Bank vs Pag-IBIG Financing in Buying a House in the Philippines?

Home >> Real Estate How To’s & Tips

Which is Better: Bank vs Pag-IBIG Financing in Buying a House in the Philippines?

Buying a house in the Philippines is a significant financial decision, and choosing the right financing option is crucial. Two popular choices for home financing are bank loans and Pag-IBIG loans. In this article, we will explore the differences between these two options, including their pros and cons, qualification requirements, loan purposes, and interest rates. By the end, you’ll have a clearer understanding of which is better: Bank vs Pag-IBIG financing in buying a house in the Philippines.

Main Difference Between Pag-IBIG and Bank Loans

The primary difference between Pag-IBIG and bank loans is the maximum loanable amount. Pag-IBIG has a maximum loanable amount of 6 million pesos, making it suitable for more affordable homes or those with lower borrowing needs. On the other hand, banks do not have a fixed maximum loanable amount, allowing for more flexibility and the ability to finance higher-value properties.

Pros and Cons of Pag-IBIG Loans

Pros of Pag-IBIG

Pag-IBIG loans offer lower interest rates and longer repayment periods, with terms extending up to 30 years. This can significantly reduce monthly payments, making homeownership more accessible. Additionally, with Pag-IBIG loans, you can get anyone to be your co-borrower as long as they have a Pag-IBIG membership. If they’re currently not a Pag-IBIG member, then you can have them apply as a member and pay 24 months worth of membership one time so they can be eligible. 

Cons of Pag-IBIG

However, Pag-IBIG’s maximum loanable amount of 6 million pesos may not be sufficient for higher-value properties. The qualification criteria are also more stringent (they have more requirements compared to bank financed loans), which may limit accessibility for some borrowers.

Pros and Cons of Bank Loans

Pros of Bank financing 

Bank loans can offer higher loan amounts, making them suitable for more expensive properties. They typically have more flexible qualification criteria compared to Pag-IBIG, which can make it easier for some borrowers to obtain financing.

Cons of Bank financing 

The downside of bank loans is that they may come with higher interest rates compared to Pag-IBIG loans. Banks also usually offer shorter repayment periods (15-20 years), which can result in higher monthly payments. Although, some banks now such as Maybank offer a higher loan term of 30 years. 

BPI also has a Maybahay program with a maximum loanable amount of 3 Million that offer loan term of 30 years. 

You can check it out here : https://www.youtube.com/watch?v=xXc0MqBdgrc&t=2s&ab_channel=AlexZeta

How Do You Qualify for a Loan?

Pag-IBIG Loan Qualification

To qualify for a Pag-IBIG loan, you must:

  • Be an active Pag-IBIG member with at least 24 consecutive monthly payments.
  • Be no more than 65 years old at the date of application and not more than 70 years old at loan maturity.
  • Pass a background and income credit investigation.
  • Be legally able to acquire property in the Philippines (Filipino citizen).
  • Have no foreclosed bank or HDMF loan.

Bank Loan Qualification

Bank loan requirements are similar to Pag-IBIG, with some differences:

  • The maximum loan term is typically 20 years for most banks, although some like Maybank offer 30-year terms.
  • Must be a Filipino citizen (foreigners can obtain loans but often at higher interest rates).
  • Must have a viable income source, whether through employment or business.

Loan Purposes

Pag-IBIG Financing

Pag-IBIG loans can be used for:

  • Buying a residential lot
  • House construction
  • Home Improvement
  • Refinancing an existing housing loan

Bank Financing

Bank loans can be used for:

  • Buying a residential lot
  • House construction
  • Home Improvement
  • Refinancing an existing housing loan
  • Buying a condominium unit
  • Buying a townhouse
  • Buying a commercial property

Different Types of Home Loans

Both banks and Pag-IBIG offer various types of home loans. For a home purchase, the loanable amount is typically 80% of the appraised value. For lot or condo purchases, the loanable amount is usually 70% of the appraised value. Construction loans typically cover 80% of the bill of materials. Home improvement loans are available for renovating an existing home, and refinance mortgages are available after two years of regular mortgage payments with no history of default.

The appraised value is determined by a bank or Pag-IBIG appraiser and is usually lower than the selling price. Equity is the difference between the selling price and the loanable amount, paid by the buyer to the seller in cash.

Interest Rates

Interest rates vary between banks and Pag-IBIG. Bank interest rates typically range from 6-8% per annum for a five-year fixing period. In contrast, Pag-IBIG’s interest rates are currently at an all-time low due to the pandemic, often lower than bank rates.

Loanable Amount

The minimum loanable amount for banks is ₱500,000. The maximum loanable amount depends on the borrower’s age, gross monthly income, and the appraised value of the property. Co-borrowers can also affect the loanable amount. For banks, the co-borrower must be a first-degree relative (e.g., parents, siblings), while for Pag-IBIG, the co-borrower can be anyone who is also a Pag-IBIG member.

Pag-IBIG members can take up multiple loans, up to a maximum of ₱6 million. Additionally, Pag-IBIG has a higher age of maturity (70 years old) compared to banks.

Conclusion

When deciding between bank vs Pag-IBIG financing in buying a house in the Philippines, it’s essential to consider your financial situation, the property value, and your long-term plans. Pag-IBIG offers lower interest rates and longer repayment terms but has a lower loanable amount and stricter requirements. Banks provide higher loan amounts and more flexible requirements but come with higher interest rates and shorter repayment periods. Evaluate your needs and qualifications to determine the best financing option for your home purchase in the Philippines.

Home >> Real Estate How To’s & Tips

How to Apply for a Home Loan in the Philippines


If you’re considering buying a home in the Philippines, understanding the home loan process is crucial. This comprehensive guide will walk you through everything you need to know about applying for a home loan in the Philippines, from start to finish. Whether you’re purchasing a ready-for-occupancy (RFO) property, a pre-selling unit, or planning to construct your dream home, we’ve got you covered.


What is a Home Loan?

A home loan, also known as a mortgage, is a type of loan specifically for purchasing residential properties. This financial assistance can be used for different types of properties, including RFO houses and lots, condominiums, and even vacant lots.


Types of Home Loans


  1. Home Loan for Purchase of Ready for Occupancy (RFO) Property
    An RFO property is a house and lot, condo, or lot that is ready for you to move into upon purchase.

  1. Home Loan for Purchase of Pre-Selling Property
    Pre-selling properties are those still under development. They offer the advantage of lower prices and flexible payment terms. Pre-selling properties require the same documents as other home loans but don’t need an appraisal fee. The loanable amount for these properties can be higher, often up to 80-90% of the total contract price. Equity payments can be made in installments without interest, and the term depends on the development stage, ranging from 12 to 50 months.

  1. Construction Loan
    If you already own a lot and wish to build a home according to your specifications, a construction loan is ideal. This type of loan finances the building process from start to finish. The bank will appraise the lot and require a bill of materials. Typically, you can borrow up to 80% of the bill of materials’ value and 70% of the lot’s appraised value. The loan amount is released in installments as the construction progresses.
  1. Equity Loan
    An equity loan uses an existing property you own as collateral. It’s often quicker to process since the title is already in your name but has higher interest rates (3-5% more) compared to other types of home loans and can be used to purchase additional property or for business purposes.

Steps to Apply for a Home Loan


Step 1: Submission of Required Documents for Home Loan

You’ll need to submit various documents, including a filled-out home loan application form and, if applicable, a marriage certificate and income documents. You can coordinate with the Zeta Group Team for your application since we have contacts with various banks to expedite your application. 


Step 2: Property Appraisal

The bank appraiser will assess the property’s value. This appraisal helps determine how much the bank is willing to lend you. The bank will usually lend the borrower 70-80% of the appraised value. You can try to request for a higher loanable amount, subject to bank approval. 


Step 3: Appraisal Fee Payment

An appraisal fee, ranging from 5,000 to 10,000 pesos, is required. The exact amount varies depending on the bank.


Step 4: Loan Approval

Once your application is approved, you can borrow up to 80% of the appraised value for a house and lot, or 70% for a lot only or a condominium.


Step 5: Equity Payment

The difference between the selling price and the loanable amount is called the equity. Typically, the equity or down payment is around 30% to 40% of the total contract price. For example, if you’re buying a house worth 10 million pesos with an appraised value of 9 million pesos, your equity would be 3.8 million pesos, plus taxes and fees totaling approximately 4.8 million pesos. Borrowers will be unable to obtain a loan for the total contract price since the bank will require a down payment. However, the higher the appraisal, the higher the loan amount. This will in turn decrease your required down payment. 


Basic Requirements for a Home Loan


  • Proof of Income: Payslips, income tax returns (ITR), or bank statements.
  • Property Documents: Title, tax declaration, etc.
  • Government-issued IDs
  • Additional Requirements for Specific Loans:
    • Pre-selling Properties: Developer’s computation and reservation agreement, proof of equity payment.
    • Construction Loans: Bill of materials, construction timeline, and budget.
    • Equity Loans: Property valuation report, proof of ownership.

Submission Process


Basic Requirements

  • IDs with three specimen signatures
  • Marriage certificate (if married)
  • Filled-out home loan application form

Income Documents

For locally employed or OFWs: Certificate of Employment (COE) or job contract, and the latest three-month payslip.

For business owners, professionals, or online workers: Income Tax Return (ITR) and financial statements for 2-3 years, and six months of bank statements.


Special Power of Attorney (SPA)

If you’re unable to sign documents personally, you’ll need an original SPA. For buyers based abroad, the SPA must be consularized or apostilled if executed outside the Philippines, or notarized if within the country.


Filipino Citizenship

While some banks allow non-dual citizens born in the Philippines to apply for home loans, this often comes with higher interest rates.


Factors Determining Loan Amount

The loan amount depends on factors such as your gross income, age, and the property’s value used as collateral. Typically, your monthly amortization should not exceed one-third of your gross income. A mortgage calculator can help estimate your maximum loanable amount, considering any existing loans.


Sample Calculation

For a gross monthly income of 100,000 pesos:

  • Maximum monthly amortization: 33,000 pesos
  • Maximum loanable amount: 3.8 million pesos for a 15-year term at 6.5% interest per annum

Bank Approval

Bank approval in the Philippines usually takes around 15 banking days but may extend to 2-3 weeks.

When to Apply for a Home Loan

For RFO properties or private listings, apply as soon as possible. For pre-selling properties, apply at least two months before your equity term ends. Early application ensures timely processing and avoids delays. The application process is mostly online, with original documents needing to be signed at the bank.

By following these steps and understanding the requirements, you can navigate the home loan application process in the Philippines with confidence.

Need more help with your home loan application process? You may contact us at Alex.Zeta@TWRGroup.PH or via Whatsapp +63 917 851 2752 for an updated inventory and price list. 



Home >> Real Estate How To’s & Tips

How to Reserve a Property in the Philippines


Reserving a property in the Philippines is an exciting but complex process that requires careful planning and consideration. Whether you are a local buyer or an overseas Filipino worker (OFW), understanding the steps involved and what to look for can help you make an informed decision. This guide will walk you through key factors to consider on how to reserve a property in the Philippines.

Developer Reputation

One of the most crucial factors in reserving a property in the Philippines is the reputation of the developer. A reputable developer can ensure that your investment is secure and that the property will be delivered as promised. Here are some points to consider:

  • Track Record and Experience: Evaluate the developer’s history and the number of years they have been in the industry. Experienced developers are likely to have a better understanding of market trends and construction standards.
  • Quality of Previous Projects: Visit the developer’s past projects to assess the quality of construction and finishing. Feedback from previous buyers can also provide insights into the developer’s reliability.
  • After-Sales Service: A good developer should offer excellent after-sales service. Check how responsive they are to queries and how they handle maintenance issues post-purchase.
  • Caution with New Developers: While new developers might offer attractive deals, they may lack the experience and resources to deliver quality projects. Additionally, new developers often face challenges in obtaining bank accreditation, which can delay the turnover of units.

Bank Accreditation


Bank accreditation is a critical aspect when buying pre-selling properties, as it affects your ability to secure a home loan. Here’s why bank accreditation matters:

  • Home Loan Applications: Accredited developers make it easier for buyers to apply for home loans. Banks have stringent screening processes and may take years to accredit new developers.
  • Title Transfer and Loan Release: Without bank accreditation, the title transfer and loan release processes can be delayed. The developer typically handles the title transfer, which can take 6 to 12 months or longer. Buyers may not be able to use their units until the title is transferred.
  • Mortgage Payments: Consider the mortgage payments you will need to make after the equity period. For instance, if the total contract price of a property is 4.2 million pesos with a 10% down payment (400,000 pesos), the equity period could be 36 months with a monthly amortization of 11,000 pesos. After the equity period, a loan amount of 3.6 million pesos may result in a monthly amortization of 34,000 pesos for 15 years at an 8% interest rate. You would need an income of at least 110,000 pesos per month to qualify for such a loan.

Loan Eligibility

Your eligibility for a home loan depends on several factors, including your gross income, age, marital status, and the property used as collateral. Here are some key points to consider:

  • Income and Monthly Amortization: The monthly amortization should not exceed one-third of your gross income. For instance, to qualify for a 3.6 million peso loan, you need to have a monthly income of at least 110,000 pesos.
  • Loan Term: Most banks offer a maximum loan term of 20 years. However, Maybank and BPI have programs that extend up to 30 years. The age of maturity (usually 65 years old) affects the maximum loan term.
  • Collateral: The property you are buying will be used as collateral for the loan, impacting the loan amount you can secure.

Marital Status

Your marital status can influence the process of how to reserve a property in the Philippines. Here are different scenarios:

  • Single: If you are single, you can sign all the necessary documents yourself.
  • Married: Both spouses need to make a mutual decision and sign the loan documents. If separated but not annulled, both spouses still need to sign the documents for bank financing.
  • Buying in Cash or Deferred Cash: This option avoids the need for a home loan and only requires your signature.
  • Selling Property While Married: Your spouse will need to sign the deed of sale. Each developer has different policies for property assumption during the equity stage.

Sample Computation


Understanding the financial commitment when buying a property in the Philippines is crucial. Here’s an example:

  • Total Contract Price: 10 million pesos
  • Assumption Price: 1 million pesos
  • Payments Made to Developer: 500,000 pesos
  • Balance with Developer: 300,000 pesos
  • Buyer’s Total Investment:
    • Assumption Price: 1 million pesos
    • Re-documentation Fee: 100,000 pesos
    • Reservation Fee: 20,000 pesos
    • Notarial Fee: 50,000 pesos
    • Total Investment: 1.17 million pesos

The buyer pays 1.17 million pesos, the seller settles their balance with the developer, and the buyer submits all requirements before the unit is assigned.

Different developers have varying policies for property assumptions. For instance, WeeComm has a policy where the price difference between the prevailing rate and the loanable amount is payable to WeeComm, plus a 50,000 pesos transfer charge. This policy protects their pricing integrity but can make it challenging for investors to have their units assumed during the equity period.

Recap on Things to Consider Before Reserving a Property

  • Developer’s Track Record: Check the developer’s reputation and history of delivering projects.
  • Mortgage Payment Affordability: Ensure you can afford the monthly amortization after the equity period.
  • Home Loan Eligibility: Check your age, income, and marital status to see if you meet the bank’s requirements.
  • Developer Assumption Process: Understand the developer’s policy on property assumption.
  • Representative for OFWs: If you’re an OFW, you’ll need a representative or attorney-in-fact to transact on your behalf.

By considering these factors, you can navigate the process of how to reserve a property in the Philippines with confidence and ease.

Looking to owning your very first property in the Philippines, but unsure as to how to find the right one for you? Watch this video as Alex gives you four tips in finding the right property in the Philippines.
Home >> Real Estate How To’s & Tips

Are you on the lookout for real estate properties in the Philippines? Are you an investor or an aspiring homeowner and would want to purchase a property in the Philippines, and don’t know where to begin?

With the current run with the property market in the Philippines, things have gotten a bit more exciting for investors, commercial leases, or aspiring homeowners. However, finding the property that fits your needs, goals, and budget can be a bit overwhelming – especially if you’re a first timer.

In this blog, we’ll walk you through four tips in finding the right property in the Philippines that you can call home. Whether you’re buying in bustling metro areas like Cebu or Davao or considering quieter spots like Cagayan de Oro, these insights will streamline your property search and save you from potential headaches.

Steps on How to Find Properties in the Philippines

Narrow Down Your Preferred Location

Before anything else, you need to decide where in the Philippines you want to invest. Real estate properties in the Philippines vary significantly in price and value depending on the location. Are you looking for a house in a quiet subdivision, a condo in the city, or a lot for a future development project?

Start by asking yourself these questions:

  • Do you have a specific city or province in mind?
  • Are you prioritizing accessibility to work, schools, or commercial areas?
  • Are you looking for a property in a bustling urban center like Metro Manila or a more laid-back city like Davao or Cebu?

Zeta Tip: If you’re investing in cities like Cagayan de Oro, decide whether you prefer the Uptown area (which is more residential and peaceful) or the downtown area (closer to businesses and commercial spaces). Identifying the exact location early on will save you time and help you focus your search.

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Work with a Licensed Real Estate Agent

One of the biggest mistakes many buyers make is thinking they can handle the entire process themselves or rely solely on recommendations from friends. The reality is that navigating the complexities of buying real estate properties in the Philippines requires expertise.

Here’s why you should find a licensed and experienced real estate agent:

  • Local Market Knowledge: Real estate is hyper-local. Agents familiar with the specific city or region can give you better insights into market trends, pricing, and the best deals. For instance, an agent based in Cebu would know which areas are currently hot for investment and which ones are expected to appreciate in value.
  • Due Diligence: A reliable agent will ensure that the property you’re eyeing is priced fairly, has no legal issues, and meets your requirements. They can also help with the often confusing paperwork and tax computations.
  • Trust and Credibility: Make sure your agent is licensed by checking their Professional Regulation Commission (PRC) ID. Also, prioritize agents with years of full-time experience over part-timers or unlicensed brokers. Just as you would trust only a licensed doctor with your health, entrust your property search to a skilled and certified real estate agent.

A Tip to Remember: Real estate in the Philippines is a long-term investment, so choose an agent who will be around for years to come—not someone who treats it as a sideline.

Talk to a Property Specialist

Specify Your Property Requirements

Knowing exactly what you want will make the property search much easier. Many buyers start their search without clear requirements, which can lead to frustration and wasted time. To find a property in the Philippines that suits you, list down your specific needs:

Considerations:

  • Lot area and floor area: Do you need a big yard, or are you okay with a smaller lot?
  • Number of bedrooms: How many bedrooms and bathrooms are you looking for?
  • Budget: Establish your maximum budget early on. Be aware of additional costs like taxes, transfer fees, and broker fees.
  • Financing options: Decide whether you will pay in cash, through bank financing, or via a deferred cash scheme. Keep in mind that banks typically finance only up to 80% of the appraised value, so you’ll need to cover the remaining equity.

If you’re not in a rush, consider pre-selling properties, which allow you to pay for the unit in installments before it’s fully constructed. However, if you need immediate occupancy, Ready-for-Occupancy (RFO) units might be the better option as they are already completed and available for move-in.

Pro tip: Your agent can help you narrow down listings based on your requirements and even provide video walkthroughs or virtual tours of properties, especially if you’re based abroad or have a busy schedule.

Screen Developers Thoroughly

Finally, the developer behind the project is just as important as the property itself. A beautiful design concept or a prime location can turn into a nightmare if the developer lacks the experience or capability to deliver what they promise.

How to Screen Developers:

  • Track Record: Check how long the developer has been in business and the number of completed projects they have under their belt. Look for developers with a solid reputation and a proven history of delivering projects on time.
  • Leadership and Expertise: Research the company’s leaders and their background in real estate. Do they have a solid team with the right experience?
  • Buyer Feedback: Ask around or look for online reviews from previous buyers. Their experiences can provide insight into the quality of construction, customer service, and whether the developer honors their commitments.

Investing in a property is a big financial commitment, so it’s crucial to partner with developers who are reliable. For first-time developers, evaluate their leaders’ prior experience in the industry to gauge their ability to deliver on promises

Conclusion

Buying a property is an exciting journey, but it comes with challenges—especially if you’re unfamiliar with the real estate landscape in the Philippines. By narrowing down your location, working with a skilled agent, specifying your property needs, and screening developers, you can make the process smoother and more rewarding.

Are you ready to find your dream real estate property in the Philippines? Contact us today for expert advice and exclusive listings! Don’t forget to subscribe to our newsletter for updates on the latest real estate trends and listings across the country.

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    Home >> Real Estate How To’s & Tips

    When considering buying a house in the Philippines, one of the major decisions you will face is choosing between Ready for Occupancy (RFO) and Pre-selling property. Both options come with their unique advantages and drawbacks, making it essential to understand which is better: RFO or preselling houses in the Philippines. In this article, we will delve into the details of each option to help you make an informed decision.

    Understanding the Difference between RFO Houses and Pre-selling Houses

    What are RFO Houses?

    Ready for Occupancy (RFO) houses are fully constructed properties that are immediately available for move-in. These homes are typically finished and have all the necessary amenities in place, such as plumbing, electricity, and interior fixtures. Buyers can inspect the property in its completed state before making a purchase decision. Some RFO houses may also be semi-furnished or fully furnished. 

    Advantages of RFO Houses

    1. Immediate Availability: One of the biggest advantages of RFO houses is the ability to move in right away. There is no waiting period for construction to finish, making it an ideal choice for those who need a home immediately.
    2. What You See is What You Get: Since the house is already built, buyers can inspect the actual property, eliminating the uncertainties associated with preselling houses.
    3. Reduced Risk: With RFO houses, there is a lower risk of construction delays or changes in project specifications, ensuring that buyers get exactly what they paid for.

    Disadvantages of RFO Houses

    Higher Cost: RFO houses may come with a higher price tag compared to pre-selling houses. This is because the developer has already invested in the construction and finishing of the property. That is unless you can find a foreclosed property or a rush sale listing, that is selling below market value.

    What are Pre-selling Houses?

    Pre-selling houses are properties that are sold before construction is completed, often even before it has started. Buyers essentially purchase a property based on plans and renderings, with the promise of receiving a completed home at a future date.

    Advantages of Pre-selling Houses

    1. Lower Cost: Pre-selling houses are typically offered at a lower price compared to RFO houses. Buyers can take advantage of pre-construction prices, which can result in significant savings.
    2. Flexible Payment Terms: Developers often offer more flexible payment terms for pre-selling houses, making it easier for buyers to manage their finances over time. This is because the down payment of 10-20% can be paid over a period of time at no interest. Buyers can also make advance payments to decrease their loanable amount.

    Disadvantages of Pre-selling Houses

    Longer Wait Time: Depending on the construction schedule, buyers may need to wait several months or even years before they can move into their new home.

    Construction Delays: One of the primary risks associated with pre-selling houses is the possibility of construction delays. Various factors, such as weather conditions and supply chain issues, can impact the completion timeline.

    Uncertainty: Buying a pre-selling house requires a leap of faith, as buyers cannot physically inspect the property before purchase. There is always a risk that the final product may not meet initial expectations.

    Which is Better: RFO or Pre-selling Houses in the Philippines?

    The choice between RFO and pre-selling houses ultimately depends on individual preferences, financial situation, and priorities. Here are some key factors to consider:

    Timing

    If you need a home immediately, RFO houses are the clear choice. They offer the convenience of moving in right away without any waiting period. On the other hand, if you have time to wait and are looking to potentially save on costs, and don’t want to have a huge cash out, pre-selling houses might be more appealing.

    Budget

    Budget is a significant factor in deciding between RFO and pre-selling houses. RFO houses generally come at a premium price due to their ready-to-move-in status. If you are looking to maximize your investment and can handle a longer wait, pre-selling houses offer a more cost-effective solution with flexible payment terms and no bulk cash out.

    Risk Tolerance

    Consider your risk tolerance when making a decision. RFO houses come with fewer uncertainties as you can see the finished product before purchasing. Pre-selling houses, while potentially more affordable, carries the risk of construction delays and changes in the final product.

    Customization

    If you have specific preferences and want to customize your home, pre-selling houses provide more opportunities for personalization. RFO houses, being fully constructed, offer limited scope for changes.

    Conclusion

    In deciding which is better: RFO or pre-selling houses in the Philippines, it is crucial to weigh the advantages and disadvantages of each option. RFO houses offer immediate occupancy and lower risk but come at a higher cost and limited customization. Pre-selling houses provides cost savings and customization options but requires patience and a tolerance for potential delays and uncertainties. Ultimately, the best choice will depend on your individual needs, financial situation, and willingness to take on certain risks. Evaluate your priorities carefully to make an informed decision that best suits your circumstances.

    If you want to discuss more on the pros and cons of both, talk with a licensed real estate agent today by clicking the button below.

    Talk with a Property Specialist
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