Owning a house can be expensive. If you save money to get the house, it will probably be higher than its current value in the future. One of the practical ways to own a home is to get a housing loan. Many banks and funding companies support you to achieve your dream house.
Therefore, it would be helpful to understand the overall process of housing loans. We also want to help you determine which housing loan suits your capabilities and prepare the necessary documents.
PAG-IBIG Housing Loan
Most Filipinos are PAG-IBIG members, making them eligible to take out a loan through PAG-IBIG. They enable their members to purchase residential units, such as townhouses and condominiums. On top of that, they also offer house construction and renovation.
To be approved by PAG-IBIG, here are the requirements you must comply with:
- You must have at least two years of savings in the organization. But you can also make a lump sum payment.
- The member must not be more than 65 years old when applying for a house loan. Additionally, not above 70 years old when the maturity date hits.
- You should also have a legal capacity to buy and own a property.
- The member must also qualify for PAG-IBIG’s background or credential checks.
- You must also have no previous PAG-IBIG Fund Short-Term Loan that is still paying.
- Lastly, you have no previous loan that has been canceled or foreclosed.
You may take out a loan of up to six million pesos worth of real estate property. But it still depends on the actual or amounts payable to the developer and your capacity to pay.
Bank Financing or Loan
Some developers are not accredited by the PAG-IBIG, especially if they offer high-end residential units and higher TCP. The way to go is bank financing. It is an agreement between two parties, the borrower and the lender. The lender is usually a bank, while the borrower is the homebuyer. Both parties will make a contract stating the negotiated arrangements regarding the loan or mortgage payment, such as maturity value, maturity date, and the interest indicated in the loan.
Potential clients may loan as high as 90 percent based on the agreed total contract price of the property. You can pay the debt for 25 years, including the interest. However, payment policies differ from other banks. The agreement depends on the ability of the borrower to pay as well as the value of the property.
Normally, the homebuyer shoulders the payment for equity or TCP. However, some real estate developers offer you a small allocation of units and have bank financing. So, be wise and make sure to assess everything before you decide on purchasing a unit.
What Are the Advantages of Bank Financing?
Before you take out a bank loan for your house or condo, we are here to guide you on why it is convenient for you. By doing this, you can weigh which type of financing suits your personal and financial capacity.
- Lower Interest Rates: If you compare the interest rates of banks from other funding companies, bank loans have the lowest interest rates.
- Flexible Payment Terms: They provide various payment terms for the clients which are more suitable for their financial capabilities.
In-house financing and bank lending are almost similar in nature. If you are not approved in the previous funding we have talked about, go for in-house financing.
There are some cases where borrowers cannot be approved in banks; developers gladly offer in-house financing for them. It refers to the flexibility of the payment made by the seller and buyer. In other terms, the client directly borrowed from the developers or company to acquire assets or property.
It is better because purchasers do not have to wait to process their loan money. Another thing, the buyer does not need to pay the total amount. Instead, they can have an agreement where payment can be stretched for several months.
While banks have tighter documentary standards, bank lending is more advantageous than the former. It offers lower interest rates. Transferring the title into your name is easier and quicker if the collateral you used is under your name. If you want to use the said property as your indemnity, the title of the condominium will be transferred under your name, but the bank will hold it and will be released only after you complete the mortgage payments.
What Are the Advantages of In-House Financing?
What makes income important? They do not require you to submit documents compared to banks. They will base the verification of the borrower on their ability to pay the amount required monthly on time. Financial advisors highly suggest that getting a maximum loan must not exceed your monthly income. Here is an illustration to further understand it. Compute your annual salary, deduct taxes and all your expenses and multiply it by 2.5 or 3. This is the maximum amount of loan you can get.
Residential tower developers usually offer in-house financing. Those developers provide above-average interest rates and provide extended payment terms, depending on the agreement between the two parties. The contract’s maturity date can range from five to ten years for 80 percent of the contract price. The 20 percent is for the down payment. You can acquire a loan with a fixed interest rate for a maximum amount of Php 5 Million. After five years, the interest rate will be subject to review.
Listed below are the pros of In-House Financing:
- Installment Payment Options: It enables the client to have a better option when paying their loan. It can be divided equally for several months and more convenient than loaning in a bank.
- Rapid Transaction: The advancement of our current technology enables companies and clients to inquire and process their concerns online. With a tap of your fingers on your phone, you can gain instant funding for your dream home.
- Interest Rates are Fixed: It will not be subject to unpredictable fluctuation. Factors such as political and economic will not affect the loan. Borrowers will always know the exact due they need to pay every month.
With a 20 to 30 percent TCP, in-house financing can guarantee you to be approved with the loan. While banks require their borrower to submit different documents and be more strict when approving the mortgage loan. It is the most convenient option for non-resident citizens and foreigners to acquire a property here in the Philippines. The bank has restrictions such as a minimum number of years of residency and endorsement of the loan agreement for the approval of the loan agreement. Make sure to transact with a legitimate realtor to guide you with your loan approval.
Common Requirements in Applying for a Loan
- Latest Income Tax Return
- Latest Payslip or Proof of Income
- Proof of Billing
- Employment Certificate
- Service Duration and Salary
The amount banks and other funding can release will also be based on your age and income bracket. The higher your income, the higher the loan you can get. They also consider the property type and the location, and the most important thing is the current value of your property on the market or the fair value of the asset.
Factors to Consider Before Taking Out A Housing Loan
Several factors can affect your housing loan approval. With that, here are the top two considerations you must check:
This is the primary basis of the main criteria and the basis of lenders. Before taking out a loan, assess your financial capabilities and analyze your spending habits. A housing loan is a huge commitment, where it even requires you to live below your means.
Other Debts or Financial Obligations
If you have other loans, you must consider them as well. As much as possible, avoid undertaking other financial obligations that may hinder your monthly amortization.
Assess Before You Risk
Most financing companies and organizations, such as PAG-IBIG, penalize the borrower once they skip monthly amortizations. They even foreclosed the properties. To avoid this event, you must assess your financial capabilities.
Before committing, make sure that you have a stable job or business to support your loan. Other than that, you must also have no outstanding liabilities to avoid problems. You also need to prepare primary and supporting documents that must be submitted. Always do your research and understand the agreements between you and the lender. With that being said, you can fulfill your dream home through careful assessment.