Owning a house is what most people dream of as it not just provides shelter, but also security. A house is a status symbol and it is also an investment as you can give it out on rent and use it as a collateral to avail loans. Every person saves up all their life to purchase a home, but the real estate prices are always high. This is the main reason why most people obtain a loan to realize their dream of owning a house. The most common way to source finance is to obtain a home loan from the bank. But, that is not the only form of funding that is available. The other two common methods of financing are through in-house financing and Pag-IBIG.
Bank Housing Loans
Bank housing loans are the loans offered by the commercial banks. The interest rates are lower and the terms are flexible. Buyers will be required to meet common qualifications. Commercial banks will have stricter qualification requirements. It is important to get prequalified so that the buyer can obtain the loan easily and it will help them compare the loans available in the market.
In-House Financing Schemes
In-house financing schemes are offered by the developers. Buyers prefer to opt for these schemes as they tailor-fit to their needs. There is minimum paperwork required and buyers will be paying for the property in staggered payments. The interest rates will be higher and the tenures will be short.
This is a government’s provident fund program that helps the employed Filipinos to buy their homes. The loans offered by Pag-IBIG can be used to purchase a new or a pre-owned house, or for reconstruction and repairs. The loan amount offered depends on the capacity to repay and the need.
Bank Versus Pag-IBIG Versus In-House Financing
Following are the differences between Bank, Pag-IBIG, and In-house financing:
|Loan purposes||The loan can be used to purchase a condominium unit or a townhouse.||The loan can be used to purchase a lot that does not exceed 1,000 sq. meters.||The financing is offered to purchase a house sold by the developer.|
|Qualification||Need not be a member and need not have a savings account. Must be a Filipino citizen and foreigners who have a visa. Monthly income requirement is P40,000. Must have a stable source of income and should be employed in a company for at least 2 years or must be running a profitable operation for 3 years.||You are required to be a member and must have made contributions for 24 months to qualify for the loan. Must not be more than 65 years old. Must not have any existing multi-purpose loan in arrears. Should not have any other Pag-IBIG housing loan that was cancelled, foreclosed, or bought back.||Must not be over 65 years if locally employed and not be over 60 years if you are an Overseas Filipino Worker. If you are unemployed but with financial assistance, you must provide an Affidavit of support from the financier. OFWs should have a representative residing in the Philippines.|
|Amount that can be borrowed||Minimum – P300,000 to P500,000.||Maximum – P6 million subject to the actual need and the capacity to repay.||Minimum – 70% of the property value.|
|Interest rates||5.50% for the first year subject to repricing. Most banks offer a fixed rate of 6 – 7.5% for 5 years subject to repricing. On the 20th year, the banks offer an average of 9 – 12% interest rate.||6.99% for the first 3 years subject to repricing up to 11.375% for 30 years.||18% p.a. for 5 years and 21% for 10 year loan term.|
|Repayment tenure||5 – 35 years.||Up to 30 years.||Up to 10 years.|
|Miscellaneous fees||Appraisal fee – P3,500 to P4,000 Handling fee – P5,000 Notarial fee – P500 Registration fee Document stamps tax||Loan application fee – P1,000 Release of loan fee – P2,000||Legal and Miscellaneous fees – 4.5% of the selling price|
|Insurance||Mortgage Redemption Insurance is needed in the event of death before the full payment of the loan. Fire insurance is also needed.||The insurance premiums are included in the monthly repayments.||Mortgage Redemption Insurance and fire insurance premiums for the first year are covered in the Legal and Miscellaneous fees.|
|Processing time||5 – 7 business days.||15 business days.||Varies from developer to developer.|
Taking a loan from a developer is less complicated, but you must be aware of the higher interest rates and shorter repayment tenures. The only reason why one should opt for in-house financing schemes is when they are denied housing loan from banks.
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