The housing loan route is the most preferred ways to acquire a home not only in the Philippines but across the world. Identified by many synonyms such as Home Loan, Mortgage loan etc. the purpose remains the same. Owning a home is one of the most secured investments one makes in their entire lifetime. It serves a dual benefit of not only ensuring shelter for self and family, but also acts as security for the future since the value of the property is always on rise.
In reality, most of us are unable to fund the costs of procuring a home upfront owing to the sheer size of the monetary obligations. It makes sense to borrow from a bank and fulfill the requirement than pooling all our savings and liquefiable assets at one go. In Philippines, there is a plethora of home loan products provided by both indigenous and multinational banks in the private sector. On the sidelines, PAG-IBIG is the most popular housing loan instrument in the public space which has fulfilled millions of housing dreams of Filipinos for decades.
How Does a Housing Loan Work?
It works like any other standard retail loan such as a Car or a Personal Loan. Based on your requirement and after assessing various criteria such as credit history or income, the bank disburses the loan amount either in phases or as a lump sum on the basis of the project in question. Since the loan is offered to you on the basis of certain predefined conditions such as payment of interest charges at a fixed or floating rate, you’re required to ensure timely repayment of the principal amount along with applicable interest charges for good credit standing.
There are some standard terms that you should be acquainted with as it helps in understanding the functioning and customizing the loan as per requirement. Lets look at some of the most common aspects that be customized in a housing loan.
- Principal Amount: This is the actual value of the loan which the customer receives in response to his loan request from the bank. This amount is disbursed after deduction of some standard charges such as processing fees, stamp charges etc.
- Mortgage: A term used to denote the property/house which is being pledged/offered as a collateral for securing the loan amount.
- Amortization: The most commonly used term in the world of housing loans. Amortization is nothing but the monthly repayment value which includes two different components, the principal and applicable interest charges.
- Loan Tenor: The loan term agreed between the borrower and the lender during which the latter agrees to repay on the loan amount with applicable interest charges until completion of the period allotted to clear the principal value and related charges such as interest.
- Down Payment: The share of the borrower in the overall project costs that he/she agrees to fund by himself in addition to the larger share borne by the borrower. The bank does not fund the entire cost of the project and provides loan on the basis of what the borrower qualifies for.
Now that you’re well acquainted with the most commonly used terms, let's look at how you can personalize or customize them to suit your requirements.
Customized Home loan in the Philippines
Banks and financial institutions in the Philippines offer housing loans that are highly customizable to suit your needs. Some of them like BPI have taken this aspect to the next level by offering loans with flexible terms and rates. Some of the terms that can be customized are explained below.
Based on how much you can afford as down payment, banks are willing to fund up to 90% of the project costs, giving you a free hand in choosing the down payment amount. This flexible option helps, specially in situations where you’re buying a property of substantially higher value.
We all understand the bare fact that amortization payment is not going to be an easy one as the amount can take a toll on your monthly budget and cash flows. When it comes to housing loans, the borrower is more or less free to choose a tenor of their choice on basis of multiple factors such as income and other general expenditure. One can choose a term of up to 25 years based on the upper limit assigned by the banks as per convenience.
Flexibility to Choose the Project/Builder
Most of the financial institutions that provide housing loans offer more than just loans. They partner with leading builders to present a host of housing projects that are certified and trustworthy. If you’re scouting for a condo unit or an apartment, approach the bank directly to inquire about such tie ups where you not only get the loan on priority basis, but also get to choose from a variety of housing options.
Customizing Interest Rates
Some of the banks operating in this segment offer customized interest rates for certain type of professionals or for applicants working in specific sectors or companies. Based on the eligibility, one can get exclusive rates and waiver of specific charges such as processing fees.
There are plenty of other personalization options such as the option where the borrower gets to skip one EMI(Equated Monthly Installment) payment every year without incurring any penalties. Such innovate options are redefining the way we borrow and payback.
As a well informed borrower, you must spare no efforts in understanding the housing loan market and the products it has to offer. With so many resources available at your disposal, deciding the loan you want to avail has never been so easy.
One must holistically compare various housing loan products available in the country before deciding to choose one. bankbazaar.ph is here to make the job easy by supplying the most comprehensive information on various home loans offered by banks in Philippines and equips the borrower with sufficient resources to help them in choosing the most optimum loan to sync with the requirements. Use our housing loan(Navigation available on the home page) section to read more about the offers from various banks.