5 things social housing buyers need to know before borrowing from the Social Policy Bank.

Below is some important information regarding the Social Policy Bank's loan policy for purchasing social housing.

The preferential loan policy of the Social Policy Bank helps many low-income people increase their access to social housing.

Loan eligibility requirements

According to regulations, borrowers must have a source of income and the ability to repay the loan as committed to the Social Policy Bank. In addition, customers need to have a loan application form for purchasing or renting social housing in accordance with regulations.

Loan applications are reviewed by the Vietnam Bank for Social Policies (VBSP) based on the actual documents submitted by each customer.

You can borrow up to 80% of the house value.

Buyers or renters of social housing can borrow up to 80% of the contract value for purchasing or renting social housing.

However, the specific loan amount will be considered by the Social Policy Bank based on the customer's available funds, repayment capacity, and capital utilization plan.

Preferential interest rate of 5.4% per year.

Currently, the interest rate for loans to purchase social housing at the Vietnam Bank for Social Policies is 5.4% per year, as stipulated by the Prime Minister.

For overdue loans, the applicable interest rate is 130% of the regular lending interest rate.

This interest rate is lower than the average mortgage interest rate at many commercial banks, helping to reduce the cost of capital for eligible homebuyers.

Maximum loan term: 25 years

The loan term is agreed upon by the Vietnam Bank for Social Policies (VBSP) and the borrower, in accordance with the borrower's repayment capacity.

According to current regulations, the maximum loan term is no more than 25 years from the date of the first loan disbursement.

For example, a loan of 1.05 billion VND

Let's assume a social housing apartment costs 1.5 billion VND. The buyer pays 30% of the contract value upfront, equivalent to 450 million VND, and borrows 1.05 billion VND from the Social Policy Bank for a period of 25 years at an interest rate of 5.4% per year.

With the equal principal repayment method and interest calculated on the decreasing outstanding balance, the borrower will pay a fixed principal of 3.5 million VND each month. In the first month, the interest will be approximately 4.725 million VND, so the total amount to be paid will be approximately 8.225 million VND.

In the second month, due to the outstanding balance decreasing to VND 1.0465 billion, interest payments decreased to approximately VND 4.709 million, leaving a total payment of approximately VND 8.209 million. By the third month, the total payment amount continued to decrease to approximately VND 8.194 million.

According to this calculation method, the monthly payment is reduced by approximately 15,750 VND because interest is calculated on the actual remaining balance.

After about 5 years, the outstanding debt is approximately 840 million VND, the monthly interest payment has decreased to about 3.78 million VND, and the total principal and interest payable is approximately 7.28 million VND per month.

By the final payment, the borrower only had to pay 3.5 million VND in principal and approximately 15,750 VND in interest, equivalent to about 3.516 million VND.

This is just an illustrative example using the method of equal principal repayment and interest calculated on a decreasing outstanding balance. Actual payments may vary depending on the repayment method, disbursement time, and applicable regulations for each loan.

Source: CafeLand