With the limited lot spaces in Metro Manila, young professionals, newlyweds, and entrepreneurs opt for vertical living space. There is so much convenience and comfort in living in a condominium—less travel time to the office, malls, parks, and other leisure places.
On top of that accessibility, condos ensure a sustainable and healthy lifestyle. Most condos have fitness suites, spa and wellness facilities, swimming pools, and green space. They promote a work-life-play balance that every Filipino wants to have within the business districts.
But before you buy your very first condo, here’s what you need to know about the cost of purchasing and living in the bustling cities of Metro Manila.
Condominium or Property Cost
Most people get overwhelmed with real estate jargon, such as the total contract price, down payment, monthly amortization, equity, reservation fee, and different real estate taxes. To give you an idea, we listed several terms you must know before purchasing a condo.
Total Contract Price
In case you encounter a property specialist or realtor, they will hand you out a sample computation of the property’s total amount. It can include the current market value or price, 12% VAT, and other charges. Every developer pays for additional fees associated with real property tax, transfer tax, registration fee, documentary stamp tax from BIR, and water and electricity installation.
It would be helpful to ask and research if the TCP already covered the VAT and other charges and what are the inclusions in the additional costs. More importantly, you will learn where your money goes.
The total contract price relies on the specific location. If the condo is near the central business districts, such as BGC, Makati, Manila Bay, and Ortigas, it will be much higher than other condos within Metro Manila. The amenities, view, and security also affect its price, so make sure to know your priorities. Select which place is more convenient and affordable for you. Check out this guide and tips in buying a condo and kickstart your investment.
If you have already chosen a condominium that fits your lifestyle, you will proceed to the reservation. This fee comes with a reservation agreement regarding the terms and conditions. It is also lessened from the down payment. You will also need to submit initial requirements, such as government IDs, income statement, or proof of billing.
Typically, this process is an agreement between the client and the developer, stating that the developer will take out the specific condo unit from the market. It means that no other clients can buy that even if they can pay it in cash.
For a low-end condo, it can cost around P10,000-P20,000. On the other side, mid-rise towers’ reservation fee can cost up to P30,000. While for the high end, the reservation fee can be P50,000 or more.
For some, this is the heaviest obligation when purchasing a condo. Luckily, most developers offer stretched or deferred payment terms. If you opt to own a pre-selling condo and do not need the condominium urgently, developers can provide a stretch payment while building it.
For instance, the condo’s turnover will be six years from now. Then the developers can extend the down payment of 15-20% to 72 months. This way, you will lessen your monthly costs. If you are eyeing your property as an investment, then pre-selling is perfect. You can buy and own a condo at a lower price, and by the time it turns over, the price has already skyrocketed. You can either rent your condo unit or sell it to other potential clients similar to the market value.
If this property is for personal use and needs it immediately, there are ready-for-occupancy residential towers available in the market. It can be more costly compared to pre-selling because it is already built. But if it’s near your work, you can significantly reduce your transportation expense and travel time.
Upon deciding to own a condo unit, here are some payment options they can offer:
This means paying cash upfront within a period of one to two months. The cash term, the simplest and quickest path to homeownership, ensures that you will enjoy certain benefits such as lesser conditions, no long-term payment issues, discounts, and faster processing of the documents.
The considerations you should remember are as follows:
- Allocated funds to be billed during one to two months for closing costs and the Total Contract Price (TCP)
- Amenable to more discounts and freebies. Some developers give a 10% discount for cash buyers, while others provide free air conditioners or home appliances upon turnover.
- Discount is given for in-house funding relative to your foregone investment earnings.
- Interests attached to the other conditions for payment
Bank Loan or Bank Financing Term
The term for bank financing is an arrangement between the bank, the lender and you, the home buyer, as the borrower. The borrower undertakes to pay for the mortgage or loan over a negotiated loan duration or lifetime.
Potential buyers can borrow up to 90 percent of the property’s Total Contract Price and pay for your debt for up to 25 years along with its interest. The payment depends on the bank policy, property value, and paying ability. Then the homebuyer will shoulder the balance of the Total Contract Price (TCP) or equity. But, some real estate developments can have a small allocation of units provided for long-term payment through bank financing. Before deciding to purchase, check the real estate project and its available units being offered for this payment form.
For bank lending, the considerations are identical to in-house financing, except tighter documentary standards for banks, lower interest rates, and the advantage of getting the title transferred to your name earlier when you use your collateral as another asset. The condominium title will be transferred to your name if you want to use the real estate property you bought as your indemnity, but the bank will hold it before completing the mortgage payments.
In-House Financing Term
For buyers who cannot be approved in banks for various reasons, some developers offer in-house financing. What does it mean? In-House funding refers to the flexibility of payment or loans provided by the seller to the customer. Through this, the client can buy the condominium unit with the help of the company. Conversely, the seller does not have to wait until the purchaser’s loan is processed. Simultaneously, as it can be split into several months, the buyer does not have to pay the full amount.
Moreover, In-house Financing Term is an extended payment term with above-average interest rates offered by the developer. Some residential tower developers can provide in-house financing. The payment depends on the developer and buyer; some offer five to ten years for 80% of the contract price. In contrast, some provide the maximum amount of Php 5 million. They commonly asked for a fixed interest rate for the first five years. After these years, the interest rates for the succeeding years are subject to review.
- Easy Transaction and Documentation: With the advent of technology companies and mobile applications, point-of-sale financing enables customers to gain immediate funding.
- Interest Rates Are Fixed: It is not subject to unpredictable political or economic factors because the developer takes the risk of not completing the purchaser’s payments in full.
- Advantages of Installment Options: It helps the customers by usually accessing a loan through the business where they would not have obtained a loan by conventional methods of funding, such as through a bank.
Though banks are notorious for their strict demand for mortgage loans, there is a reasonably low chance of being refused with in-house financing. It is sufficient to guarantee a down payment of 20% to 30% of the TCP.
In-house funding requirements include:
- Latest Income Tax Return
- Latest Payslip or Proof of Income
- Proof of Billing
- Employment Certificate
- Service Duration and Salary
Most non-permanent residents or foreigners choose this type of financing due to bank restrictions. The only available payment options they have are in-house funding and cash term because bank financing has a minimum number of years of country residency and family connections to endorse loan agreements.
Not knowing these real estate terms can lead to a trap or pit. Before buying, make sure to transact with the professionals and do the research. Also, you must save money for this investment.