Homebuyers are often advised to save up for a home before purchasing a real estate property. This is because they are usually required to pay upfront costs – such as the down payment – in the beginning of their homebuying purchase.
Here are four things every smart homebuyers should know before putting a down payment for their dream home.
What is a down payment?
A down payment (or equity) forms part of the total selling price of the home you are buying. It is the amount that you pay upfront to acquire a real estate property and is usually combined with a housing loan to pay the entire contract price.
How much do you need to pay?
Your required down payment depends on the agreement between the seller (property developer or homeowner) and the homebuyer. The typical down payment is 20% of the total purchase price of the property.
For those who can’t afford to pay the spot cash down payment, you can negotiate for an agreeable payment terms. Many developers now allow homebuyers to purchase properties by spreading out the downpayment within a particular time frame, but you would need to pay the installments in Postdated Checks (PDCs).
Don’t have enough for a downpayment yet? Read these seven ways how overspenders save money.
When do you pay the downpayment?
A homebuyer will start paying the downpayment depending on when he or she has paid the reservation fee for the unit. After the reservation fee has been processed, you will be advised with the specific due dates for your succeeding monthly payments.
Can I get a refund on my preselling condo?
This question is perhaps among the most popular among homebuyers, especially with first-timers.
Although many Filipinos aspire, and ultimately get to purchase a condo or a house and lot for sale, there are some forces or situations beyond our control that could hinder one from fulfilling his dream or buying a home. This circumstance can either be failure of developer to complete building the project, your permanent lack of funds to pay your monthly amortizations, among other things.
However, it entirely depends on the terms of your contract to sell or any written instrument of agreement and existing laws whether you can qualify for a refund or not.
To illustrate, here are four situations when a homebuyer can qualify for a refund. Because not all real estate transactions are similar, it pays to consult with a lawyer for your next course of action if you do decide on cancelling your property purchase:
Scenario 1: You bought a real estate property and have been paying at least two years’ worth of down payment or more, but unforeseen circumstances prevent you with pushing through with the sale.
Why you qualify for a refund: Under the Maceda Law (Republic Act No. 6552) or the “Realty Installment Buyer Protection Act,” homebuyers who default on their payments are qualified for a 50% refund.
In the event that you have been paying for less than two years, you are qualified for a refund depending on your agreement with the seller. Otherwise, the best alternative is to sell your rights or assign the payment to another person so you can still get your money back.
Scenario 2: When a condominium or subdivision developer cannot deliver on promised time or fails to complete the project, homebuyers are entitled to a full refund if they decided not to push through with the purchase.
Why you are qualified for a refund: According to an interview with HLURB Commissioner Atty. Antonio Bernardo with a local news website, a homebuyer can demand to get their money back because as stated in Section 23 of the Presidential Decree 957 or the “Subdivision and Condominium Buyers protective Decree.”
SECTION 23. Non-Forfeiture of Payments. – No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desist from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer, may at his option, be reimbursed the total amount paid including amortization interest but excluding delinquency interest, with interest thereon at the legal rate.
Scenario 3: If the contract is voluntarily canceled by the seller, the law states that the seller should refund the cash surrender value of the payments made by the buyer on the property.
Why you qualify for a refund: The Section 3 of the Maceda Laaw (RA No. 6552), stresses that a homebuyer has a right for a refund so long as he or she has paid at least two years’ worth of down payment.
Section 3. (b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments, an additional five per cent every year but not to exceed ninety percent of the total payments made; provided, that the actual cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
Scenario 4: A buyer who bought a lot from a subdivision developer, who sold lots without license to sell, is entitled for a refund.
Why you qualify for a refund: Although the sale is still valid, the owner is still accountable for unauthorized selling and must pay the penalties. Homebuyers can annul the contract and demand for a refund. If the developer failed to address this concern, the homebuyer may file a complaint with the Housing Land Use and Regulatory Board (HLURB).
Final Words of Advice
Before purchasing a condominium or house and lot, make sure you read and understood the provisions on your contract. Practicing due diligence is your best protection so that in the event of non completion of project by developer or failure on your part to continue payment, you know what you actions to take.
Ensuring that you and the developer are in the same page before you finalize a deal will help avoid problems (miscommunication, misunderstanding, etc.) in the future since everything is in black and white. Keep in mind that the seller is also entrusting with you their property and allowing you to purchase it in installment in good faith.
Have more questions about buying a home? Read on the Top 10 Common Questions Homebuyers ask about Philippine real estate laws.