Owning a house is a dream that we all work hard to fulfill. Since this is a more or less a one time affair for most of us, it has be planned well, taking into account all possible factors that can influence the decision. At the end of it, you don’t want to feel guilty of having invested in a project that fell short of your expectations and regret about it for the rest of your life.
For those of you investing in a home for the time, it's most likely to comes by means of a loan provided by banks and institutions. In this age where prices are always heading north, it makes sense to rely upon a loan instrument to close the housing deal.
Housing Loan Options in Philippines for First Time Buyers
Offered by the HDMF(Home Development Mutual Fund), this loan is one of its kind in the Asian region where members of the fund can avail a loan for a plethora of housing requirements which includes purchase of a house/lot/condo and also for construction. It is available for salaried, self employed and OFWs(Overseas Filipino Workers) up to the age of 65 years.
Nearly all banking institutions with a retail lending portfolio offer housing loan solutions to Filipinos who are aspiring to own a home in the country. Loan is extended for purchasing a house/condo unit, construction or purchase of a plot and towards renovation of an existing home for Filipinos between the age of 21 to 65 years. Some of the leading names in the private space are BPI, BDO, Eastwest, Metrobank etc.
Availing a loan calls for great responsibility and deep scrutiny, both before and after signing up. As a well informed home buyer, follow the checklist below and your first time experience can be a delightful one if you are taking the home loan route.
Applying with A Bad Credit
Perhaps, the most crucial determinant in loan approval. Since the quantum of loan amount involved is high, banks leave no stones unturned in ensuring all backgrounds credit checks are in place before granting a loan. As a part of the scrutiny, all past financial dealings with banks such as existing and terminated loan accounts, credit cards will be closely examined to dig out information such as late payments, defaults, foreclosures etc. with a view to understand if it poses risks for them.
Tips & Suggestions
If you have negative credit records in the past, work towards getting them resolved(if feasible) before applying for a housing loan. Do not blindly apply even if you know it will be an outright rejection. Lookout for options to rebuild your credit over the next couple of months and apply after you’re confident of having a good credit score. Do not apply with multiple banks at the same time since it will have a bearing on your credit.
Choose the Right Bank/Institution
We’ve given this the second priority since loan from the right bank can make or break the deal for you. There are many underlying factors involved in choosing the right bank which must be considered carefully. Terms such as interest rate, quantum of finance, customer service, reviews are some of the factors that should top your list. Also decide if you are taking a loan from offers in the public space or private lenders. Products such as PAG-IBIG are the most sought after in the former while a plethora of banks such as BPI, BDO provide the most competitive loans in the latter.
Tips & Suggestions
Don’t just focus on “Low Interest Rates” as a primary measure to choose the housing loan. To make sure the deal is a sweet one, use an online comparison resources where you can find unbiased and honest information to understand the product in question. Also look for a bank that has a sound network and is recognized for its after sales service for all post availment transactions.
Choose the Right Loan Amount
Typically, financing is provided up to 70-80% of the project costs, the remainder being your share. The approval and quantum is based on a complex set of factors such as eligibility, income, credit etc. Consider various aspects such as affordability, repayment capacity, residual income before accepting the loan amount offered. If there is bandwidth to increase your share, consider it every penny that you borrow will be billed interest. Lower the amount borrowed, easier to payback. Do understand the extent of finance before applying, as it gives sufficient time to decide on how much you need.
Tips & Suggestions
Once approved, try to negotiate if you feel the amount is insufficient and does not match the expectations. There is always a room to speak to the representatives to get a slightly higher amount if its falls short. On the sidelines, the applicant can also ask for a lower value before disbursal if it's in excess of what you really need.
An Optimum Tenor Does The Trick
The housing loan tenor(also called term) is a period over which you repay the principal along with applicable interest charges. In Philippines, it starts at around 5 years and can go up to 20-25 years depending on the bank and its offer. The thumb rule is, with a larger tenor, you may end up with smaller EMIs but the implication of interest charges is bigger. Therefore, the term should be chosen after considering short and long term income and financial commitments. Bottom line, the sooner you pay it off, the feeling is better.
Tips & Suggestions
The control to choose the tenor is in your hands. Based on the range offered by the bank, you’re free to choose a tenor of your choice. Remember, once frozen and the loan is disbursed, you will not be able to alter the tenor. If you have surplus monies, consider paying off the loan or make excess payment if the product permits you to do so.
Lookout for Offers
First time or not, lookout for promo and festive offers from banks which that extend exclusive benefits on your housing loan. Low interest rates, waiver of fees, freebies are some of the things you can look forward to, during the offer. Depending on your profession and employer, you can be eligible for exclusive deals. You may want to inquire further with the bank to make use of it.
Tips & Suggestions
Ask for details of fees/charges component during application. Factors such as processing fees/stamp charges can take a toll on the overall loan amount since they are deducted upfront from the disbursed value. Try to negotiate a deal where you can either get a waiver or reduction in the miscellaneous charges billed to you housing loan.
Get Mortgage Redemption Insurance(MRI)
Most of the lenders provide the MRI at the time signing the loan contract. It secures the loan amount and offers relief in case of death/disablement and works just like any other insurance such as life. It covers the outstanding loan amount and comes at premium payment either as a one time payment or annually. One can also opt for MRI outside the deal with an insurer of their choice. Some banks make it mandatory to secure the loan with an insurance. The premium amount is calculated on the loan amount which is a small value of every P1,000 of the loan amount.
You may also be required to get other insurance policies such as Fire Insurance to safeguard the house from potential hazards.
Quantum of Housing Loan First Time Buyers Can Avail
There is no disparity between how much one a first time buyer and a seasoned buyer can avail. It depends on the applicant’s qualification and the project costs. Typically, the applicant can avail up to 80% of the costs involved in producing the home. You can read the Housing Loan section on this website to understand the extent of loan offering from various banks and institutions in Philippines.
Use resources available on bankbazaar.ph to get access to up to date details about housing loan offers from various banks in the country. As a first time home buyer, the spotlight on the loan instrument should be as intense as the home itself since it's a long time financial commitment. Use the resources available on this site to compare loan offers and also get details of latest fees and charges in relevant sections.