Not every one is capable of paying for their property purchase in cash. That’s why private and government institutions offer housing loans to help buyers own their dream home. When it comes to home loans, there are 2 main financing institutions that offer this: Bank and Pag-ibig Fund (or Home Development Mutual Fund).

Now you may ask, what is the difference between these 2 loan institutions? Which one should I go for?

Banks are owned by private corporations while Pag-ibig is backed by the government.

How do you qualify for a loan?

Pag-ibig Fund Qualifications

• You need to be a Pag-IBIG Fund member who has made 24 consecutive monthly payments. If you need to get a loan now and you’re not a member yet, don’t worry. You can just pay a lump sum that is equal to 24 monthly payments. Since the minimum monthly contribution is 200, multiply that with 24 months=4,800.
• Be no more than 65 years old on the date of the application, and not over 70 years old at loan maturity.
• Pass background and income credit investigation
• Be legally able to acquire a property in the Philippines – must be of legal age and a Filipino citizen.
• Have no bank or HDMF loan that has been foreclosed on

Bank Loan Qualifications

• Be of legal age and not more than 65 years old at loan maturity. Your age will determine your loan term. Most banks give a maximum loan term of 20 years.
• Be a Filipino citizen
• Have a viable income source, either thru employment or business.

The main differences between the bank and pagibig when it comes to qualifying for a loan are:

• AGE LIMIT. When it comes to the loan age limit, Pagibig gives a higher limit-at 70 y/o compared to the bank at 65 y/o.
• You need to be a Pag-ibig member to avail of a Pag-ibig loan. With bank financing, you don’t need to be a depositor at that bank to get a loan. You just need to prove that you’re a qualified borrower.

Interest Rates

Bank and Pagibig interest rates in the last few years were at 6-7% per annum for a 5 year fixing period. Now, because of the pandemic, BSP has adjusted its interest rates and they’re now at an all time low.

Pag-ibig – 5 year fixing period 5%

Bank – 5 year fixing period – 6.5% . Last year it was at 6.88%

Loanable Amount

The minimum loanable amount for banks is P500,000. This is why for socialized housing projects, where the loan amount is 450,000, the only option is Pag-ibig financing.

The maximum loanable amount for banks will depend on these 3 factors:

• Age of borrower – age of maturity is 65 y/o
• Gross monthly income – both spouses if married
• Appraised value of the property. For house and lot, construction loan – you can loan 80% of the appraised value or 80% of the bill of materials. For condos/lot only – 70% of the appraised value.

Investing in a property is a huge decision. This is why you need to carefully weigh your options as to which type of financing is best for you.