Most of us prefer to buy a partially finished housing unit because it is cheaper. In addition, we have the advantage of selecting the most desirable location and living space. Buying early can result in a lot of savings because developers often offer more benefits and discounts than fully finished housing units. Do you know that you can still use a packaged home loan such as BUC or building construction loan? The same terms and conditions apply to both BUC and fully completed housing units. BUC loan refers to a dwelling unit or property loan made while the physical building is still under construction. This means that a legal completion certificate has not yet been issued for the physical building.
Payment scheme
Most banks or credit institutions offer financing that works with the developer’s progressive payment scheme. This means that the bank usually follows the promoter’s predetermined payment schedule, which is usually based on percentages. Percentages are established throughout the development process in which the developer requests a payment when a certain stage of construction is completed. From its schedule, the bank would release the loan in stages and when requested by the developer. Keep in mind that the monthly amortization of your home loan increases after each publication of the progressive payment schedule. Typically the developer would create a schedule similar to the example below
Level 1
Granting of the 5% Purchase Option, which covers the reservation commission
Stage 2
Signing of the Purchase Agreement 20%
Stage 3
Foundation work – complete 10%
Stage 4
Reinforced concrete frame of the unit – complete 10%
The stages will continue until you receive the regulatory completion certificate. This is the time you also pay off your BUC home loan in full. You may be wondering if you can get a different lender for each stage. Theoretically, it is possible, but it can mess up your personal payment schedule with so many loan repayment schemes and terms and conditions to take note of. It is advisable to apply to at least one bank or lender for the entire BUC loan. The three most common loan packages are loans with lower subsequent rates, lower initial rates but higher subsequent rates, and fixed-rate loans. Choose what is most convenient and applicable to your financial situation. It would be wise to use the Mortgage Comparison Calculator prior to applying for any loan package to determine your qualifications, as well as to find promotional mortgage loans for new releases.