Deferred Payment vs Progressive Payment

[nhc125]

Dear Bros,

I would need some advice for taking Deferred Payment Scheme (DPS) or Normal Progressive Scheme (NPS).

My family is looking to buy an EC and the prices are:

NPS : $690,000
DPS : $710,000 (Additional 3% ~ $20,000)

We will be taking up the loan offer with OCBC variable rates. We will be locked in for first 3 years and can do conversion or repricing within the period.

The youngest borrower is 35yo and we are looking at a loan tenor of 30 years. The way OCBC calculated the rates were:

OCBC Board Rate - Fixed Discount

The rates offered to us were :

1st year - 4.5%-3.32% = 1.18%
2nd Year - 4.5%-3.02% = 1.48%
3rd Year - 4.5%-2.72% = 1.78%

I have no financial background but I am assuming that the interests rates will not remain so low in the future.

Initially I wanted to go for DPS is because I wanted to lock in these "preferred" interest rates (technically I can only lock the discounts) and delay my loan servicing by 2 years so that I can give it more time to "beat" the economic cycle as I suspect the interest rates will not remain so low in future.

Now looking back, it might not be a good move since the bank can change the Board Rate anytime depending on the economic conditions. Through they have claimed that the board rates has remained at 4.5% since 2006 and will not go up easily.

What are your thoughts and recommendations for my case please?

Am I thinking too much?
Should I just go for the $20k cheaper option and worry about the future later?

Best regards,

 

[henrylbh]

Never like board rate as it is not same across the banks and the basis depends on the bank.

Better go for spread (which is fixed) plus sibor or sor which is more transparent.

 

[chopra]

agree. go for fixed plus sibor.
since you got no financial background and you are worried about interest rate hike, you need to ensure you have money to pay when I/r go up to say 3 - 4 percent.

do that if you have not!

 

[joanie_dan]

Take the PPS with the $20k upfront savings, as initial disbursements are minimal, with current interest rates, the interest paid progressively from first disbursement til top where 65% loan is disbursed will not add up to $20k.

Recommended to go with sibor/sor like what the rest says.

Side note why choose Ocbc? They will never be the "cheapest" in the market.

 

[nhc125]

Thanks for the advice!

I can only choose OCBC because of my self employed status is less than a year.

 

[joanie_dan]

Oic, so they granted 75% or 80% loan?

 

[nhc125]

OCBC granted 75% loan.