Different Types of Housing Loans for Filipino Homebuyers
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- by Rebusel Duphilco Admin,
- January 08, 2022
Depending on the need and financial capacity, there are several types of housing loans available for Filipino homebuyers
It is every Filipino family’s dream to purchase their own home. To realize this dream, they toil hard, adjust their priorities, and save up. But the labor does not stop there, because the buying process itself can be tricky so you have to wise up and carefully plan how you would want to purchase your property. Since not everyone is financially capable to pay for a home upfront, some opt to secure home financing from different sources. Thankfully, there are different types of housing loans for Filipino homebuyers that we have rounded for your reference.
1. In-house Financing Schemes
Some buyers choose to pay for their properties in installments, which is why developers offer
their buyers financing schemes that are tailor-fit to their financial capacity. The advantage of
this financing scheme is its relatively lenient and quicker application processes that do not
entail much paperwork or background checks; you basically pay for the property in staggered
payments. The bane in this type of financing scheme, though, is its higher interest rates (which
could go as high as 18 percent) and shorter loan terms. So with this, you need to make sure that
you have planned out your finances properly.
Who can possibly avail of in-house financing?
Buyers who should consider in-house financing are the following:
Buyers who cannot provide documents required by a bank, such as proof of income
Buyers who will be financially assisted by a foreign spouse, parents, or relatives
Buyers with an unsatisfactory credit card payment history, or those who have an unpaid loan
from a financial institution
What are the other advantages?
Aside from the fact that in-house financing is a bit easier to apply for, their interest rates are
fixed and are not subject to volatile political or economic conditions. This is because the
developer is shouldering the risk of the possibility that the buyer will not be able to complete
the payments in full.
Also, with in-house financing, there is no third party and you are transacting directly with the
developer.
Are there any disadvantages?
The interest rates of in-house financing tend to be higher; they can be within the range of 14 to
21 percent. Also, while bank loan payments can be extended up to 20 years, in-house
financing requires a shorter time frame.
What are the minimum qualifications for potential in-house financing applicants?
Buyer must be at least 21 years old
Buyer must not be more than 65 years old upon loan maturity
What does one need to submit in terms of documents?
As is often the case with banks, requirements may vary, but let’s take the developer of this
project as an example. Should you decide to purchase one of their properties through in-house
financing, be prepared with the following documents:
If you’re locally employed:
- 2 pcs. 2×2 ID picture
2 pcs. government-issued ID
- Birth certificate (if single) / marriage certificate (if married)
- Certificate of No Marriage or CENOMAR (if single and above 30 years old)
- Tax identification number (TIN)
- Residence certificate (cedula)
- Proof of billing address (with Barangay Certificate, if renting)
- Notarized Contract of Employment with Compensation
- Bank statements (within the last 6 months)
- Payslips (within the last 3 months)
- Latest income tax return (ITR)
If you’re an OFW/ Immigrant:
- 2 pcs. 2×2 ID picture
- 2 pcs. government-issued
- ID
Birth certificate (if single) / marriage certificate (if married)
- CENOMAR (if single and above 30 years old)
- TIN
- Passport (original and photocopy)
- Notarized/consularized Contract of Employment with Compensation
- Bank statements (within the last 6 months)
- Payslips (within the last 3 months)
- Proof of remittances (within the last 6 months)
If you’re self-employed or a business owner:
- 2 pcs. 2×2 ID picture
- 2 pcs. government-issued valid ID
- Birth certificate (if single) / marriage certificate (if married)
- CENOMAR (if single and above 30 years old)
- TIN
- Residence certificate (cedula)
- Proof of billing address (with Barangay Certificate, if renting)
- Bank statements (within the last 6 months)
- Payslips (within the last 3 months)
- Latest ITR
- Audited financial statements (2 years)
- Valid business registration
- List of suppliers and clients with contact numbers
- Vehicle official receipt/certificate of registration (if transport business)
- Business permits/SEC/DTI Registration
- Picture of business establishment/s
- Company profile (if applicable)
Professional Regulation Commission card (for practicing professionals)
What’s a typical in-house financing scheme?
Suppose you are buying this house in Cavite and you want to acquire it through in-house
financing, you must be prepared to shell out 30 percent of the unit price as a down payment,
payable within 12 months. The remaining 70 percent is payable within 5 or 10 years.
Note that the terms are slightly different if you’re buying during a development’s pre-selling
period. The 30 percent down payment is payable within 24 months and the remaining 70
percent is payable within 5 or 10 years. The downside to this is you will have to wait a while
before moving in.
In-house financing or not, make sure you invest in a property from a reputable developer you
can trust. your hard-earned money is on the line, so it’s only right that it goes to a place that’s
completely worth it.
2. Bank Housing Loans
Housing loans offered by the commercial bank are a popular choice because they usually come with
lower interest rates and the terms can be flexible. While there are common qualifications and
requirements for different banks, they tend to have some nuances with regard to the terms,
interest rates, requirements, and such. They also have stricter qualifications, so it is important
to get yourself prequalified to know if you are eligible to secure a housing loan. One way to get
your chances of getting approved for a loan is to have your credit history cleaned up before
sending an application.
Banks usually offer housing loans for up to 25 years. Interest rates vary from bank to bank, but
at present can be between 4.99 and 7.75 percent. The maximum loan amount an applicant can
apply for depends on the proposed collateral, but the loan-to-collateral ratios can go from 60 to
80 percent.
Also known as a Housing Loan or Home Loan, this refers to the amount of money you borrow
from a bank or financial institution and is given for the specific reason of buying a real estate
property rather than funding a business.
Employment Status
Typically, banks will require you to be employed for a minimum of two years with a specified
minimum gross monthly income before you can apply for a loan. If you own a business, you
must meet the minimum years of operation and prove significant financial profit.
Interest Rates
Bank financing typically has fixed interest rates and payment terms that you will need to oblige
by. However, in some cases, the interest rates may be adjustable. Unique factors such as
economic conditions can also help determine this factor.
Banks typically provide you with adjustable interest rates that can go anywhere between 5% to
12% per annum. Meanwhile, fixed interest rates usually have a decided period between 1 to 5
years that banks will assess after the term. This can be a good or bad option depending on the
economic state of the country.
Repayment Terms
Your bank can also offer you longer payment terms, ranging from 5 to 20 years, based on your
financial capacity. This is an excellent benefit for those who prefer to balance their finances
over time.
Bank loans are an advantage because of their extended payment plans. However, a
disadvantage is that they often charge you several fees such as property appraisal, registration,
notarial, handling, etc.
Requirements
Bank financing is the more traditional type between the two options and is easy to apply for, as
long as proper requirements are met. These include preparing the correct documents such as
Income Tax Returns, financial statements, certification of employment, payslips, valid
identification, etc.
Banks usually list requirements on their website or give this out through their customer
representatives over the phone or in person.
Qualifications
- At least 21 years old but not older than 65 years old upon the loan’s maturity
- Filipino citizen or having a permanent visa in the Philippines
- Must be employed with a monthly income of at least Php30,000
- The applicant must be a regular employee of a company for at least two years
- If the applicant is self-employed, must be in business for at least two years
Requirements
- Any valid or government-issued ID
- ITR
- COE
Transfer Certificate of Title (TCT)/Condominium Certificate of Title (CCT)
- Tax declaration
- House plans/vicinity map/bill of materials
- Marriage contract (if married)
- Certificate of business registration (for business owners)
- Proof of remittance for three months (for OFWs)
3. Pag-IBIG (just integrate or incorporate the previous article we have)
The Pag-IBIG Fund is the government’s provident fund program that helps employed Filipinos to
purchase their home. Loans from Pag-IBIG can either be used for reconstruction and repairs, or
for purchasing a pre-owned or brand-new house or a condominium unit.
The maximum amount a Pag-IBIG member can borrow is Php6 million. However, this is subject
to certain conditions. For instance, the maximum amount that a member can borrow depends
on his or her actual need and his or her capacity to pay. The interest rate will also depend on
the loaned amount, but will not exceed a maximum of 11 percent per year.
Pag-IBIG Fund also offers loans to finance affordable housing—defined as houses not costing
more than Php750,000. This is available for members whose monthly income does not exceed
Php17,500 for those working in Metro Manila, and Php14,000 for those working in other
regions.
The maximum term for Pag-IBIG housing loans can be up to 20 years, while interest rate is
between 6.5 and 11 percent. The amount of the loan depends on the member-applicant’s
monthly contribution, but is usually 80 percent of the property’s selling price.
Qualifications
- Must be a member of Pag-IBIG for at least 24 months
- Not more than 60 years old upon the date of loan application and not more than 70 years old at
the age of loan maturity
- Can legally acquire real property
- Has no outstanding housing loan or Pag-IBIG loan that was foreclosed
Requirements
- Completed Pag-IBIG housing loan application with recent ID photos
- Membership status verification slip
- Birth certificate (if single)
- Marriage contract (if married)
- Notarized COE or one month payslip for government employees
- ITR
- Special Power of Attorney, job contract, and photocopy of visa (for OFWs)
- Proof of billing address
4. SSS
The Social Security System (SSS)—the state-run social insurance program for non-government
employees—offers a housing loan that caters mainly to overseas Filipino workers (OFWs). This
particular housing loan’s goal is to provide a means for OFWs to purchase socialized or low-cost
housing. In addition, this same program also offers loans that can be used for the construction
of a house.
The terms for SSS housing loans can reach a maximum of 30 years, while their interest rates can
be between 7.5 and 11 percent. The maximum loanable amount is Php2 million.
Qualifications:
Applicant must be an SSS member OFW and must not be older than 60 years at the time of
application
Must have made 36 (non-consecutive) or 24 (consecutive) monthly contributions
Has not been previously granted housing loan by the SSS
Is up-to-date with all contributions
Requirements:
- COE
Latest ITR
- Tax declaration
- TCT or CCT of the property
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