The requirements in a tenant-purchase scheme are not as stringent and as detailed as those in a mortgage.
- The homebuyer in a tenant-purchase enjoys a grace period, the period between payment of the deposit and when the house is ready for occupancy. There is yet another grace period between receiving the letter of occupation and starting to pay the monthly instalments. Normally, one is given about a month before interest starts accruing.
- The approval process for tenant-purchase is simpler and faster.
- The cost of borrowing under tenant purchase scheme is lower than a mortgage and is on a reducing balance.
- Should you default a tenant-purchase, the foreclosure deadlines are flexible, with several warning letters coming before a public advert with a notice period. This is unlike a mortgage where demand letters are immediately followed by litigation.
- Under tenant-purchase, one can easily sell off the house because getting the developer’s consent and change of records is faster. With a mortgage, the process is tedious and takes longer due to various consents and ‘discharge of charge’ against titles.
What to look out for in a tenant purchase agreement
- Work out the cost of the unit under tenant-purchase agreement in terms of the interest and then look at its cost under a mortgage facility and see what favours you most. In most cases, tenant-purchase is more affordable, unlike a mortgage or accessing a home through a bank loan.
- Scrutinise the contracting process to check the duration of payment. The longer the better for the tenant as it means lower monthly repayments.
- Take note of related transactions like legal and administrative costs, including any payable taxes. These further push up the cost of the house as they are payable upfront. The stamp duty that is payable is relatively lower today rather than in future, as the value of the house goes up after acquisition.
- Full ownership of the house under tenant purchase scheme is only acquired after the full payment of the total cost of the house. It is only after this that one can use the house as collateral for credit.