"Property projects are so fiercely competitive now that they can actually offer 'zero down payment'" "Mortgage rates have come down, and many support 'zero down payment'"... Recently, Beijing Business Today reporters noticed that on social platforms, several real estate agents have been posting in the tone of homebuyers to promote "zero down payment" schemes and attract buyers' attention.

The so-called "zero down payment" mostly refers to developers inflating the contract price to help buyers apply for a larger mortgage loan from the bank, thereby using the surplus funds from the loan to pay the down payment.

In recent years, the "zero down payment" phenomenon has become commonplace. Many developers and real estate agents use it as a gimmick to attract customers and boost property sales, but this practice violates relevant national financial and credit policies. Recently, regulatory authorities in Zhengzhou, Nanning and other places have issued warnings about "zero down payment" home purchases, reminding consumers to guard against potential financial and legal risks.

　　"Zero down payment" home purchase with shopping card rebate

Recently, on social platforms, real estate agents in Guangzhou, Shenzhen, Zhengzhou and other places have been active, posting in the tone of homebuyers to promote "zero down payment" schemes and attract buyers to inquire.

Liu Yu (pseudonym), a real estate agent from Shenzhen, is one of those promoting "zero down payment" home purchases. He told Beijing Business Today that his company has partnerships with multiple property projects in Shenzhen and can facilitate "zero down payment" home purchases.

How does "zero down payment" work? According to Liu Yu, there are currently two main forms of "zero down payment": one is that the developer directly inflates the contract price to help the buyer apply for a larger mortgage loan from the bank, using the surplus funds from the loan to pay the down payment. The other is that the developer advances funds or helps the buyer apply for a business loan or consumer loan, repackaging legitimate bank loan funds as "down payment loan" funds to cover the shortfall in the down payment.

"We basically do the first type, and there are quite a lot of completed deals. Last week I closed two 'zero down payment' deals," Liu Yu said by way of example. If a buyer plans to purchase a home with a total price of 3 million yuan and a down payment of 1 million yuan, the developer will raise the contract price to 4 million yuan. The buyer then applies for a bank mortgage at the 4 million yuan price, and the extra loan amount can be used to pay the down payment, which is equivalent to "zero down payment."

This "high appraisal, high loan" approach allows buyers to pay no down payment, but the monthly payment increases with the larger loan amount. As for the increased portion of the monthly payment, Liu Yu said the developer will rebate it to the buyer in the form of shopping cards. If the buyer wants cash, it can also be exchanged—an 80,000 yuan shopping card is worth approximately 72,000 yuan after exchange.

In fact, the "zero down payment" home purchase Liu Yu described is itself a violation of regulations, and he is aware of it. "We don't have partnerships with banks. 'Zero down payment' is inherently non-compliant, but it's not illegal. We just bypass the down payment process, and we are a large platform with many stores in Shenzhen, so the risk is relatively controllable," Liu Yu added.

Another agent from Guangzhou, Zhao Bo (pseudonym), directly promoted a property project. The project poster reads, "Completed and ready to move in, buy and live immediately, truly 'zero down payment.'" Zhao Bo explained that the so-called "zero down payment" involves inflating the appraisal price and then applying for a loan. The monthly payment depends on the size of the home, but a deposit of 13,000 yuan must be paid to the developer upfront. The developer has a partner bank, the down payment is advanced by the developer, and it is repaid after the loan is approved.

As for the reasons behind the rise of "zero down payment" home purchases, Wang Deyue, a lawyer at Beijing Xunzhen Law Firm, said that during a downturn in the real estate market, "zero down payment" serves as a promotional tool to attract potential buyers, stimulate housing demand, and thereby boost market activity. "Zero down payment" reduces the initial financial pressure on buyers, enabling more buyers with insufficient funds to enter the market, while developers, in order to quickly recoup funds or clear inventory, may launch promotional activities such as "zero down payment" to attract buyers.

　　Violates financial and credit policies

Tempted by the lower initial "threshold" for home purchases, many buyers choose the "zero down payment" scheme. Homebuyer Wang Mianhua (pseudonym) is one of them. Recently, Wang Mianhua complained to the Nanning Housing and Urban-Rural Development Bureau that a property project he had purchased engaged in false advertising and irregular sales practices, including "zero down payment" home purchases.

According to the complaint, the property project Wang Mianhua purchased used "high appraisal, high loan" to inflate the total home price. The developer required buyers to pay a deposit of 20,000 or 40,000 yuan, with the rest of the home price entirely covered by a bank mortgage loan. To make the mortgage amount cover the down payment, the developer deliberately inflated the total home price and then used down payment advances to create proof that the buyer had paid the down payment in full, thereby enabling buyers to purchase commercial housing with "zero down payment" or a very low down payment.

In fact, in recent years the "zero down payment" phenomenon has not been uncommon. Many developers and real estate agents use it as a gimmick to expand brand influence, attract customers, and boost sales of relevant property projects, but this practice violates relevant national financial and credit policies.

In November 2017, the Ministry of Housing and Urban-Rural Development, the People's Bank of China, and the former China Banking and Insurance Regulatory Commission jointly issued the Notice on Regulating Home Purchase Financing and Strengthening Anti-Money Laundering Work, strictly prohibiting real estate development enterprises and real estate intermediary agencies from illegally providing down payment financing, installment down payments, and disguised down payment advances for home purchases.

Why does "zero down payment" home purchasing persist despite repeated prohibitions? Guan Rongxue, a senior analyst at the Zhuge Data Research Center, said the persistence of "zero down payment" home purchases involves multiple aspects: there may be imperfect regulatory policies or inadequate enforcement, providing room for developers to maneuver; or in a low-interest-rate environment, financial institutions may be more inclined to provide such loans to increase business volume; or, faced with offers such as "zero down payment," some consumers may ignore risks and pursue short-term benefits. Therefore, subsequent regulation and financial institutions should strengthen loan qualification reviews, increase repayment capacity assessments, severely punish violations, and strengthen standardized management and risk control of the real estate market.

　　Regulators in multiple places issue documents warning of risks

The "zero down payment" that appears to offer low-cost home purchasing actually harbors multiple risks. Wang Deyue pointed out that, first, it violates relevant laws and regulations; regulatory policies explicitly prohibit "zero down payment" home purchases and strictly forbid the diversion of funds such as personal comprehensive consumer loans to home purchases. Second, "zero down payment" home purchases are often accompanied by irregular operations and dual contracts (yin-yang contracts); these operations cannot be stipulated in the contract and are not protected by law. Once the developer or agent fails to honor its promises, the buyer may lose both money and the home. In addition, "zero down payment" loans are often accompanied by higher interest rates and additional fees. These fees may include loan processing fees, appraisal fees, insurance fees, etc., increasing the total cost of the home purchase. Finally, "zero down payment" home purchases appear to ease the initial financial pressure, but in reality the buyer may bear higher monthly payments and a longer loan term, facing greater repayment pressure.

"Zero down payment" home purchases not only undermine the market environment for mortgage business but also affect the order of the financial market. Amid these irregularities, regulators in multiple places have stepped up warnings.

Recently, regulatory authorities in Zhengzhou, Nanning and other places have issued warnings about "zero down payment" home purchases, reminding consumers to beware of potential financial and legal risks.

The Zhengzhou Housing Security and Real Estate Management Bureau stated that "zero down payment" cannot fundamentally solve buyers' short-term funding shortages and usually requires irregular practices such as signing dual contracts and inflating home prices to achieve. This not only increases buyers' loan interest and mortgage monthly repayment burden but also carries significant legal risk of loan fraud. At the same time, "zero down payment" usually involves real estate development enterprises or real estate intermediary agencies advancing funds in advance, or virtually inflating home prices, to obtain the down payment from banks in the form of mortgage loans. The home purchase contract signed between the developer and the buyer is subject to legal disputes, and therefore the parties involved may all face criminal liability.

The Nanning Housing and Urban-Rural Development Bureau pointed out that for buyers, "zero down payment" means no down payment is required at the initial stage of purchase. Although the initial pressure is reduced, it may in fact cause buyers to bear a higher loan amount, thereby increasing the monthly payment burden. In the long run, this may lead buyers into financial difficulty, making it hard to maintain stable repayment capacity. At the same time, due to market instability, it may cause the value of buyers' assets to shrink while the loan balance remains unchanged, further exacerbating buyers' financial pressure.

Faced with temptations such as "zero down payment" home purchases, what should buyers do? Wang Deyue suggests that buyers should fully consider factors such as their financial situation, market trends, loan conditions, and legal compliance when making decisions, to ensure they can make wise and responsible choices. Before purchasing a home, they should conduct comprehensive financial planning and budget analysis to ensure they have sufficient repayment capacity. They should pay attention to changes in market interest rates and housing price trends and choose appropriate timing and loan methods. When signing the home purchase contract, buyers need to carefully read the contract terms to ensure they fully understand and agree to all provisions. Particular attention should be paid to clauses regarding loans, repayment, and breach of contract to avoid potential legal risks.

"Faced with temptations such as 'zero down payment,' buyers are advised not to readily believe promotional pitches, and even more so not to falsify loan documents. From past cases, once risks such as loan recall or loan cutoff occur, the agent will shift blame or even simply flee, and ultimately it is the buyer who bears everything," said Su Xiaorui, a senior researcher at Suxi Zhiyan.