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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.
Home loans make it easier for people to own a house.. It can also be used to fund home renovations. In the Philippines, most banks and financial institutions offer housing loans.
In this article, we give a rundown of your options for getting a home loan in the Philippines 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.
Related: Complete Guide to Pag-IBIG Fund: Online Registration, Contribution Table, and Benefits
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
A mortgage broker serves as an intermediary between borrowers and major banks.
At Grit, we highly recommend checking out the following online mortgage brokers in the Philippines.
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.
Ohmyhome bills itself as a user-friendly property technology solutions platform.
Founded by the sisters Rhonda and Race Wong, Ohmyhome handles everything related to the real estate business, from agent services to financing options.
Whether you are a buyer, a seller, a landlord, or a tenant, Ohmyhome is a one-stop solution for all your real estate needs.
How Their Mortgage Loans Work
If you’re planning to purchase a new home, you likely already know how overwhelming it can be.
Securing your mortgage loan can sometimes be a complicated and stressful process, especially if you’re a first-timer.
Ohmyhome simplifies the entire home buying experience by guiding you every step of the way.
How do you get a mortgage loan using Ohmyhome?
It is an incredibly easy three-step process.
We get into detail below:
Step 1: Schedule a Consultation
First, you will have to schedule a free consultation with Ohmyhome. You can easily set this up by heading over to their “Contact Us” page, and filling out the callback form.
Wait for one of Ohmyhome’s dedicated relationship managers to give you a call within 15 minutes during their working hours (Monday to Sunday, 9:00 AM to 9:00 PM GMT+8).
The relationship manager will match you with one of their capable agents based on what they learned from your consultation.
Step 2: Coordinate with your Agent
Your agent will then research and compile a shortlist of home loan products they feel are especially suited for you. You can then decide for yourself which one to select, or ask for their expert guidance on which one they think works best for your needs.
Once you and your agent iron everything out, the agent will begin working on the documents to get your loan application ready to go.
Your agent will also help you with anything further that you might require, including additional documents and paperwork.
Step 3: Wait for Approval
All that is left for you to do is to wait for your agent to call with great news.
This is the hardest step of all. But don’t worry: Ohmyhome offers round-the-clock Customer Support via Viber, Messenger, or their in-site chatbox, for any questions or concerns you might have about your loan.
Once your loan is approved, you can go right on ahead with your home purchase.
Tips on how to get your home loan application approved in the Philippines
For most of us, getting a home loan is the best (and usually the easiest) way to acquire our very own home. And that’s why it’s important to get a good grasp of the process of getting a home mortgage so you can increase your chances of getting approved.
Here are 10 simple methods to improve your opportunities:
- Check your bank’s requirements
Banks establish basic requirements that are fairly simple to meet. For example, candidates usually need to be at least 21 years old at the time of the proposal. They also shouldn’t be more than 65 years old when the debt is paid off.
Most financial institutions only accept applications from Filipino nationals. However, foreign nationals can still apply for a home loan provided they can meet the requirements. For example, a foreigner married to a Filipino or a foreigner with an immigrant or resident visa.
Borrowers must also fulfill the bank’s gross monthly household income criteria, often PHP 25,000 or more. If you’re an OFW, you might be required to have a two-year work agreement and provide the corresponding paperwork.
Please keep in mind that fulfilling these basic standards does not ensure clearance. But at the very least, it provides you with the basics on how to proceed.
- Prepare your requirements and documents for the application.
No mortgage company will accept you as a client unless you can confirm your identity. Therefore, ensure that you have a current ID and that all your IDs have the same registered address.
You’ll need to give your creditor a lot of monetary paperwork, so gather them all before you begin your request. A verified (photo-bearing government-issued) ID, documentation of revenue (employment certification, ITR, or payslips), and other pertinent security papers are required at the least. If you’re self-employed, you may have to submit extra proof of income.
Financial institutions sift through mortgage applications to ensure that their customers are actual persons with a genuine need to acquire funds for a house acquisition.
Therefore, all the papers you send them should be current, correct, and adheres to their requirements. Any minor error will result in your request being denied. But don’t fret: most banks allow candidates to rectify any discrepancies in their files.
- Know your financial capacity
The easiest way to accomplish this is to begin talking to your prospective creditor as soon as possible. Your banker will often inquire about your possessions, regular income, debts, and anticipated purchase price. The key is to imagine yourself in the shoes of a creditor and examine the three factors that creditors look at when evaluating house loans: your earnings, credit score, and existing debt percentage.
When it comes to vetting their candidates, banks are pretty careful. They’re seeking those who can cover expenditures other than the monthly mortgage payment, such as the deposit. In addition, you must demonstrate to the banker that you can pay all these expenditures by ensuring that you have sufficient cash in your savings account.
- Put more funds in your savings account.
You’ll require at least 20% of the purchase value for a deposit in most cases, although you can opt for a bigger down payment which will decrease your total loan amount and amortization. However, it’s important to remember those down payments aren’t the only monetary outlay you’ll have to deal with. Home evaluations, title claims, and other costs associated with completing your home loan are all in one process.
- Purchase only if you can afford it.
Similar to the previous tip, buy a property that you can support and afford. That way, you will not have a hard time applying and paying for a suitable home mortgage.
The glossy advertisements of luxury property developers and the lifestyle they offer are highly appealing. This is why you should do an honest and accurate assessment of your financial capacity if you can indeed afford such a mortgage. If you’re excruciatingly hopeful, you risk losing perspective of reality, which will lose you a lot of money in the future.
For example, if you believe you can purchase a lovely and expensive apartment in the heart of the downtown, you may feel compelled to qualify for a house mortgage that is above your monetary means. Ultimately, your request will be turned down if your creditors find out that you aren’t financially qualified
- Fix your credit score.
Some applicants seldom check their credit records before applying for a house loan, assuming that prior non-payments will be ignored. This presumption is incorrect, regardless of whether the non-payment is from some other institution or the creditor from whom you are seeking a mortgage. Banks and other financial institutions frequently exchange data about overdue (nonpaying) borrowers, and a record of delayed payment is a primary red signal for creditors.
To improve your credit score, pay off all your debts, including credit card bills and outstanding debts. Even if you believe you’ve paid off all your existing obligations, you should double-check your files for accuracy. Examine your account statements and issue a complaint with the Credit Information Corporation if you notice any discrepancies.
- Ask advice from mortgage brokers.
Do you want to expedite the acceptance of your home mortgage? Try collaborating with a loan brokerage firm. Mortgage brokers are experts that provide substantial monetary assistance to house purchasers. They also make the process of buying a house easier by assisting you with the documentation and removing the need for you to speak with several lenders.
One of the most advantageous aspects of using the services of a mortgage broker is that it may connect you with a lender that provides competitive residential mortgage rates. In addition, its financial relationships can offer you a variety of home financing alternatives.
- Ask banks to get you pre-assessed for a loan.
Since the predefined mortgage value has been assessed to meet your monetary capability, you have a greater probability of receiving a home loan acceptance once you’ve been pre-assessed.
- Maintain a consistent source of income.
Lenders are seeking people who will be able to pay back their loans. That is why they only accept individuals who have been at their employment for a long time. Therefore, quitting during your house mortgage loan may not be the best idea since it will give the lender the perception that you’ve recently lost a means of income required to pay back the mortgage.
Creditors prefer steady clientele over risky ones, so put your best foot forward by being monetarily secure. You’ll need to keep your cash flow steady and prevent taking on new loans. It’s critical to stay with your job throughout the residential purchase transaction.
Choosing a low job or resigning to become self-employed, on the other hand, is a red signal for creditors and may cause your request to be delayed or denied entirely.
- Always be prompt and at-reach by banks and lending institutions.
It’s crucial to keep your channels of contact open after completing your request so that you can react to any queries for further details from your creditor. Hesitating to answer might lead your mortgage to be delayed, or, much worse, your application to be rejected altogether.
After you’ve covered all your options, it’s better not to place yourself in a situation where you’ll lose your ideal house as well as any deposits you’ve cast aside.
Related: How to Invest in Real Estate in the Philippines [Ultimate Guide]
How can I get my home loan application approved in the Philippines?
If you plan to own a home, finding a reliable and trusted financing partner is essential. With that, a lot of people turn to banks because of their reputation. However, before deciding which bank to charge, keep in mind that a home loan is different from other loans.
Applying for a home loan in the Philippines is a fairly easy and straightforward process.Tons of banks and financial institutions can provide you home financing options. Filipinos have the opportunity to apply for a home loan from PAG-IBIG or their trusted bank.
If you plan to apply for a home loan to a bank, you need to be ready mentally and financially. Home loan applications to banks can be pretty expensive due to taxing, and it could affect your entire loan approval process. Thus, you will need to invest a lot of time and effort for your loan to get approved.
Pag-IBIG vs. Bank Home Loans
While it may seem best to apply for a home loan at PAG-IBIG Fund because of its low-interest rates, the process might take longer. You may find yourself waiting for weeks—or worse, months—to receive your application results.
On the other hand, if you apply for a loan at a bank, approval time may only take five banking days.
Another reason why it’s better to apply for a home loan at a bank is that they offer lower home loan rates than other financing institutions.
Terms are also flexible if you choose to get a home loan from a bank. For example, some banks allow borrowers to pay amortizations for up to 20 years.
Speaking of flexibility, bank housing loans can also be used for other purposes. For example, borrowers may use the loan to purchase a residential lot, home renovation, or new home construction.
In addition, unlike in-house financing, you don’t need to buy a property from a developer to be eligible for a loan application.
The most important thing is to make sure that you understand your total obligation and not be caught in a situation where you’re paying for more than what the property is worth. So it’s best to find out the rate of return in your area from a bank, which websites like Moneymax offer, so that if rates do rise later on, an owner-occupant would not be bearing this burden alone.