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Anonymous

25 Nov 2020

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Hi, is it possible that lenders can loan out an amount which is higher than purchase price? How is it possible for anyone to claim that they have cash in pocket?

Example: sale price $1mil. LTV: 70% = $700k loan, $300k cash/cpf
before TOP, value increased to $1.5mil. LTV 70% = $1.05 mil > purchase price.

My question is, how realistic is this scenario? I thought before the lender will look at the sales contract and only disburse loan amount to the seller (ie in this case it is the developers lawyers).

Of course after X years can refinance at the valuation at the point in time. But this is a different story.

AMA Stacked Homes

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Ryan Ong

25 Nov 2020

Partner at Stacked Homes

The maximum loan that a lender can give, for residential properties, is 75 per cent of the price or valuation (whichever is lower), so this isn't usually possible; but do let us know where you saw such an offer, and we could look further into it for you.

One of the things to beware of is the loan cashback scheme. This is illegal, and essentially involves lying to the bank about the property price (i.e. claiming the price is higher than it actually is, subsequently getting the loan, and then distributing the excess amount as "cashback"). Do avoid getting involved in these.

Another possibility that comes to mind are the "120% financing" ads regarding commercial properties. This usually just means a combination of two loans, such as a business loan for the commercial property plus a working capital loan, which adds to up to 120 per cent of the price.

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