Ultimate Guide to Buying a House in the Philippines

Last Updated – Sep 5, 2022 @ 10:26 am

Most people buy a house or condo unit to live in it. However, there are some who purchase a property for other reasons, such as interest in investing in real estate.

Whatever your reason is for buying a property, there are a few things you need to consider aside from the price tag.

Contents

Buying a house vs. buying a condo in the Philippines

Before you decide which one to buy—a house or a condo unit, you should know that each comes with a set of advantages and disadvantages.

Buying a Condo Unit Pros

More Budget-Friendly

Landed properties within prime areas in cities can get ridiculously expensive while a condo unit could cost only half or even a third in prime areas.

However, there are exceptions, such as upscale condos in BGC, Rockwell, and other business districts.

Middle-income families and first-time buyers can afford low-end and mid-range condo units. In Metro Manila, a studio unit can cost as low as PHP 1.7 million.

Houses generally cost more because they have larger spaces, but they actually have lower prices per square meter compared to condo units.

Conveniently Situated

Condominiums are often located a few minutes away on foot or by car from establishments like convenience stores, supermarkets, laundry shops, restaurants, transportation hubs, malls, and hospitals.

Sometimes, the establishments are even located on the lower floors of the condominium itself.

Although there are newer and more developed subdivisions that also offer residents easy access to commercial establishments, condo owners, in general, can access more options much more easily.

In addition, condominiums are often located near business districts, so working professionals don’t need to commute long distances to go to work, saving significantly on commuting expenses and time.

Better Security

For many high-rise properties, this is one of the strongest selling points.

Compared to subdivisions, most condominiums have a higher level of security and have features like 24/7 security monitoring with CCTV cameras and multiple tier access cards.

There are also fire sprinklers and smoke detectors at the hallways and in each condo unit.

Subdivisions have guards who make regular patrols (and some exclusive villages also have CCTVs), but it is more challenging to maintain strict security in larger subdivisions compared to smaller condominium complexes.

More Amenities

The amenities that many condominiums feature include swimming pools, sports facilities (e.g. basketball, badminton, and tennis courts), gyms, playgrounds, function halls, lounge areas, and other recreational facilities.

While gated subdivisions also offer similar amenities at their clubhouse, they usually don’t have reception areas.

Condo receptionists offer concierge services, such as verifying visitors, accepting deliveries for residents, and providing assistance during emergencies.

Buying a Condo Unit Cons

Interior Space Is Limited

A studio-type condo unit can be as tiny as 18 sqm. In the Philippines, condo units have an average floor area of less than 50 sqm.

If you don’t think you can live in a small space like that, then you should reconsider buying a condo unit.

What’s more, condo residents have no exterior space of their own, unlike those who live in a house and lot. Common areas and outdoor facilities have to be shared by condo residents.

Costly Fees

Over time, it costs more to own a condo unit compared to a house due to the highly monthly association fees collected for maintenance and operational costs of the condo complex.

Depending on the property developer, the size of the condo unit, and the location of the condominium, the monthly dues in condos can be anywhere between PHP 1,000 and PHP 8,000+ in Metro Manila.

Condo owners need to pay their monthly dues—which can increase over time—even long after they have paid off their mortgage. What’s more, late payments are charged interest that can go as high as 4% per month.

On top of that, condo owners have to pay membership fees, parking fees, real property tax (RPT) for their unit and their share of RPT on the condominium’s shared areas and the land where it is built.

Peace and Privacy Issues

If you are someone who values peace and quiet, you might want to reconsider buying a condo.

You will likely have neighbors on most sides of your unit and will not be spared from all kinds of noise, from loud chatter and footsteps to crying babies and noisy kids to partying neighbors.

Also, you can’t just leave your door open since there will be people walking along the halls at any time.

Limited Freedom

Condo owners are not allowed to do extension projects because the building integrity may get affected. With a growing family, this may become a big issue.

Renovations within a unit are possible, though. However, condo owners would have to get approval from property management first before they can start any home improvement.

Aside from that, condo residents should follow multiple house rules relating to the use of facilities and common areas, keeping pets, and inviting guests, among others.

Buying a House Pros

Exclusive Rights

Buying a house and lot gives you exclusive rights to the property unlike condo owners, who share the land’s ownership.

You can customize a house more easily than a condo unit. No one can stop you from building an additional room, a veranda, or a small playground.

However, you will have to get a building permit from the municipal or city hall before you can start building anything, as per the National Building Code of the Philippines.

Bigger Spaces

You can enjoy a larger interior space and your own outdoor space if you own a house. Living rooms, dining areas, kitchens, and bedrooms are more spacious in houses.

What’s more, homeowners typically have space for a dirty kitchen, laundry, and a garage unlike condo owners.

More Privacy

Compared to condo communities, subdivisions generally have more peaceful neighborhoods, with homes sitting at a distance from each other.

If you live in a detached house, you don’t share the same building, wall, or floor with your neighbors. Those who live in a duplex or townhouse still have more privacy compared to condo residents as the homeowners still have their own separate space despite sharing walls with neighbors.

In addition, noise won’t be a big issue, unless your neighbors enjoy videoke sessions.

Better Long-Term Investment

A condo’s lifespan is only 50 years while a house and lot can be passed down through generations.

The value of the house may decrease, but the land where it sits on steadily appreciates. This makes a house a better investment in the long term.

Buying a House Cons

Costly Maintenance

Since you have complete control over your house and lot, you are also responsible for its upkeep.

Although you can hire someone to handle the maintenance of your home, this can get expensive.

Maintenance of condominiums is shared by unit owners while maintenance of a house is shouldered by the homeowner themselves.

Utility Bills Are Higher

A larger living space means a higher consumption of electricity and water, so homeowners typically spend more on utilities than condo owners.

Long Commutes

Most houses that are for sale are in suburban areas, while many workplaces are located in central business districts.

This means that for people who live in the suburbs, the commute to work will be quite long.

Finding the right property for you

Purchasing a home is a massive financial investment, not to mention a major milestone in life. You should be a cautious and scrutinizing buyer. Here are some things you need to consider when choosing a property to buy:

Location

The geography affects the price of the property.

Is the climate in the area nice?
Is the place prone to flooding?
Is the commute to your workplace long?
Do you have family and friends living near you?
How accessible are establishments like markets, malls, and hospitals from the property?

The answers to these questions will guide you in making your decision.

The Type of Property

Houses can be single-attached or single-detached, a bungalow (single story) or multi-story.

If you go for a condo unit, you can choose from a studio unit (the bedroom, living area and kitchen are combined into one room), a loft unit (comes with an elevated, open bedroom that looks over the living area below and can be accessed by stairs), a 1-bedroom / 2-bedroom / 3-bedroom unit, or a penthouse (with a large floor area, offers exclusivity and privacy, and has own elevator, among other features).

How to Buy a House in the Philippines (step-by-step)

The process of buying a home can be intimidating and time-consuming with all the things that you need to do.

However, here are some steps you can take to make the process more manageable.

Step 1: Find the right property to buy

First, you need to think of why you are buying a property.

Will you live in it or use it as a vacation home? Will you use it for your business or is it going to be an investment?

Also, you have to decide on the property’s specifications, such as its location and its features (how many bedrooms and bathrooms).

Knowing what you want can help you make choices easier and find the property which best suits your preferences and needs.

Step 2: Financial preparation

Decide on an estimated move-in date. This way you will know if you should go for a place which is ready for occupancy, or a pre-selling property instead.

You can also determine how much money you will have to raise.

Analyze your cash flow and evaluate your options for a home loan. In the Philippines, there are five common home financing options:

Pag-IBIG financing
Bank loans
In-house financing (property developers)
Mortgage brokers
Spot on cash

Compare the mortgage payments and interest rates.

Note: Make sure you have at least 20% of the total amount of your target property saved up. Most lending institutions have a maximum loan amount of 80%-90% of the property’s appraised value or selling price¹.

Transaction costs when buying a house & lot property in the Philippines

Buying a property is definitely going to cost a lot of money. Aside from the property value that you need to cover, there are other fees that you have to pay. Here are some of those fees:

1. Notary Fee

You pay a notary fee to have documents notarized. Typically 1-2% of the property’s value, this fee is negotiable between the seller and buyer.

2. Local Transfer Tax

This tax is imposed by the government on the transfer of ownership of the property. Depending on the location of the property, you are required to pay 0.50-0.75% of the property value.

3. Documentary Stamps Tax

An excise tax, the DST is set for legal requirements, such as documents and papers which prove the transaction. It is 1.5% of the selling price or the fair market value of the property, whichever is higher.

4. Capital Gains Tax

You also have to pay taxes for the gains in the capital that you invested. Usually, it is 6% of the selling price, fair market value, or zonal value, whichever is the highest.

5. Home Loan Fees

After your housing loan is approved, you will have to pay several fees that the lender will charge before releasing the loan amount to the seller or property developer.

6. Mortgage Redemption Insurance (MRI)

This protects lenders against loss in case there are unpaid mortgage payments due to the death of the homeowner during the loan term.

7. Handling Fee and Notarial Fee

These fees are charged by banks and other lenders for processing the legal requirements of your home loan.

8. Fire Insurance

This covers any damage on your property in case of a fire or other calamities.

9. Mortgage Registration Fee

You have to pay this fee when you register the Deed of Absolute Sale with the Land Registration Authority (LRA).

10. Move-in Fees

These are fees that you need to settle before the property is officially turned over to you by the developer. Move-in fees include electrical connection fee, water connection fee, and homeowner’s association dues.

You may also have to pay condo fees like membership fees, association dues, and parking fees, among others.

Step 3: Work with a real estate agent or broker

Property developers in the Philippines have brokers or agents that sell their properties. Get a real estate professional that you, your family or friends know and trust.

Schedule a site tour so you can evaluate the property’s size, the construction quality, and the neighborhood. You can ask for a sample computation from your agent.

It should include the total contract price, down payment, interest rate, loanable amount, reservation fee, and the monthly amortization.

Ask your agent if something is unclear to you. Make sure you understand the fees involved, including transfer, legal, and miscellaneous fees. Ask about the payment scheme for the down payment.

Step 4: Property Viewing & Inspection

Together with the real estate agent, visit properties matching your requirements. This step is crucial because it gives you an opportunity to evaluate if the home would suit your needs.

Have a family member with you during an inspection. Even if you’re very observant, there might be things that will get overlooked. Your family member can help point out the strengths and flaws of the house.

Be sure to inspect the walls, roof, floor plan, locks and gates, plumbing, ventilation, outdoor area, and the community. Now is the time to be meticulous and scrutinizing.

Things to watch out for:

Exterior

Start by inspecting the exterior of the property. Explore the surroundings. Check if the roof is falling or if the trim is rotting. Look for cracks or other issues.

Interior

Inspect the ceilings, walls, and floor for cracks as they can suggest damage from earthquakes, poor engineering or low-quality construction work.

Ownership history

If the property is not brand-new, find out about its history. Ask questions like how it was maintained or why the seller is leaving. Investigate and save yourself the trouble.

Plumbing

Open all the available faucets to test the plumbing and the water pressure. Clogged or leaky pipes can cause low water pressure. Flush the toilet and test the shower a few times.

Water damage

Look under sinks and check bathrooms walls to see if there is any damage covered with paint or mold growth. Consult an expert right away if you do.

Septic system

Make sure the septic system is functioning well since damaged ones can cause strong unpleasant odors, soil contamination and may expose you to dangerous bacteria.

Uneven floors

Place a round object in every room. If the object rolls around randomly, then this means the floor is uneven as well as the foundation. It can be costly to this, so think about your decision carefully.

Ventilation

Ventilation can influence how warm or cold a home can get or even your home’s scent. Dedicated vents and windows can release accumulated smoke or pollutants, and prevent the growth of mold. Adequate ventilation could help save energy on electric fans and air conditioning.

Electrical components

Check the lights and light switches in each room and the availability and location of power outlets. You can test the sockets by bringing and plugging in a small phone charger with you.

Also, ask about the property’s electrical system. Broken electrical fittings or faulty wiring can be really dangerous, aside from causing a lot of inconveniences.

Signs of pest infestation or activity

Knock on wood surfaces of structures like cabinets, desks, and walls. If they chip or break easily and sound unusually hollow, that could indicate termite activity. Look for small crevices and holes on the walls of the dining room and kitchen as they can be possible points of entry for insects and rodents.

Accessibility

It is better if the property is conveniently located near establishments like markets and hospitals.

Step 5: Negotiate

The seller’s goals are different from the buyer’s in terms of price. Of course, the seller wants the highest possible price for their property whereas you want to save money.

In most cases, the final price is somewhere in the middle due to price negotiations. An experienced broker can help you with this, but you should do your part as well.

Do some market research so you know what price for the property is reasonable, and maintain professionalism at all times when dealing with the seller.

Also, explore other options because there are just times when negotiations fall through.

Step 6: Decide on financing option

Not everyone can afford to pay for the property they choose right then and there, nor can everyone make a spot cash payment (the entire price is paid in full within a short period, typically one month).

There are financial institutions in the Philippines that could lend buyers the amount they need for purchasing a home.

These institutions include PAG-IBIG, SSS, and banks. With a loan from these institutions, you can pay for the property you choose over several years.

However, the loan application process requires a lot of effort and stringent paperwork. You can also opt for in-house financing, where buyers pay the property’s developer directly.

After paying the down payment, the buyer pays the remaining balance and interest over a few years.

Step 7: Prepare all the required documents

The documents required for a home loan may include an accomplished application form, copies of government-issued IDs, recent income tax return (ITR), community tax certificate, pay slips for three months, and certificate of employment.

When filling in and signing contracts and other documents, make sure to read the fine print and everything else in the contract. Don’t sign anything unless you fully understand its contents.

Required legal documents when buying a house in the Philippines

As a buyer, you are obligated to secure the following legal documents:

1. Letter of Intent or Intent to Purchase Real Estate

Your letter should include:

the date of the offer
a complete description of the property
your offer (price)
the reservation fee
the deposit
the financial clauses

If the terms are acceptable for the seller, they reserve the property for you.

2. Reservation Agreement

This is drafted after the Letter of Intent is signed by the seller and before the reservation fee is paid. The agreement contains:

the complete address of the property
the type of property
the floor area
the payment details.

3. Letter of Guarantee

Issued by a bank, this document informs the developer or seller that you have been approved of a loan which can cover the remaining balance. This document indicates the loan amount and the date it will be released, among others.

4. Contract to Sell

This binding document has the terms and conditions of the sale, which includes what requirements the buyer and seller have to meet before the property is fully paid.

After you pay the down payment and the remaining balance through home financing, the developer or broker drafts this document. It is then signed and notarized.

5. Deed of Absolute Sale

This document declares that all rights and interests to the property have been completely relinquished by the seller to the buyer.

After it is notarized, the Deed of Absolute Sale is filed with the city’s (where the property is located) Registry of Deeds. After you pay the full price, you will be issued the Deed of Absolute Sale. It specifies:

the names of the seller and buyer;
the Transfer of Certificate of Title number
a description of the property
the selling price.

6. Transfer of Certificate of Title

This document proves that the property now belongs to you. The Transfer of Certificate of Title is obtained from the city’s (where the property is located) Registry of Deeds.

It has duplicate copies. The Registry keeps one while the other goes to you.

7. Tax Declaration

Since you are the property’s new owner, all tax obligations for it are yours. This document proves that. The City Assessor (where the property is located) issues the Tax Declaration, which also signifies that the sale is successful.

Make sure that all the paperwork is authentic. It may seem like a lot of paperwork, but these documents protect both you and the seller.

How much does it cost to maintain a house & lot property in the Philippines

Needless to say, you will still need to settle monthly and yearly expenses when you own a house and lot in the Philippines. These include:

Real Property Tax

Also known as real estate tax, the Real Property Tax is collected by the local government based on your property’s value.

It is used to fund services like law enforcement and fire services, water and sewer maintenance, and other general services concerning your property.

Maintenance Fees

Even if you don’t live in your house, you will still need to consider its upkeep. This means you will have to pay maintenance expenses, which can vary according to the amenities and condition that your property has.

Home Buying Tips in the Philippines

Even if you already have in mind a property to buy, these tips will still help you in making the right decision.

Here are some helpful tips when purchasing a property in the Philippines:

Check your credit rating

When lenders decide whether to approve your loan or not, they will take a look at your credit history, as well as the scores derived from reports.

Before you buy a house or apply for a loan, you should take steps to increase your credit score since this will help you qualify for a loan, and even reduce its interest.

Know the hidden costs

Most of the time, buyers do not realize the real cost of homeownership until they purchase their first house. Because they get blindsided by unexpected costs, their budget may suffer.

When it comes to buying a home, preparing for hidden costs is half the battle. These costs include, but are not limited to:

Closing costs
Property tax
Emergency repairs
Home appraisal
Home inspection fees
Homeowners association fees
Utilities

Set a budget

One major part of owning a home is to know how much money you are willing to put out for it. This is where budgeting comes into the picture.

Generally, a 20% downpayment is recommended. Once you settle this, find a way to accommodate the monthly payments to your current budget. If you can’t make ends meet, consider getting another source of income.

Get pre-approved

If you want to enjoy a more seamless home buying process, one of the things you must do is to get pre-approved for a loan. But before that, you must raise your credit score and prepare documents that prove your financial capabilities.

Only after accomplishing those things can you seek out different lenders and compare their interest rates.

When you get pre-approved for a loan, you will enjoy tons of benefits such as improved bargaining power. You will also save some time when searching for a home since you don’t have to worry about the price tag.

Make sure the mother title is available.

Do this if you are thinking of buying a property that is still in the pre-selling stage as individual titles may not be available yet.

Choose a reputable developer with a track record of completing developments.

You don’t want to spend your money on something that will be in the pre-selling stage for a really long time, or worse will never be completed.

Read the fine print of the Contract to Sell.

It is better if you consult a licensed real estate agent or a lawyer to explain to you what is stipulated in the contract. You should also have an original notarized copy of the document.

Negotiate.

It can benefit you if you can make a deal for the least cash out or monthly installments. You can also ask for no interest on properties that have not been built or are still in construction.

Ask about what modifications are allowed.

In case you decide to make some changes to your property in the future, you should know what adjustments the developer allows before you decide to buy the property.

Engage with a licensed real estate agent that you can trust.

A good agent should have a proven record of providing good and honest service. Aside from that, it is helpful if the agent is knowledgeable of the local area.

If you are purchasing a property from an individual:

Check the authenticity of the “Transfer Certificate of Title.”

The Register of Deeds can provide you a “Certified True Copy” of the document. Make sure you have the owner’s name and the title number because you will be required to provide the information when you get the certified true copy.

Make sure that the title is clean.

You can check the back of the title for the section called “Encumbrances.” There should be nothing in it, otherwise the property may be mortgaged or it has debts against it.

Verify the description of the land on the title.

Since land titles don’t have street names and numbers to identify a property, the technical description found on the Transfer Certificate of Title should match the actual property.

The Register of Deeds can validate this or you can hire a geodetic engineer or a private land surveyor.

Make sure you are buying from the real owners.

Ask for identification papers, such as driver’s license or passport.

Confirm that the payments for the real estate taxes are up to date.

You can do this by asking for a copy of the Tax Receipts and Tax Declaration.

Where to find properties for sale online in the Philippines

So, you have decided to make a move and start actively looking for a property to purchase in the Philippines. However, you have no idea where to start.

Here are some platforms that can help you search for that perfect property to buy:

Lamudi

This real estate listing website allows homebuyers to find properties for sale or rent. Lamudi offers important information on various properties including the type (apartment, condominium, house and lot) and price.

There are also photos of the properties. Lamudi only works with brokers who are licensed by the Philippine Regulatory Commission (PRC).

Ohmyhome

Ohmyhome is a property solutions platform that can be accessed via website or mobile app. There are different kinds of listings on the platform, including house-and-lot units that are ready for occupancy, condo dwellings, and even raw land.

Buyers can explore choices, talk to a real estate agent, or complete the deal. All of these things can be done virtually. With Ohmyhome, clients can opt for the DIY option or get agent assistance.

Dotproperty

This property portal network is one of the largest across Asia. With Dotproperty, property seekers can search for available properties while developers and real estate agents can maximize opportunities by showcasing listings.

The listings include houses, villas, condominiums, foreclosures, land and commercial spaces that are for sale or for rent.

Hoppler

Taking pride in being the first fully online property network in the Philippines, Hoppler aims to connect real estate buyers and sellers with a trustworthy network of people.

The properties are listed on their website and mobile app. Aside from their own premium online marketplace, Hoppler also connects to other major marketplaces.

Zipmatch

This online real estate marketplace aims to make the process of buying a home easier and more efficient with the use of content and new technologies.

The Zipmatch feature called Property Pages has interactive visual content, such as 3D floor plans, 360-degree virtual property tours, and interactive maps. Zipmatch also has a blog that provides information about buying real estate or getting a housing loan in the Philippines

Aside from being a major milestone in life, buying a house or any property is a big financial investment.

It is better to equip yourself with enough knowledge to make an informed decision so that you can choose the property that best suits your needs.

Read Next: Personal Finance 101

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