What's an interest absorption scheme?

Posted by goldenpeace on 09-Mar-2009

Where do you see this?

In property advertisements, brochures on developments and newspaper reports.

What does it mean?

This is a scheme that property developers offer in conjunction with banks at project launches.
It is similar to the deferred payment scheme, in that it allows you to defer the bulk of the purchase price until the project’s temporary occupation permit period.

The big difference is that under the interest absorption scheme, you have to take a bank loan at the time of purchase. But the developer will absorb the interest payments on the loan until the project’s completion.

The scheme may be offered at a premium. Some developers are now charging a 3 per cent premium over the buying price.

Why is it important?

This scheme allows genuine home buyers to commit to a purchase with just a small upfront payment.

More developers have been using this to help drive sales after the Government scrapped the deferred payment scheme in late 2007.

So you want to use the term? Just say…

‘If I take up the interest absorption scheme, I won’t have to worry about the monthly payments until the development is completed.’

Source : Sunday Times - 8 Mar 2009