Homeownership is an aspiration shared by most working Filipinos and their families. However, most of us who dream of buying a home seldom have the upfront funding to immediately pay for the property in full. This is why, more often than not, we apply for a home loan to proceed with the purchase.
Here in the Philippines whether it’s a condo or house and lot being purchased, the most common route is to either seek financing from the Home Development Mutual Fund (Pag-IBIG) or a private lender such as a bank.
Just like how no two properties are exactly the same, so too is the case when it comes to home loans. It is important to be mindful of the differences so that we are not only successful in applying for the financing we need but so that we are also able to get the most favorable terms even when entering into significant debt.
Qualifications
When applying for a home loan, the type which often comes to mind first for most working Filipinos is a Pag-IBIG loan. Given the fact that most full-time employees in the country are mandated to make monthly Pag-IBIG contributions, it makes sense to try to apply for a Pag-IBIG loan to at least benefit in some way from making those payments.
QUALIFICATIONS
| Pag-IBIG Loan | Bank Loan |
| – You must have been a Pag-IBIG member for at least 24 months, and – Must have completed at least 24 monthly Pag-IBIG contributions (this can be paid in a lump sum) – You must be no more than 65 years old at the date of loan application and no more than 70 years old at the date of loan maturity – You have no existing loans that are in arrears, and – Have no existing Pag-IBIG loans that have been canceled, foreclosed, or bought back. – You must be legally able to acquire and encumber real property. | – As the borrower, you must be between the ages of 21 – 65 years old, and – Have tenure of at least two (2) years with your current company of employment, or – Have at least three (3) years’ worth of profitable operation if running a business or practicing a profession. – You must also meet the minimum monthly gross income set by the lending bank (commonly ranges between P30,000 to P40,000 per month.) *Qualifications may vary between banks |
The most notable advantage to Pag-IBIG loans is that the requirements are not as stringent when compared to bank loans, by virtue of making almost anyone who is an actively paying Pag-IBIG member eligible. Along with making monthly contributions, being no more than 60 years of age and not having other existing home loans–or at least loans not in arrears–all but guarantees a Pag-IBIG loan approval.
Loan Amounts
While Pag-IBIG loans are more accommodating to low-income borrowers, bank loans in turn are the more viable choice for property buyers who are interested in pricier homes for sale. Lenders like Asia United Bank (AUB), Banco de Oro (BDO), and the Rizal Commercial Banking Corporation (RCBC), for example, can cover as much as eighty percent of the total price of a property–however much that may be.
On the other hand, Pag-IBIG offers a current maximum of Php6 million via its End-User home financing program. The higher loan amounts are the reason for banks being more stringent with their requirements, although it must be noted that you need not be a depositor or member of a private bank to apply for the housing loan/s that they offer.
LOAN AMOUNTS
| Pag-IBIG Loan | Bank Loan |
| – Maximum of Php6 million (can be taken through multiple loans and not just 1 loan worth Php6 million). – The amount is subject to other qualifiers like the member’s actual need and capacity to pay, and – The loan amount must not result in a monthly amortization that is 35% of the borrower’s total gross salary. | – The maximum loan amount offered by banks differs with each, but the most similar across several is 80% of the appraised value of the home. – One example of the differences: the Bank of the Philippine Islands (BPI) offers 80% of the appraised value for houses and lots not exceeding Php5 million, and 60% for vacant lots and residential condominiums. Security Bank, on the other hand, offers 80% of the appraised value regardless of the home type. – The amount can also differ depending on the loan type, as is the case with banks like HSBC Philippines, which offers a maximum amount of Php30 million for Home Equity, and Php50 million for Home Loans. For a more comprehensive comparison of home loans from banks in the Philippines, click here. |
Interest Rates and Loan Terms
Interest and loan terms are significant aspects of home loans, and for many are the deciding factors of whether to take out said or not. Generally, Pag-IBIG loans are more favorable when it comes to loan terms, as the Home Development Mutual Fund provides borrowers with a lengthier time for repayment compared to private banks.
And while Pag-IBIG loans also involve less miscellaneous and processing fees, home loans from private banks may be the better option when it comes to being able to save money in the long run. For one, due to the constant competition between lenders, home loan interest rates of most banks always have the potential to decrease with the loan period.
INTEREST RATES AND LOAN TERMS
| Pag-IBIG | Private Bank |
| – As per the official Pag-IBIG website, the interest rate of the HDMF’s Affordable Housing Loan for Minimum-Wage Earners remains at 3% per annum – a rate that has been offered since May 01, 2017. – For the standard Pag-IBIG loan, the following are the rates for January to June 2021 with their respective re-pricing periods: 1-Yr* Fixing: 5.750% 3-Yr Fixing: 6.250% 5-Yr Fixing: 6.500% 10-Yr Fixing: 7.250% 15-Yr Fixing: 7.875% 20-Yr Fixing: 8.500% 25-Yr Fixing: 9.125% 30-Yr Fixing: 9.875% | – Interest rates vary between banks, and can be vastly different between each, so choosing a loan isn’t as simple as picking which bank offers the lowest interest rate. – For example, as of January 2021, EastWest bank offers the lowest rate at 5.75%. But this is only for a 1 year fixing period. – If the fixing period were 2 years, Security Bank offers a 6.25% rate that is lower than EastWest’s 6.75%. – For a 5-year fixing period, banks like BDO, BPI, and EastWest offer an interest rate of 7.25% as of 2021. For a more comprehensive comparison of home loans from banks in the Philippines, click here. |
Ultimately, both Pag-IBIG loans and bank loans have their merits, and both continue to be the best way to buy a home in the Philippines. However, given the money and commitment involved in purchasing a home, it is of course in your best interest to take into account every pro and con a type of loan may have for you and the particulars when applying for each.
And while doing this via research is helpful, it remains best to consult with trusted finance and/or real estate professionals to make the most informed decision possible.
Sources: PagIBIGfund.gov.ph, BDO.com.ph, BPIHousingLoans.com, EastWestBanker.com, HSBC.com.ph, PNB.com.ph, RCBCSavings.com, SecurityBank.com
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