Most of us prefer buying a partially completed housing unit because it is cheaper. In addition, we have the advantage in selecting the most desirable location and living space. Early purchase may come with much savings because the developers usually offer more benefits and discounts than the fully completed housing units. Do you know that you still can avail of a housing loan packaged as BUC or Building Under Construction loan? The same terms and conditions goes with both BUC and fully completed housing units.
BUC loan refers to a housing unit or property loan made while the physical building is still under construction. This means that there is no issued certificate of statutory completion yet for the physical building.
Most of the banks or lending institutions offer financing that works with the progressive payment scheme of the developer. This means that the bank usually follows the predetermined schedule of payment of the developer, which are normally based on percentages. The percentages are being set out throughout the course of the development process where the developer calls for a payment when a certain stage of the construction is completed. From their schedule, the bank would release the loan in stages and when the developer calls for it. Please take note that your monthly housing loan amortization increases after each release of the progressive payment schedule. Usually, the developer would create a schedule similar to the sample below
Grant of the Option to Purchase 5%, which covers the booking fee
Signing of the Sale & Purchase Agreement 20%
Foundation work – complete 10%
Reinforced concrete framework of unit – complete 10%
The stages will continue until you will receive the certificate of statutory completion. This is the time that you pay your BUC housing loan in full too. You might be wondering if you can get a different lender for each stage. Theoretically, yes it is possible but it may mess up your personal payment schedule with so many lending payment schemes and terms and conditions to take note. It is advisable to apply at least only one bank or lender for the whole BUC loan.
The three most common loan packages are the loans with lower thereafter rates, lower initial rates but higher thereafter rates, and the fixed rate loans. Choose whatever is most convenient and applicable to your financial situation. It would be wise to use the mortgage comparison calculator before applying for any loan package to determine your capability as well as find promotional home loans for new launches.
By Robert Charlson