Investing in the home of your dreams, whether a house and lot or a condominium, is a milestone. Financing a real estate property, however, can be intimidating considering the upfront payments you have to make. This is why people make use of a house loan or mortgage.
Home loans, simply put, are a type of loan used to provide financial assistance to purchase a property. Housing loans in the Philippines are accessed through banks, real estate developers, or PAG-IBIG, the housing development mutual fund in the country. How bank housing loan works in the Philippines If you are taking out a home loan in the Philippines, you as the "borrower" enter into an agreement with a lender and agree to pay back your loan over a length of time also known as loan tenure or loan term. You may choose from two housing loan options: public via PAG-IBIG, or private through bank home loan. Loan rates are different for every bank. Interest rates for different loan amounts in the Philippines likewise differ from bank to bank. Monthly payments are commonly given during the tenure until the borrower has fully paid both the principal house loan and the interest. Monthly payments are used to repay interest during the first years of the home loan. The latter years are dedicated to paying off the principal of the mortgage loan. Paying more than the monthly dues will decrease the interest in subsequent months. To get the best housing loan for you, have a look at the different home loan terms of 8 banks in the Philippines in this article. Make sure to deep dive into their home loan products, minimum loan amount, and maximum loan amount before completing that loan application form. Other ways to get home financing in the Philippines Of course, banks are not the only house loan options available to purchase a real estate property. Home or property financing can also be done through the following home financing options. 1. Spot Cash Payment Paying on the spot is the fastest and easiest way to acquire a real estate property. In this option, a buyer of the property pays the price in a short period of time in cash, commonly one month after its date of reservation. Among the benefits of this payment are having fewer requirements, not having to worry about long-term payments, and getting real estate documents in a short period of time. Not most people have the luxury of buying properties at the drop of a hat. While this paying on the spot seems worry-free it is recommended to review your state of finances first before acquiring the property. 2. PAG IBIG Housing Loan When considering purchasing a house, the PAG-IBIG Housing Loan is commonly what most Filipinos reach for due to its longer loan terms and lower interest rates. In fact, getting a bank loan is regarded as a fallback when the PAG-IBIG home loan fails to materialize. In this option, the borrower pays the equity initially. The balance will be financed through PAG-IBIG and payment can be up to 30 years. Some downsides to this option include the long processing of documents and having more requirements to fulfill compared to other home loan alternatives. 3. Deferred Cash Payment This method enables a buyer to see through the payment of the total price of property equally over a specific period of time (e.g. 5 years). A deferred payment arrangement usually entails phrases like "no down payment required" or "no interest." Among the benefits of this option is a short period for processing real estate documents. Also, some developers give out discounts to buyers. Watch out for bigger monthly payments though! PRO TIP: Ask your developer or real estate agent for their recommended or preferred home loan type. Other types of home loans in the Philippines For property acquisition functions, the home purchase loan is the most common, whether for acquiring condos or houses and lots. Banks typically require that a borrower pay at least 20% of the total value of the property before approving a personal loan. This easily points to why major developers have a "20% downpayment, get to move in" offer because 80% will be usually paid by the bank once the loan application is approved. Below is a list of house loan alternatives other than home ownership: 1. Property Construction Loan Congrats, you already own your dream home! Naturally, home construction comes next. This loan enables a borrower to design the home of their dreams with the help of a construction or an architectural firm. Along with a loan application form, banks require the title of the lot under the primary borrower's name to be used as collateral. Documents to prepare also include a bill of materials (BoM) and a copy of the floor plan. 2. Refinancing Loan People resort to getting a refinance when a new home loan is needed to pay off an existing home loan from another bank. Changing to another home loan product or lender is normal so borrowers can enjoy better rates or a shorter loan term, or consolidate their debt. 3. Home Improvement Loan Homes are wear and tear purchases, too, hence the need for home renovation every few years. This type of loan is used for home construction or remodeling. Whether big or small renovations, homeowners can find this a viable financial help. 4. Home Equity Loan This home loan is basically a second mortgage that lets a borrower use an existing property to get extra funds for home renovation, to acquire a second home, for travel, education, and other personal needs. Getting a housing loan in the Philippines comes with requirements and financial responsibilities. Study each option carefully to come up with a good plan to repay the loan. Make these options work for you to make your dream home come true!
2 Comments
2/7/2024 03:11:42 pm
Great article on the different house financing options available in the Philippines! It's so helpful to have all the different options laid out in one place, from traditional house loans to PAG-IBIG and deferred cash payments. I especially liked the point about considering your financial situation before buying - it's so important to be realistic about what you can afford. As a mortgage broker, I would be happy to help Filipinos find the best financing option for their needs.
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