Buying a home is going to take a lot of time, money, and patience. You’ll consider a lot of factors when you’re buying a home. There’s the matter of location, and whether you’re willing to commute. There’s also the area’s security, and whether you’re financially prepared for the financial responsibility that owning a home entails.
While you may have found the perfect home for you, the next question becomes: “How am I going to pay for all this?” There are several options in the country when it comes to financing the purchase of a home. Here’s a look at some of them.
Social Security SystemThe SSS offers loans that can be used to build a new house, buy an existing house, or finance the purchase of a townhouse or condominium unit. The loan amount ranges from a minimum of Php 400,000 to a maximum of Php 2,000,000.
The interest rate on an SSS loan is 8% to 11% per year, depending on a review that happens every six months. It may also be fixed on loans not exceeding 15 years while loans exceeding that may be subject to repricing every 5 years.
Applicants must be a member not older than 60 years upon application, as those at 60 years are subject to a maximum loan term of 5 years. They must also be up to date on their SSS contributions.
Note: SSS no longer offers direct housing loans. They do, however, offer the following: Direct Housing Loan Facility for Workers’ Organizations Members; Direct Housing Loans Facility for OFWs; House Repair/Improvement Loan; Assumption of Mortgage
Pag-IBIGLoans made for housing via Pag-IBIG Fund have lower interest rates compared to before and higher loan amounts owing to 2012 reforms that were placed to cater to minimum wage earners. Loans from Pag-IBIG can be used to finance purchase of house and lot, residential lot, or condo. Pag-IBIG loans can also be used to finance construction of a new house and home renovations/improvement.
Interest rates for a housing loan are pegged at 8% to 11.5% while loan terms are at a maximum 20 years, or 15 years for OFWs. A qualified Pag-IBIG member can borrow an amount up to a maximum of Php 6 million.
Applicants must be a Pag-IBIG member for a full 24-month period and have no existing housing or foreclosed property loans. Additionally, the borrower’s monthly amortization cannot exceed 35% of their total gross salary. A borrower must also be under 60 years of age upon application, and under 70 upon loan maturity.
Bank LoansA housing loan borrowed from a bank is vastly different from one that you might get from government organizations as you will require collateral in order to secure the loan, which is the home you plan on purchasing.
A bank loan is similarly versatile, allowing you to finance the purchase of a vacant lot, existing houses or condominium units, construction, and renovation of your home and refinancing. Requirements can vary depending on the bank and your employment status.
Interest rates for banks can range from 5.75% to 12%, the lower amount subject to repricing after a year, but borrowers can opt to lock in their interest rate for 1 to 5 years. As for the amount, it will depend on your paying capacity, but it starts at a minimum of Php 400,000 to 80% of the property value.
Applicants must be 21 years or older, but younger than 60 years. You must also be a regular employee at your company for at least 2 years with a monthly gross income of Php 30,000. If you are a business owner, your business must be in operation for at least 2 years.
In-House FinancingThis form of financing comes from developers, allowing their buyers payment schemes that suit their ability to pay. This also means that interested buyers will pay their monthly amortization to the developers. This type of financing is less stringent with requirements, and the developer takes care of processing the loan directly.
Interested buyers will have to pay 10% or 20% if the project is pre-selling, and if you pay spot cash – or as soon as the unit is turned over, you can get a discount. The amount you pay also determines whether your monthly amortization and balance are higher.
Kyle Kam is a guest contributor from MoneyMax.ph, a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.