In previous article, we have talked about buy property from developer who have offer pre-arrangements in order to meet the concept of “buy property with little or even no money down“. Let us have a short review of this point.
In order to make the property affordable and attractive for potential property buyers, the developers have come up the new marketing strategies where they works as follows;
➻ The developers will mark up the sales price of the property to make buyers to acquire the higher financing from the bank.
➻ The developers may work together with their panel banks to offer a 90% loans to the qualified property buyers. In some cases, the banks may even offer 100% loans to cover all of the costs such as legal fees, stamp duty, MRTA and home furnishing packages during buying a property.
➻ In some cases, the developer will give you the discount from the property sales priceonce your home/ mortgage loan have been approved by the bank.
Legally, there is nothing the banks can do to avoid the developers from giving discounts after the S&P Agreement and loan documents have been signed. But, remember in mind that it will take some risks in the future. Most of the bankers will refuse to do financing once they’re aware of such schemes and may even blacklist the its developer.
In facts, the good reputable developers will never come out such schemes. They are more prefer buyers to put down a 10% of their own money to show their commitment. Therefore, the property buyers have to be careful of such developers as the bankers can stop financing the project at any time.
According to this point, we will discuss about what are the pros and cons of such interesting schemes that offered by the developer;
✔ Property buyers no need to waste their precious time to shopping around for housing loans because the developers would made all the necessary arrangements with their panel banks. All the thing that property buyers have to do is make sure they are qualify for such loans terms, their own affordability and capability.
✔ It’s financially not taxing for young working adults who can extend their loans tenure to the next 25 to 30 years. Hence, it makes most of the first-time homebuyers have the chance to get involves in property investment field.
✘ Bigger loans can increase your financial burden as the monthly loan repayments are higher and interest costs are higher too. Before accept for such schemes, make sure your financial is able to commit to such long term loans.
✘ The developers will given out some freebies such as free legal fees, MRTA and etc. But do note that these costs are usually already built into the property selling price.
✘ In facts, you are buying a property which you may not able to afford yet. You may be over extending your financial capabilities. Even you have borrow a 70& to 80% loans from the bank, many people are still unable to sustain their monthly loan repayments in the event of an economic downturn.
✘ You have to check whether the interest spread offered by their panel banks is comparable to other conventional housing loans. To cover the costs of preparing the loan documents and MRTA, the banks may impose a certain “lock-in” period or charge higher interest spreads. There may also be heavy penalties for early settlement of loans.
Although it sounds good that the developer arrange all for you and you just need to pay the costs, but if you fail to read carefully and understanding all the terms and conditions, it will caused yourself to lose the house in the future. As we mentioned above, you are buying a property that you actually cant afford for it, but you just bought it because there are too much offers given out by the developers. That is not true! Remember, buying a property is a serious case just like you are doing a business. For whatever reasons, you should done all the arrangement and documentations by yourself or hire a solicitors to assists you on the legal stuff. Be safe and be smart!