Considerations and Risks of Progressive Payment Plans in Property Purchase


Considerations and Risks of Progressive Payment Plans in Property Purchase

With the booming real estate market, many people are considering buying a new property. When purchasing a new property, buyers can choose to make full payment or opt for progressive payment plans. Today, we will discuss the risks and considerations associated with using progressive payment plans.


Progressive payment plans involve paying the initial deposit when buying off-plan and paying the remainder through a mortgage upon completion. One advantage of this payment method is that buyers can plan their finances for a longer period and have more flexibility with their cash flow. They may also enjoy higher purchase discounts. However, this payment method also comes with risks.


One of the risks is that the off-plan period can last up to 30 months, during which the property market may experience fluctuations. This could lead to adjustments in the unit price at the time of completion, which could result in a shortfall in the bank's valuation. In this case, the loan amount may decrease, and buyers may need to make up for the shortfall. Furthermore, buyers may face the risk of a property market collapse if there are significant market fluctuations.


However, unless the off-plan period is excessively long, and there are significant market fluctuations, banks generally try to accommodate the valuation. The difference in valuation is usually not significant, and buyers can request clauses in the sale and purchase agreement to protect their rights.


Buyers also need to consider the following when using progressive payment plans:

Firstly, buyers must ensure that they have sufficient cash flow to deal with unexpected situations, such as significant market fluctuations or personal financial changes.

Secondly, buyers should try to understand the construction progress of the property and the developer's reputation. Buyers can check the information of the architect and contractor to understand the construction progress and quality, among others, to avoid issues related to building quality.

Lastly, buyers should read the sale and purchase agreement carefully, especially the clauses related to the mortgage, before signing. Buyers should understand the terms of the agreement, such as the interest rate, repayment period, and early repayment charges, to avoid unexpected situations and unnecessary financial burdens.


In conclusion, progressive payment plans have advantages and risks, and buyers should carefully evaluate their financial capacity and risk tolerance. They should read the sale and purchase agreement and related clauses carefully to avoid financial risks. Buyers can also seek the assistance of professional financial advisors to help with financial planning and risk assessment to protect their interests.

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