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Few life milestones state security and stability more than having your own home. Fortunately, you have a few options if you’re a prospective homeowner.
In this article, we give a rundown of your options and sprinkle a few tips. Let’s go!
What is a Home Loan?
Also known as a mortgage, a home (housing) loan is an amount of money borrowed from financial institutions for the purposes of purchasing/building/renovating a residential property. The borrower will then have to repay the amount monthly with interest over an agreed-upon timeframe, which usually spans 10-30 years, depending on the nature of the loan.
If you are a member of PAG-IBIG and are eligible to apply for a PAG-IBIG housing loan, you can borrow with a maximum payment term of 30 years.
There are different kinds of home loans designed to meet different needs. These include:
- Home Purchase Loan
- Construction Home Loan
- Land Purchase Loan
- Home Improvement Loan
- Home Repair Loan
- Home Extension Loan
Bank Home Loan vs. PAG-IBIG Housing Loan
Essentially, the main difference between the two is that compared to banks, there’s a higher chance for eligible PAG-IBIG members to be approved for a PAG-IBIG Housing Loan.
Banks usually offer loans with a term duration of up to 25 years, while a PAG-IBIG Housing Loan has a maximum term duration of 30 years.
As well, when it comes to fixing periods and interest rates, PAG-IBIG usually offers more competitive rates.
|Interest Rate (per annum)||Fixed pricing period|
Rates are subject to change. Visit www.pagibigfund.gov.ph/ for updated rates.
When it comes to interest rates, banks offer low-interest rates with a fixed rate for 1-, 2-, 3-, and 5-year loans (with a select few offering up to 20 years). Conversely, PAG-IBIG has a fixed pricing period of up to 30 years.
Below is a sample comparison:
|PAG-IBIG Loan||Bank Loan|
|Interest Rate (per annum)||5.35% – 10%||4.99% – 10.12%|
|Fixing period||1-30 years||1-5 years (up to 30 years with EastWest Bank)|
|Repayment amounts||Relatively consistent due to stable interest rate||Amount varies as fixed rates depending on the term duration (1,2,3 or 5 years)|
|Loan Appraisal Value||90-100%||70-80%|
|Maximum loan amount||Up to P6,000,000 or 80% of the total accumulated value (TAV)||Depends on the amount (P10,000,000 for EastWest Bank Home Loans) or 70-80% of the appraised value of the property|
|Miscellaneous fees for processing||P3,000 +||Around P15,000|
|Processing period||Up to 15 business days or so||5-7 business days|
As you can see, while PAG-IBIG might have slightly higher interest rates, it offers a fixing period of up to 30 years (with banks offering 20 years max). You can also borrow up to P6,000,000 from PAG-IBIG if you meet the qualifications as an active member.
Repayment is also less complicated with PAG-IBIG Housing Loans as the fixed rate is consistent for the loan tenure. You can opt to pay in a lump sum or pay the amount in full should you wish to do so.
Typically, a PAG-IBIG Home Loan is advisable if you have a stable income and don’t want to depend on the fluctuating rates from banks once the fixing period ends. However, if you have a good enough understanding of the housing market and know how to refinance your property after the fixing period, you can enjoy lower rates.
It’s important to note the terms and conditions, though, when it comes to repayments and missing monthly amortizations because the penalties and late fees could be costly.
Best Home Loans from Philippine Banks
See our bank home loans comparison table below:
|Bank||Lowest interest rate available||Margin of finance||Minimum loan amount||Maximum loan amount||Minimum loan tenure||Maximum loan tenure|
|HSBC||4.99%||80%||P700,000||P50 million||5 years||20 years|
|Security Bank||5.25%||80%||P1 million||P100 million||1 year||20 years|
|BPI||5.25%||80%||P400,000||70% of the appraised value (house and lot), 60% for a vacant lot and residential condo, and 80% of appraised value for a house and lot not exceeding P5 million||1 year||25 years|
|Metrobank||5.50%||80%||P500,000||P100,000||1 year||25 years|
|RCBC||5.50%||70%||P300,000||P5 million||1 year||20 years|
|Eastwest||5.50%||80%||P500,000||P10 million||1 year||30 years|
|BDO||5.50%||80%||P500,000||P100 million||1 year||20 years|
|PNB||5.75%||80%||P200,000||80% appraised property value||1 year||20 years|
|Chinabank||5.75%||80%||P500,000||P25 million||1 year||25 years|
|Maybank||6%||80%||P800,000||80% of appraised property value||1 year||20 years|
|Chinatrust||5.75%||80%||P500,000||P25 million||1 year||20 years|
|Union Bank||6%||90%||P500,000||90% of appraised property value||1 year||20 years|
How to Apply for a Home Loan in the Philippines
There are three main ways you can acquire a housing loan.
PAG-IBIG Housing Loan
Step 1: Gather the requirements
- Housing Loan Application
- Vicinity Map of Property
- Proof of Income
- Updated Tax Declaration and Tax Receipt
- Valid IDs
- Certified True Copy of Title
- Additional Requirement by Loan Purpose
Step 2: Submit the Housing Loan Application
You can submit at any PAG-IBIG branch near you
Step 3: Receive the Notice of Approval (NOA) and the Letter of Guarantee
Should you be approved, you can claim these after 17 days at the Servicing Department (2/F JELP Bldg. Shaw Blvd., Mandaluyong City).
Step 4: Accomplish the NOA requirements for the release of loan proceeds
The borrower will be given 90 days (this includes the transfer of title and annotation of mortgage).
Step 5: Receive loan proceeds
Return annotated documents to the Servicing Department 10 working days after the release of loan proceeds.
Step 6: Start paying the monthly housing loan amortization
Monthly amortization starts exactly one month from the DV/check date.
For more info, click here.
Bank Home Loan
Different financial institutions will have their own processes. For reference, below is the one for BDO’s Home Loans.
Step 1: Check qualifications
- At least 21 years old but not older than 70
- Minimum gross income of P50,000/month with a stable source of income from employment or business
- For those locally employed: At least 2 years with the company
- Self-employed: at least 2 consecutive years of profitable operation
- Employed abroad: 2-3 years consecutive employment, assignment of Beneficiary as Loan Administrator (if not in the Philippines at the time of application)
Step 2: Prepare the requirements
- Accomplished application form
- Photocopy of 1 valid ID
- Income documents
- For Locally Employed
- Latest Income Tax Return or BIR Form 2316
- Latest three (3) months payslip
- Certificate of Employment with Income (COEI)
- For Self-Employed
- Photocopy of Audited Financial Statements for the last two (2) years with latest ITR
- Bank Statements or Photocopy of Passbook for the last six (6) months
- Certificate of Business Registration from DTI or SEC, Articles of Partnership or Articles of Incorporation
- Company Profile
- For OFWs
- Proof of Remittance for the last 3 months
- Latest Crew Contract, if sea-based
- Consularized Certificate of Employment with Income (COEI) or latest three (3) months payslips
- For additional income (such as rental properties)
- Lease Contract
- Photocopy of Title
- For Locally Employed
- Collateral documents (photocopy of title, lot plan with vicinity map, photocopy of tax declaration)
Step 3: Submit Application Form and Requirements
You could apply online or visit any BDO branch.
Related: Best Online Loans in the Philippines
Mortgage Broker [Nook PH]
A mortgage broker serves as an intermediary between borrowers and major banks. At Grit, we highly recommend checking out Nook – the Philippines’ first official mortgage broker.
Their team of experts promises to get you the best loan from a major bank for free, with the financial institutions paying the platform a commission for approved loans.
With Nook, you get pre-qualified for a loan in minutes, not days. They’ll also take care of the entire loan application process for you.