Borrow up to VND 1 billion to purchase social housing
The Government has recently issued Decree No. 100/2024, detailing a number of articles of the Housing Law on the development and management of social housing. Notably, the new decree has increased the maximum loan limit for cases of new construction, renovation, and repair of housing.
Specifically, Article 48 of Decree 100/2024 stipulates: In the case of purchasing or renting social housing, the maximum loan amount is 80% of the value of the home purchase or rental contract.
In the case of new construction or renovation and repair of housing, the maximum loan amount is 70% of the estimated value or capital usage plan, not exceeding VND 1 billion (previously the maximum was VND 500 million), based on the investment capital quota, construction unit prices of housing by the competent authority, and not exceeding 70% of the value of the secured assets.
When buying or renting social housing, the maximum loan amount is 80% of the value of the home purchase or rental contract.
The interest rate for loans is the same as the interest rate for loans to poor households as stipulated by the Prime Minister in each period; the overdue interest rate is 130% of the loan interest rate.
Meanwhile, according to the Vietnam Social Policy Bank, loans that have signed credit contracts with the bank to purchase, rent-purchase social housing, or build new or renovate and repair houses since August 1, 2024, will have an interest rate of 6.6%/year, with a maximum loan term of 25 years.
Regarding the VND 120,000 billion package for purchasing social housing, the interest rate is currently 7.5%/year. However, the State Bank of Vietnam and the Ministry of Construction are proposing to further reduce this interest rate to support the people.
Borrow VND 1 billion to buy social housing for 15 years, how much to pay each month?
According to a calculation by Tien Phong newspaper, based on the bank’s interest rate on the outstanding principal balance:
Total monthly payment = Monthly interest payment + Total monthly principal payment.
Where:
Monthly principal = Initial loan amount ÷ Number of months of loan
First-month interest = Initial loan amount x (Interest rate / 12 months)
Second-month interest = (Initial loan amount – First-month principal) x (Interest rate / 12 months)
Similarly, from the third month onwards, interest will be calculated on the remaining balance.
With a longer-term social housing purchase, the monthly principal payment is smaller, which will help reduce the financial burden on the people.
For example, if a person borrows VND 1 billion to buy social housing for 15 years, with a fixed interest rate of 7.5%/year of the VND 120,000 billion credit package, using the above formula:
In the first month, the person has to pay:
Interest = VND 1,000,000,000 x (7.5% / 12 months) = VND 6,250,000
Principal = VND 1,000,000,000 / 180 months = VND 5,555,555.5
Total interest + Principal for the first month = VND 11,800,000
In the second month, the person needs to pay:
Interest = (VND 1,000,000,000 – VND 6,250,000) x (7.5% / 12 months) = VND 6,210,937.5
Principal = VND 1,000,000,000 / 180 months = VND 5,555,555.5
Total interest + Principal = VND 11,766,492
Thus, it can be seen that with a longer-term social housing purchase, the monthly principal payment is smaller, which will help reduce the financial burden on the people and give them more flexibility with their financial plans.
Subjects eligible for preferential loans to purchase social housing
According to Article 48 of Decree 100/2024 of the Government, subjects specified in Clause 1, Clause 4, Clause 5, Clause 6, Clause 7, and Clause 8, Article 76 of the Housing Law, to be eligible for preferential loans to purchase or rent-purchase social housing, must meet the following conditions:
Have a source of income and be able to repay the debt according to the commitment with the Social Policy Bank; Have a proposal for a loan to purchase or rent-purchase social housing; Have a contract to purchase or rent-purchase social housing with the investor according to the regulations of this Decree and the law on housing; Implement loan security with assets formed from the loan capital according to the law. The Social Policy Bank, the investor, and the borrower must clearly define the method of managing and handling the secured assets in the tripartite contract.
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