What is the Progressive Payment Scheme?
The progressive payment scheme (PPS) structures payments for under-construction properties like new launch condos or ECs in stages tied to construction milestones, typically 5-10% of the purchase price per stage.[1][2] Instead of paying the full property price upfront, you pay smaller instalments as the developer reaches certified construction phases—from foundation work through to legal completion.
This approach benefits your cash flow management significantly. You make an initial 5% booking fee (cash) and 15% downpayment (cash or CPF) within 8 weeks of the Option to Purchase (OTP). Banks then disburse loan portions progressively, starting from foundation works, aligning with your construction loan Singapore approval.[1][2] Monthly repayments begin only after the first loan disbursement—often at 55-75% loan-to-value (LTV) depending on your profile.[1][3]
At Homejourney, we prioritize transparency in helping you understand this process. The progressive payment scheme protects both you and the developer by linking payments directly to visible construction progress, ensuring accountability throughout the building period.
How Construction Loans Work with Progressive Payments
A construction loan Singapore (or BUC loan) covers 55-75% LTV for new launches, disbursed progressively to the developer. Monthly interest-only payments apply until TOP (Temporary Occupation Permit), then principal repayments begin.[2] The exact disbursement schedule depends on your loan-to-value ratio and the developer's construction certification.
Banks like DBS and OCBC assess your application based on MAS Total Debt Servicing Ratio (TDSR) ≤55% and Mortgage Servicing Ratio (MSR) ≤30% for HDB/EC. Approval hinges on stable income, low existing debts, and project credibility.[2] This is why understanding your financial profile before applying is crucial for success.
To compare rates across Singapore's major banks and calculate your borrowing power instantly, visit Homejourney's bank rates comparison page. You can calculate your mortgage eligibility and see which banks offer the best rates for your situation—all in one place.
Understanding the Payment Stages
The payment structure follows a clear timeline from signing to legal completion. Here's what you can expect:
| Stage | % of Purchase Price | Payment Mode |
|---|---|---|
| Booking Fee | 5% | Cash |
| Downpayment (S&P signing) | 15% | Cash/CPF |
| Foundation | 10% (5% Cash/CPF + 5% Loan) | Cash/CPF/Bank Loan |
| Reinforced Concrete Framework | 10% | Bank Loan |
| Partition Walls | 5% | Bank Loan |
| Roofing | 5% | Bank Loan |
| Windows/Plumbing | 5% | Bank Loan |
| TOP | 25% | Bank Loan |
| Legal Completion (CSC) | 5-15% | Bank Loan |
Payments must be made within 14 days of developer notice, or late fees apply.[2] For BUC property loan, disbursements start post-downpayment, and the developer will notify your legal team when each construction phase is complete.
Key Factors That Improve Bank Approval Chances
1. Maintain a Strong Debt Servicing Ratio
Your Total Debt Servicing Ratio (TDSR) is the single most important factor banks evaluate. TDSR measures your total monthly debt obligations (including the new mortgage) against your gross monthly income. Banks require TDSR ≤55%, meaning your total debts cannot exceed 55% of your income.[2]
To improve your approval chances: pay down existing debts before applying, avoid taking new credit in the months before your application, and ensure your income documentation is current and accurate. If you're self-employed, banks typically require 2 years of audited accounts.
2. Demonstrate Stable Employment and Income
Banks want proof that you can sustain monthly repayments throughout the construction period and beyond. Employed individuals should provide recent payslips (typically 3 months), employment letters, and CPF statements. Self-employed applicants need audited financial statements for the past 2 years.
Pro tip: If you've recently changed jobs, ensure you have an employment letter confirming your new role and salary. Banks may hesitate to approve applications from people within their first 3 months of employment.
3. Build Adequate Savings and Down Payment
A larger downpayment signals financial stability and reduces the bank's risk. While the minimum is 15% (plus 5% booking fee), putting down 20-25% significantly improves approval odds. This also lowers your loan-to-value ratio, making you eligible for better interest rates.
Banks also assess your liquid savings—they want to see you have emergency reserves beyond your downpayment. Aim to maintain 3-6 months of living expenses in savings.
4. Choose a Credible Developer
Banks conduct due diligence on the developer and project before approving your loan. Established developers with strong track records of completing projects on time receive faster approvals and better loan terms. New or smaller developers may face stricter scrutiny or lower LTV ratios.[2]
Check the developer's completion history, track record with previous projects, and financial stability. This information is typically available through URA records and property databases.
5. Optimize Your Loan-to-Value Ratio
Most banks offer 55-75% LTV for construction loans, depending on your profile. A lower LTV (closer to 55%) improves approval chances but requires a larger downpayment. A higher LTV (75%) requires stronger financial credentials but minimizes your cash outlay upfront.[1][3]
Calculate your ideal LTV based on your savings, income, and existing debts. Use Homejourney's mortgage eligibility calculator to see what LTV different banks will offer you based on your financial profile.
Common Mistakes That Hurt Approval Chances
- Applying to multiple banks simultaneously: Multiple credit inquiries within a short period can negatively impact your credit score. Instead, use Homejourney's multi-bank application system to submit once and receive offers from all major banks—DBS, OCBC, UOB, HSBC, Standard Chartered, and more.[2]
- Taking on new debt before approval: Car loans, credit cards, or personal loans taken within 3-6 months of your mortgage application increase your TDSR and reduce approval chances.
- Changing jobs close to application: Banks prefer 6+ months in your current role. If you must change jobs, wait 3 months before applying.
- Incomplete or inaccurate documentation: Missing payslips, outdated employment letters, or incorrect CPF statements delay processing. Prepare all documents in advance and verify accuracy.
- Not comparing rates across banks: Interest rates vary significantly between banks. A 0.1-0.2% difference compounds to substantial savings over 25 years. Homejourney's bank rates page lets you compare offers side-by-side instantly.
How to Apply for a Construction Loan: Step-by-Step
Step 1: Calculate Your Borrowing Power
Before house hunting, determine how much you can borrow. Visit Homejourney's mortgage eligibility calculator to input your income, existing debts, and downpayment amount. The calculator instantly shows your maximum borrowing capacity and estimated monthly repayments based on current SORA rates.
Step 2: Prepare Your Documentation
Gather all required documents: recent payslips (3 months), employment letter, CPF statement, bank statements (3 months), income tax returns (last 1-2 years), and property valuation report. Self-employed applicants need audited financial statements and business registration documents.
Step 3: Submit Your Application via Homejourney
Rather than visiting each bank individually, use Homejourney's streamlined application process. Visit our bank rates page and click "Apply Now." You can authenticate via Singpass, which auto-fills your income, employment, and CPF data instantly—saving time and reducing errors.
One application sends your details to all major banks: DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, CIMB, RHB, Public Bank, Hong Leong Bank, and Citibank. You'll receive offers from multiple banks within days, not weeks.
Step 4: Compare Offers and Select Your Bank
Once offers arrive, Homejourney displays them side-by-side so you can compare interest rates, lock-in periods, early repayment penalties, and other terms. Consider not just the rate, but the total cost over your loan tenure and any additional fees.
Step 5: Proceed with Valuation and Final Approval
After selecting your preferred bank, they'll order a property valuation (typically $350-$500). Once the valuation confirms the property value supports your loan amount, the bank issues a formal approval letter. This letter is valid for a set period (usually 3-6 months) and outlines all loan terms.
Timeline: When Do Loan Repayments Start?
Understanding the repayment timeline is crucial for financial planning. For a 75% LTV loan, monthly repayments typically begin after the first loan disbursement at the foundation completion stage.[1][3] However, the exact timing depends on your specific loan terms and the developer's construction schedule.
Before foundation completion: You pay the 5% booking fee and 15% downpayment in cash or CPF. No loan repayments yet.
Foundation completion: The bank disburses the first loan tranche (typically 5-10% of purchase price). Monthly interest-only repayments begin based on the disbursed amount.
Subsequent stages:
