,600 | 69,600 | 94,600 | 119,600 |
| Pay remaining 15% downpayment | Within 8 weeks from date of OTP | 15% | Cash or CPF | 225,000 | 300,000 | 375,000 | 450,000 |
| Pay 5% for completion of foundation work | 6 to 9 months from launch date | 5% | Cash or CPF | 75,000 | 100,000 | 125,000 | 150,000 |
| Total Cash and CPF Requirement | 422,600 | 572,600 | 722,600 | 872,600 |
Need help working on the financial calculations ?
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Funding sequence for downpayment of a new launch condo
This is a point that is rarely mentioned when it comes to using cash and cpf to pay for the downpayment for a new launch condo.
Assuming you were to use a combination of cash and cpf to fund the down payment.
There is a sequence in which funds are utilised, all cash needs to be fully utilised first before touching on CPF as a fund source.
Example
You are looking to fund a $1.5 mil new launch condo, with a downpayment, stamp duty and legal fee requirement of $422,600.
And you have got $300,000 in cash and $122,600 in CPF.
You will need to fully utilise the $300,000 in cash first, followed by the usage of CPF.
How much mortgage will I be paying during the progressive payment phase ?
Having tackled the challenge of accounting for the cash and cpf required in the downpayment phase.
Let’s move on to discuss the monthly mortgage payment required.
Example of mortgage to be paid
We will simulate the monthly mortgage payment to be paid at different phases by using the following assumptions.
- Loan tenure – 30 years
- Loan quatum – 75% of purchase value
- Interest rate – 4%
| New Condo Price | 1,500,000 | 2,000,000 | 2,500,000 | 3,000,000 | |
| New Condo Loan (75%) | 1,125,000 | 1,500,000 | 1,875,000 | 2,250,000 | |
| Timeline | Stage of construction | Mortgage Payment based on loan quantum above | Mortgage Payment based on loan quantum above | Mortgage Payment based on loan quantum above | Mortgage Payment based on loan quantum above |
| 6 – 9 months from launch | Completion of Foundation (10%)5% cash/CPF5% loan for 6 months | $358 Payment duration – 6 months | $477 Payment duration – 6 months | $596 Payment duration – 6 months | $716 Payment duration – 6 months |
| 6 – 9 months from launch | Completion of Reinforced Concrete (10%) | $1080 Payment duration – 6 months | $1440 Payment duration – 6 months | $1800 Payment duration – 6 months | $2160 Payment duration – 6 months |
| 3 – 6 months later | Completion of Brick Wall (5%) | $1443 Payment duration – 3 months | $1924 Payment duration – 3 months | $2405 Payment duration – 3 months | $2886 Payment duration – 3 months |
| 3 – 6 months later | Completion of Ceiling / Roofing (5%) | $1806 Payment duration – 3 months | $2408 Payment duration – 3 months | $3011 Payment duration – 3 months | $3613 Payment duration – 3 months |
| 3 – 6 months later | Completion of Doors & Windows Frames are in position, the Electrical Wiring & Plumbing & Internal Plastering (5%) | $2171 Payment duration – 3 months | $2894 Payment duration – 3 months | $3618 Payment duration – 3 months | $4342 Payment duration – 3 months |
| 3 – 6 months later | Completion of Car Park, Roads and Drains (5%) | $2536 Payment duration – 3 months | $3382 Payment duration – 3 months | $4227 Payment duration – 3 months | $5073 Payment duration – 3 months |
| TOP Date | Obtaining Temporary Occupation Permit (TOP) (25%) | $4388 Payment duration – 1 year | $5851 Payment duration – 1 year | $7313 Payment duration – 1 year | $8776 Payment duration – 1 year |
| 10 – 15 months from TOP | Upon Production of the Certificate of Statutory Completion (CSC) (15%) | $5509 Payment duration – 27 years | $7346 Payment duration – 27 years | $9183 Payment duration – 27 years | $11019 Payment duration – 27 years |
Types of mortgage available for new condo under the progressive payment scheme
For property under construction, banks will only offer variable rates loan for your consideration.
You will not be able to select a fixed rate loan for property that have yet to be completed and is funded by a progressive payment scheme.
Feature to look out for when selecting a home loan for new condo under the progressive payment scheme
Pay attention to the 3rd year interest rate
When selecting variable rates loan packages for your new condo, pay attention to the 3rd year interest rate.
The 3rd year is the year in which the bulk of the loan is being disbursed and interest expense is most intense.
Hence, it is crucial to not be dubbed by the low 1st and 2nd year rates but pay extra attention to select a package with low 3rd year rate.
Option to reprice after 2 years
Unlike your usual lock packages for properties that are under the normal payment scheme, you will not be able to refinance to another bank, after the 2 year lock in period.
It will be helpful to select a loan package with the option to reprice internally within the same.
This gives you some leeway to switch to a floating rate package with lower interest rates, assuming interest rates were to decline after 2 years.
Benefits of the progressive payment scheme
Interest rate defence
Assuming you were to purchase a property under a high interest rate environment. The progressive payment scheme provides a 2 to 3 year relief from facing the brunt of the high interest rate on the full loan amount.
It will be ideal if you are able to time your purchase with the interest rate cycle. If done right, you could be enjoying lower interest expense during the first 3 years and subsequently refinance into a lower rate loan package as the cycle shifts towards a lower rate environment.
Better financial and cash flow management
Having a 3 year gap before dealing with the full mortgage payment, allows you time to build your career and enhance your income towards a higher level in 2 years.
Many couple purchasing a new launch condo as their startup homes, leverage on this 2 year buffer to prepare themselves financially for the full mortgage obligation when new launch is fully constructed.
Lower Initial down payment
For a resale condo funded under the normal payment scheme, you will be required to pay the 25% down payment upfront, with the 12 to 14 weeks completion time frame.
For a new launch condo funded under the progressive payment scheme, you will only need to pay the first 20% within the 8 weeks from receiving the option to purchase.
The remaining 5% cash or cpf payment is deferred 6 to 8 months later upon the completion of foundation work.
Higher nett cash flow between the TOP and CSC phase
Referencing the payment schedule above, you will notice that after TOP, there is a 15% payment only to be made after the development achieves its CSC status.
But once the property TOP you will be able to rent out the property or live in it.
For owners renting the property out, you will be able to enjoy higher net cash flow for 10 to 12 months before the full mortgage payment kicks in after CSC.
What is certificate of Statutory Completion (CSC) ?
It is a official certification issued by the Building and Construction Authority of Singapore (BCA). It certified that the new launch condo development have fulfill all the necessary building standards set by the authority.
Developer accountability
As a final point, the progressive payment schedule also serves as an incentive to keep developers motivated towards completing construction in time to receive the full payment.
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Book your New Launch Research Consultation now to make a confident and well-informed decision.
Difference between progressive payment scheme and normal payment scheme
Resale condos, HDBs and properties that have been fully constructed will be funded using the normal payment scheme.
The key difference between the normal payment scheme and the progressive payment scheme lies in the duration and cadence of payment.
Under the normal payment scheme you would have to pay the remaining 20% downpayment and bear the full burden of the 75% loan within 8 to 12 weeks from date of exercising option.
Where else under the progressive payment scheme, the loan disbursement is phased out over a 3 years time frame.
Payment schedule under the normal payment scheme is as follow
| Payment Milestone | Timeline | Percentage of payment |
| Option fee | Day 1 | 1% |
| Exercise option | Within 14 days from grant of option | 4% |
| Stamp duties | Within 14 days from exercising option | Prevailing tax rate on purchase price |
| Legal fee | Within 14 days from exercising option | $3000 |
| Valuation Fee | Within 14 days from exercising option | $500 |
| Legal completion of sale and purchase | 8 to 12 weeks after exercising option | 95% 20% – cash and cpf75% – bank loan |
How much interest can you save under the progressive payment scheme vs normal payment scheme ?
Assuming a loan tenure of 30 years and a 75% loan to valuation ratio.
| Property Purchase Value | Progressive payment scheme – 3 year Interest expense4% Floating Rate | Normal payment scheme – 3 year Interest expense3% Fixed Rate | Savings under the Progressive Payment Scheme |
| 1,500,000 | 32,650 | 98,836 | 66,186 |
| 2,000,000 | 43,533 | 131,781 | 88,248 |
| 2,500,000 | 54,416 | 164,726 | 110,310 |
| 3,000,000 | 65,299 | 197,672 | 132,373 |
Gaining a competitive edge when buying a new launch condo
Think about it, what does buying a new launch condo entails ? You are essentially sealing a multi million dollar purchase by relying on a developer’s floor plan, a showroom and some assurance from your property agent.
The only way to ensure you place your money in the best development is do your prep work, lots of prep work, lots of research.
Objectively parsing through facts and numbers to decide if the new launch condo development …
- Is it priced fairly ?
- Are there any upcoming price catalyst ?
- Does it possess fundamental attributes that buyers desire. I.e school, affordability ?
If research is not your cup of tea, the smarter way is to outsource it to someone who enjoys doing it.
More Relevant Read Regarding New Launch Condo Investing
- Characteristics of New Launch Condos That Deliver the Highest Capital Appreciation in the Shortest Time
- Progressive Payment Calculator – Singapore New Launch Condo
FAQ – New Launch Condo Payment Schedule
Can you refinance a loan for a new condo under the progressive payment scheme ?
No, you will not be able to refinance your loan when the new condo purchased is still being constructed and has not achieved its TOP status.
You can only reprice your loan to ideally a lower interest rate loan package within the same bank.
Can you sell a property under the progressive payment scheme ?
Yes there is no restriction pertaining to the sale of a property under the progressive payment scheme.
You will only need to be mindful of incurring seller stamp duty if you are selling it within a 4 year time frame.
You will also need to be mindful that you could incur a early loan redemption penalty due to the sale of property. Check your current loan package or loan package that you are intending to undertake for waival of penalty due to sale clause.
What happens when you refinance the loan before the disbursement of the last 15% payment before CSC ?
If you were to refinanace the loan for a property currently under a progressive payment scheme, be mindful that a early loan redemption penalty of 1.5% would be levied on the 15% undisbursed amount.
Your best option available to avoid this penalty is to explore repricing option within the same bank.
Can I use CPF to pay for my monthly mortgage under the progressive payment scheme ?
Yes CPF can be used to fund the payment of a monthly mortgage under the progressive payment scheme.
Are there penalties for late payments under the PPS scheme ?
Yes, penalties such as late interest charges will be imposed on late mortgage payment under the progressive payment scheme.
It will normally comprise of 5% above the bank’s prime lending rate on the overdue amount.
What are the property types falling under the progressive payment scheme ?
Both a new launch condo and new EC that is not fully constructed will be funded under the progressive payment scheme.
Can you pay for the new launch condo using full cash under the progressive payment scheme ?
Yes, you can pay for the property in full cash.
The payment schedule will remain the same, the conveyancing lawyer will contact you at each phase of funds disbursement for a cash payment via cheque at each construction milestone.
