In today’s competitive and fast-paced world, buying our dream home is one of our biggest aspirations. It’s more of an accomplishment when we look back at the dedication and hard work that we have put into saving up for a nice house in a decent location or neighborhood. We will all agree, that is no easy task.
Research shows that the economy of Philippines is constantly growing and this comes with a growing need for more developed and comfortable residential properties as well. Because of this, banks now offer various flexible options to help us buy our dream home. Now getting our dream home, furnishing it the way we always desired and maintaining it in the best way possible is now only a step away. Get yourself a housing loan and move to your new home.
What is a housing loan or a home loan?
A housing loan or a home loan is a loan facility provided by banks or other lending institutions to help buy a plot of land or a house; funding for the construction of a house or renovating the same. Housing loans in the Philippines can be used to purchase condominiums as well.
Almost all banks in the country offer housing loans today and the information available regarding the same is almost overwhelming. It indeed is difficult for us to make a choice because these home loans offered by various banks are not standard across all banks and there is a lot more to them behind the “lowest interest rates” that are advertised.
There are numerous factors that affect the application and approval process for a home loan, some of them being:
- Profession or Nature of work
- Salary or Income Bracket
- Property type (Plot, house etc.)
- Location of property
- Current Market value of the property
While these are some of the factors that will be dug into to check if you are eligible for a home loan, banks also request for the applicant’s employment & business records and statements to substantiate your income to check your income capacity to pay off the monthly EMIs or dues.
It’s not just a background check of your financial status that is looked into, but the property that needs financing will also be reviewed. This is to be able to assess the value of the asset in case you are applying for the construction of a house or for the renovation of a house.
Based on the details that emerge from this background check, a loan package is determined that will best suit your requirement, in terms of repayment term and interest rates on the loan.
In the Philippines, you have 2 options for home loans:
- Public - in the PAG-IBIG form
- Private - in the form of banks
The major banks that provide home loans in the Philippines include Security Bank, BPI and BDO.
How important are low rates of interest on your home loan? Are low rates of interest all that matter?
Banks always advertise their lowest rates of interest to be able to attract prospective clients easily. More often than not, this is just a marketing strategy.
Before deciding which financial institution to get your loan from, look at the table below to know of the lowest rates of interest that some banks offer. Make a wise decision while choosing a bank because the rate of interest that you actually end up paying might affect your repayment amount in the long run. You might also want to consider the tenor over which you want to repay the loan. It is advisable to try making a down payment of a larger amount so that the EMI ends up being of a lesser amount. This will ease out your monthly payments as well as ensure you repay comfortably over the tenor of the loan that you have chosen.
|Banks||Rates of Interest (in percentage) for the Fixing period of 1 year|
|Security Bank||5.25 percent|
|Bank of Philippines Islands (BPI)||5.50 percent|
|Philippines National Bank (PNB)||5.75 percent|
Note:The above mentioned data is accurate as of 26th November, 2015.
However, while applying for a home loan one must remember that different banks have different terms but most of them offer a fixed rate of interest on the first year of the loan and the years thereafter are subject to change. This change is a result of the property being subject to repricing.
- Look back on your financial capacity. In how many years will you be able to repay your loan? If you are sure of the term in which you will be able to repay your loan, go for a loan which offers a fixed rate of interest.
- If you are not sure of the time period over which you will be able to repay your loan, or you need a low monthly EMI, go for the longest term available even if it means paying a high rate of interest.
- If you are sure of being able to pre close a loan in a short period of time because you have multiple sources of income, opt for a loan with the lowest rate of interest in the market.