HOW TO CHOOSE THE RIGHT HOUSING LOAN
MANILA, 10 OCTOBER 2014:
Armed with the right housing loan, ahouse purchase can be made more enjoyable and fulfilling
for the common Filipino home-buyer. All it takes is some guts and a whole lot
of planning.
The best way
to get a housing loan is to think like lenders and evaluate the three things
they consider when assessing loan applications: your income, your credit
history, and your debt service ratio. Your income is important because it helps
lenders determine your capacity to repay a loan, while your credit history
sends a signal to them if you have your finances properly manage. Debt service
ratio refers to the proportion of your monthly take-home pay that will go to
your monthly amortization. As a rule of thumb, you should not spend more than
30 percent of your income on housing.
2. Determine the Amount You Should Borrow
Aside from
your paying capacity, the loan amount is also determined by the property’s
appraised value. Banks may lend a minimum of Php400,000 to up to 80 percent of
the property’s selling price.
An important
thing to remember: borrow only an amount you can pay back to avoid facing
foreclosure and losing your investment altogether.
3. Study Your Financing Options and Choose the One
That Works Best for You
Now that you
know what you can afford, it is time to evaluate which home financing scheme
offers loan terms and monthly amortizations you can live with.
To help you
weigh your choices, here is a rundown of the four home financing schemes
available to Filipino home-buyers.
a. Bank Loans
Commercial
and universal banks are home-buyers’ first resort when looking for housing
loans. Compared to other lenders, banks granter longer loan tenor and more
competitive interest rates. Although bank loans’ interest rates are adjusted
after a certain number of years, the home-buyer will still pay lower monthly
amortizations than they would under a developer’s in-house financing.
However,
banks are rather stringent when it comes to approval and require more
documents, which include valid government IDs, income tax return for employees,
certificate of employment, and pay slips, among others. The number of
requirements depends on how strict the chosen bank is, so you are advised to
seek the help of a loan officer to help you sort this out.
b. In-house Financing
Applying for
in-house financing is simple and straightforward. Most of the time, developers
require nothing more than the down payment and a verifiable proof of income,
and little or no background checking is done. But this less stringent
application process comes with a steep price: interest rates in in-house
financing can be prohibitive (14–18 percent) and loan tenor is short, rarely
exceeding 10 years.
c. Social Security System (SSS) Home Loan
An SSS
member or an overseas Filipino worker not older than 60 years old may apply for
a housing loan, provided he or she has made 24 continuous contributions prior
the application. The payment term is five to 30 years, and the interest ranges
from 9 to 14 percent per annum. Although the interest rate is reviewed every
six months, it may be fixed for loans not exceeding 15 years.
d. Pag-IBIG Fund
Officially
named the Home Development Mutual Fund (HDMF), this government-mandated
provident program offers long loan tenors (20–30 years) for members who have
made at least 24 monthly contributions and with no existing loan with another
bank or a Pag-IBIG housing loan that had been foreclosed. The maximum loanable
amount is Php6 million, with an interest of 8–11.5 percent.
Three
qualified members, as long as they are related within the second degree of
affinity (spouses, siblings, etc.), may apply for a single loan to finance the
same property.
Arguably the
most affordable and flexible home financing option, the Pag-IBIG Fund enables
minimum wage earners have a home of their own.
Buying
a house can be intimidating, but any apprehension can be dispelled by
clarifying your needs and getting enough information. By making an informed
decision, you will sleep easy at night, secure within the walls of your very
own home.
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