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Peng Jason

How does construction (A&A) loan works?

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Hi all,

I understand that Banks may loan up to 80% of the construction invoice/quotation.

After TOP,  the construction loan can be converted up to 80% of the value of the new house.

But I also read on this link and I am bit confused how it is calculated.

Can any kind soul advise?

Thanks,

 

 

 

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not sure if my understanding is correct or not as this is based on my hazy recollection from discussion with my banker > 1 year ago and what I had read in this forum.

You need to get a quotation from your builder/contractor on how much the construction cost will be at. The bank will also do a valuation of your house based on the approved design and then decide how much they can loan you, subjected to TDSR. if you have an existing home loan, the construction loan repayment installments and existing loan repayment installments must be below your TDSR, else the bank cannot loan you the 70% or 80% of the construction costs.

assuming that you can get a loan of up to 80% of the construction cost, this construction loan will be disbursed to you at current prime rate (which is about 5% interest). this prime rate will apply throughout the duration of your house construction process until you get TOP or CSC upon which the outstanding balance can be converted to your existing (if any) home loan at the home loan rates (currently about 2%). As TOP is usually obtained before CSC (though in cases both can be obtained at same time), it is better to get a construction loan which will allow you to do the conversion when you get TOP instead of CSC since CSC can be several months after TOP. this will allow you to save quite a bit on the interest you need to pay.

Again, I stress that the above might have some incorrect information so for more accurate information, best is talk to your banker.

 

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On 3/13/2018 at 11:29 AM, Peng Jason said:

Hi all,

I understand that Banks may loan up to 80% of the construction invoice/quotation.

After TOP,  the construction loan can be converted up to 80% of the value of the new house.

But I also read on this link and I am bit confused how it is calculated.

Can any kind soul advise?

Thanks,

 

 

Hey, so personally I think that it's always depends on the politics of the company that doing that, since some of them differs from the others. However, once I had a problem with a house that I wanna build, so when I bought a place for a future house, I decided to take a loan for some construction work, so I builded it almost a year, and lately I discovered that I have a debt that I should pay to the office and in one day, guys from the debt collectors came to me and we discussed how can we solve this problem (they was pretty nice) (I guess this is the guys frontline-collections.com) . Since then I am trying not to take any loans in my life.

 

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