Home Loan: Bank Financing and Pag-IBIG Fund

One consideration to do when planning to get a house and lot or lot for sale is a home loan.

A home loan is financial help or simply borrowing money with interest at a specific time frame from banks and government agencies. Home loans are usually availed to either purchase, build, renovate, extend a house, and even refinance an existing home loan.

SIX TYPES OF HOME LOANS AVAILABLE IN THE MARKET

There are six types of home loans available in the market- home purchase loans, home construction loans, home improvement loans, home extension loans, home equity loans, and home refinancing loans.

A home purchase loan is a type of home loan intended for people who wants to purchase a new house and lot, while home construction is for those who have bought or have an existing lot and would like to build a house based on their preference and specifications.

On the other hand, a home improvement loan is for homeowners that want to repair or renovate their house, and a home extension loan is for those who want to create extra space or extend their house with another room.

A home equity loan is for people who need to borrow money against their property value. The amount borrowed from this type of loan is used for expenses or investments such as putting up a business or the support their family’s needs.

A home loan refinancing is simply switching from either fixed-rate to variable-rate or vice versa to save money in the long run.

TYPES OF HOME LOAN IN THE PHILIPPINES

In the Philippines, there are two types of housing loans that can be availed on either bank or government entities. These are conventional home loans and fixed home loans.

Conventional Home Loan

A conventional home loan allows the borrower to pay fixed monthly payments on a specific period. A conventional home loan is for people who want to predict and plan their monthly payments.

Flexible Home Loan

Banks offer flexible home loans as it is a conventional loan tied or linked to a bank account. In Flexi loan, the borrower’s payment depends on their deposit, every time they deposit cash to their current account, their home loan interest will reduce.

FOUR TYPES OF HOME LOANS BASED ON THE FINANCING SCHEME IN THE PHILIPPINES

In the Philippines, there are four types of home loans based on financing scheme- Pag-Ibig, Bank Financing, Inhouse or Owner Financing, and SSS Housing Loan.

Pag-IBIG HOUSING LOAN

Pag-IBIG housing loan is offered by the government agency Home Development Mutual Fund (HDMF) or commonly known as Pag-IBIG Fund. Pag-IBIG members that are salaried, self-employed, and OFW with ages 65 and below can avail their housing loan.

BANK FINANCING

Most banks in the Philippines offer housing loans. The amount that can be borrowed, terms, and interest may vary from one bank to another. That is why it is needed to research first before applying for a home loan via bank financing.

IN-HOUSE FINANCING

In-house financing or owner financing is where borrowers can get a direct housing loan from the real estate developer. Unlike Pag-IBIG housing loan and bank financing, In-house financing has shorter-term and usually would take only about five to 10 years.

SSS HOUSING LOAN

Another government agency that offers housing loans is Social Security System or commonly known as SSS.

SSS housing loan is open to all their members under WOM, Workers’ Organization Members, or workers in the private sector registered under DOLE, the Securities and Exchange Commission, or the Cooperative Development Authority. To avail of a housing loan, the borrower should not be more than 60 years old at the time of application, has at least 36 months premium contribution, or has 24 contributions before the loan application.

The loan amount granted by SSS housing loan is the lowest amount based on the following factors:

1. Appraised value of the collateral of at least 70% but not to exceed 90%.
2. The borrower’s capacity to pay.
3. TActual need of the borrower based on the scope of work/contract to sell and bill of materials evaluated by the SSS.

The maximum loanable amount is P2,000,000.00 with the following interest rates:

1. Up to P450,000.00 – 8% p.a.
2. Over P450,000.00 up to P1,000,000.00 – 9% p.a.
3. Over P1,000,000.00 up to P1,500,000.00 – 10% p.a.
4. Over P1,500,000.00 up to P2,000,000.00 – 11% p.a.

Like bank financing and Pag-IBIG, the SSS housing loan term is five to 30 years.

Pag-IBIG HOUSING LOAN or BANK FINANCE

Among the four types of home loans in the Philippines under financing scheme, the most considered are Pag-IBIG housing loan and bank financing, but which is better?

PAGIBIG FUND

Pag-IBIG fund offers Pag-IBIG housing loans that let borrowers get up to Php 6,000,000 loans at low-interest rates with long repayment terms.  Aside from housing loans, Pag-IBIG Fund also offers Affordable Housing Program (AHP). AHP is intended to help minimum-wage and low-income earners own homes with monthly payments as low as Php2,445.30 per month with a maximum term of 30 years.

OFFER

Borrowers can use the loanable amount to the following:

• Purchase a residential lot, house and lot or condominium unit.
• Acquire a fully developed residential lot or adjoining residential lots that do not exceed 1,000 sqm.
• Complete or construct a residential lot or unit owned by the borrower or a relative.
• To remodel or improve the borrower or relative’s house and property currently secured under Contract-to-Sell (CTS) or Deed of Conditional Sale (DCS) between Pag-IBIG Fund and the buyer.
• Refinance an existing house loan.
• Buy a residential lot or unit with the cost of transfer of title.

ELIGIBILITY

• Must be an active member with at least 24 months’ contribution.
• On the date of application, the member should be not more than 65 years old and not more than 70 years old during the maturity date.
• Has a legal capacity to acquire and encumber real property.
• Has no Pag-IBIG housing loan that foreclosed, canceled, brought back, or surrendered.
• Should have updated payment for existing Pag-IBIG Housing account or STL or Short-Term Loan.

LOANABLE AMOUNT

Pag-IBIG Housing Loan allows borrowers to get up to Php 6 million or depending on the actual amount needed, and loan entitlement based on the capacity to pay or loan-to-loan value ratio or whichever is lower.

INTEREST RATE

The interest rates of Pag-IBIG Housing Loans remain at their lowest levels as they want to help and secure Filipinos to have a home under the most affordable terms.

The interest rate of Affordable Housing Loan for Minimum-Wage Earners remains at 3% p.a. – a rate that Pag-IBIG Fund has been offering since May 01, 2017, to help minimum-wage workers and low-income own a house of their own.

LOAN TERMS

Pag-IBIG Housing loan minimum term is one year and a maximum of 30 years period.

HOW TO APPLY

6 STEPS IN PAG-IBIG HOUSING LOAN AVAILMENT

1. Get the requirement checklist via the Pag-IBIG FUND website or their nearest branch.
2. Submit the housing loan application at JELP Business Solutions Building, Shaw Blvd., Mandaluyong City, or the nearest Pag-IBIG branch near you.
3. Receive the Notice of Approval (NOA) and Letter of Guaranty (GOA) after 17 working days at Servicing Department 2/F JELP Business Solutions Building, Shaw Blvd., Mandaluyong City.
4. Borrowers are given 90 days to accomplish the NOA requirements needed to release the loan proceeds.
5. Receive loan proceeds.
6. A month after the check date, the borrower will start paying the monthly amortization.

Borrowers can also apply for housing loans via VIRTUAL Pag-IBIG.

INSURANCE

Pag-IBIG Fund Housing Loan is covered by a Mortgage Redemption Insurance (MRI) or a Sales Redemption Insurance (SRI) as well as a Fire and Allied Perils Insurance (FAPI).

BANK FINANCING

Most banks in the Philippines are offering housing loans. The amount that can be borrowed, terms, and interest may vary from one bank to another. Here is the list of banks that you may consider when looking for a home loan.

BDO UNIBANK

OFFER

BDO offers financing assistance for the following loan purpose:

• Purchase of House and Lot, Townhouse Unit or Condominium Unit
• Purchase of Vacant Lot
• Home construction
• House Renovation or improvement
• Reimbursement of Acquisition Cost
• Refinancing or Loan Take-out

Aside from this, BDO also offers:

All-in Financing- Payment of mortgage fees and loan-related charges is spread out up to the house loan term.

 Built-In Insurance- The 1-year coverage of Insurance Premiums can be paid in 12 months installment, without interest, and can be billed together with the monthly amortization. The insurance coverage will automatically renew yearly until the term of the house loan.

 Light Payment Options- the borrower can choose between:

• 60-day Grace Period

First payment to start sixty (60) days after the release of your loan, subject to applicable interest.

• Interest Only for the first six (6) months

 Principal and interest payments to start right after.

LOANABLE AMOUNT

The minimum loan amount for House & Lot/ Townhouse/ Construction is Php 500,000, while the maximum loanable amount is 80% of the property’s appraised value.

INTEREST RATE

Borrowers have the option to have interest fixed for 1, 2, 3, 4, to 5 years. After the initial fixing period, it will be yearly re-pricing and yearly fixed.

LOAN TERMS

The maximum term for a vacant lot is 10 years, while a condo unit is 15 years and townhouse, and house and lot construction are 20 years.

HOW TO APPLY

With BDO, a borrower can get loan approval within five working days if he is residing in Metro Manila and ten working days for provincial locations upon submission of entire application documents.

To apply, the borrower should do the following steps:

1. Check if you meet the qualifications set by BDO, which are:

• At least 21 years old but not exceeding 70 years old at the end of the loan term.
• Filipino Citizens or Foreign Nationals
• Minimum gross income of P50,000/month or its equivalent in US Dollars
• At least 2 years in the company for locally employed and at least 2 consecutive profitable years of operation for self-employed. For OFWs, they should be 2 to 3 years consecutive employment or can be Assignment of Beneficiary as Loan Administrator if not in the country during the application.
• With a stable source of income from employment or business

2. Prepare and complete the required basic, income, and collateral application requirements. See the complete list of requirements via BDO’s Home Loan page. 

3. Submit Application Form and Requirements through:

• Home Loan Online Application
• BDO Home Loan Provincial Business Centers
• BDO Branches Nationwide

FEES 

Processing home loans via bank requires fees such as appraisal fee upon submission of loan documents:

• P5,000 (if the collateral is within 30km radius from any BDO Branch)

• P5,500 (if the collateral is outside 30km radius from any BDO Branch)

Prior to loan release, these fees should be settled:

• Handling Fee
• Notarial Fee
• Registration Fee
• Doc. Stamp Tax
• Credit Life Insurance (CLI) Premium
• Fire Insurance (FI) Premium

CHINA BANK SAVINGS

OFFER

China Bank Savings offers Easi-Livin’ Home Loan for a lot or home purchase, home construction, home improvement, or to refinance an existing home loan.

INTEREST RATE

It has a fixed-term option of 1, 2, 3, 5, 10, 15, 20, and 25 years with re-pricing every year after that.

LOAN TERM

Easi-Livin’ Home Loan terms are as follows:

• Purchase of House and Lot-25 years
• House Construction and Renovation-25 years
• Purchase of a Townhouse Unit-25 years
• Purchase of a Condominium-15 years
• Purchase of Vacant Residential Lots-15 years
• Refinancing/Take-out-25 years

REQUIREMENTS

For Employed

• Latest 3 months of payslip OR Latest ITR or Certificate of Employment with compensation and tenure 

For Self-Employed

• Photocopy of the last 2 years ITR with matched Financial Statement 
• Bank statement for the last 6 months
• Photocopy of DTI Registration or SEC Papers and latest GIS
• List of major suppliers and customers with contact details

For OFW / Immigrant

• Notarized or Consularized Special Power of Attorney (SPA)
• Latest job contract with compensation or Certificate of Employment with compensation and tenure.
• Assigned co-borrower.

FEES

•  Appraisal fee- P3,500.00, non-refundable 

UNION BANK

OFFER

Union Bank offers flexibility in terms of the amount that borrowers can get and the down payment they can make.

AMOUNT OF LOAN

Union Bank’s minimum loan amount is PHP 500,000, and the maximum loan amount is 80% of the property’s contract price.

INTEREST RATE

Union Bank’s home loan interest rate ranges from 8% to 11%.

ELIGIBILITY

The borrower should be:

• 21 to 65 years old but not exceeding age 70 upon loan maturity.
• Filipino or former Filipino citizen
• Employees with permanent status
• Self-employed individuals whose business has been operating profitably for at least two years.
• OFWs

REQUIREMENTS

• Accomplished Union bank Home Loan application form
• Valid ID
• Marriage contract 
• Latest income documents for employed applicants:
  • Certificate of Employment with salary details
  • Payslips for the last three months.
• Latest income documents for self-employed applicants:
  • DTI or SEC Business Registration Certificate
  • Financial statements
  • Bank statements for the last six months
  • ITR
  • List of customers or suppliers with contact information

Additional documents for OFWs:

• Valid passport with entry and exit stamps.
  • Original consularized Special Power of Attorney

HOW TO APPLY

To apply, the borrower should accomplish the documents needed to process the loan and visit their website to apply online or go to the nearest Unionbank branch.

RCBC

OFFER

RCBC offers Regular Home Loan with low monthly amortization and Home Loan Plus, which has insurance coverage throughout the loan term. 

LOANABLE AMOUNT

The minimum loanable amount is Php 300,000, while the maximum amount is up to Php 5,000,000.

INTEREST RATE

The interest rate ranges from 6.38% to 10.5%, depending on the term.

LOAN TERM 

RCBC Regular Home Loan and Home Loan Plus loan period is a minimum of 1 year and a maximum of 20 years.

ELIGIBILITY

Employed borrowers should be: 

• Filipino Citizen or Dual Citizen
  • If a foreigner must be married to a Filipino citizen
  • At least 21 years old upon loan application and at most 65 years old upon loan maturity.                    
  • Must have a mobile number and a residence or office landline.
  • With a minimum employment tenure of one year and minimum gross monthly income of Php40,000
  •  Must have worked abroad for at least two consecutive years if OFW.

Self-employed, on the other hand, should have:

• Filipino Citizen or Dual Citizen
• Must be married to a Filipino citizen if a foreigner.
• At least 21 years old upon loan application and at most 70 years old upon loan maturity.
• Must have a mobile number and a residence or office landline.
• Business must be in profitable operations for the past 2 years.

REQUIREMENTS

• Accomplished RCBC Home Loan Application Form
• Copy of TCT and Tax Declaration (Land & Improvement)
• Bill of Materials (Construction)
• For Employed applicants: Certificate of Employment (COE) or latest ITR, 2 valid government-issued IDs, TIN, Utility bill
• For Self-employed applicants: Business Registration with DTI, Audited Financial Statements, ITR, or bank statements.

FEES 

Appraisal Fee- PHP3,500.00

Registration Fee- Depends on the loan amount.

SECURITY BANK

Security bank offers home loans to cut the hassles of buying, building, or renovating a house. Asian Banking and Finance’s Wholesale and Retail Banking Awards awarded Security Bank’s home loan as the Home Loan Product of the Year in 2019.

LOANABLE AMOUNT

The minimum loan amount of PHP 1,000,000, and the maximum loan amount is 80% of the property’s appraised value.

INTEREST RATE

• 6.25% fixed for one to three years.
  • 6.75% fixed for five years.
  • 7.75% fixed for 10 years.

LOAN TERM

• Minimum of 1 year
• Maximum of 25 years for house & lot
• Maximum of 20 years for townhouse or duplex
• Maximum of 15 years for a residential vacant lot or condominium unit

ELIGIBILITY

• At least 21 years old, but not more than 65 years old upon loan maturity
• Earning a combined monthly income of P50,000
• Has been continuously employed for at least 2 years.
• The self-employed must be operating a legitimate and profitable business for the last 3 years.

REQUIREMENTS

• Home Loan Online Application Form
• List of Required Documents
• Special Power of Attorney (SPA)
• Authorization Letter Template for Property Collateral Verification and Tax Mapping

HOW TO APPLY

To apply for a housing loan in Security Bank, you should follow these four easy steps:

1. Using Security Bank’s calculator check how much you can borrow.
2. Choose the loan that fits your needs and budget.
3. Complete the application and checklist. Apply online or go to your nearest Security Bank branch.
4. Get approved in as fast as 5 days!

BANK OF COMMERCE

OFFER

• Purchase of house and lot, condominium unit, or townhouse
• Construction of house on a lot owned by the borrower.
• Major repair, expansion, or improvement of an existing house
• Take out/refinancing of existing housing loan.

LOANABLE AMOUNT

The loanable amount for the Bank of Commerce is a minimum of Php 500,000.

LOAN TERM 

The loan term of the Bank of Commerce is ten to 20 years.

INTEREST RATE

• 8% for a one-year fixed rate
• 8.25% for three years fixed rate.
• 6.75% for five years fixed rate.

REQUIREMENTS 

General

• Home Loan Application Form
  • 2 x 2 Photos (both spouses / co-obligor)
• Photocopy of the valid ID
  • List of acceptable IDs: Driver’s License, Passport, SSS ID, Company ID (if Top 5,000 Corporation), Postal ID, PRC ID
  • Marriage contract (if applicable)
  • Photocopy of bank statements or deposit passbooks (3 months)

Employed

• Copy of (ITR) Income Tax Return with BIR or bank stamp (latest 3 years)
  • Certificate of Employment stating the applicant’s position, income, and length of stay in the company (original copy only)
  • Copy of payslips (for the last 3 months)
  • Proof of other sources of income, if any
  • Proof of billing address and original copy of Latest Contract of Employment (OFW/Seafarer)

Self-Employed

• Copy of business registration papers with DTI (if single proprietorship) or SEC (if partnership or corporation)
  • Copy of Audited Financial Statement for the last 2 years.
  • Copy of Income Tax Return (ITR) with BIR or bank stamp (latest 3 years)
  • Company/business profile
  • List of major suppliers/customers

Pag-IBIG or BANK FINANCE?

Choosing between Pag-IBIG Housing Loan and Bank Financing would still depend on the borrower’s needs and budget.

Some might consider Pag-IBIG Housing Loan because it has few restrictions and requirements compared with bank financing. Others might also find bank financing requirements stringent and complicated because they conduct background checks and require submitting supporting documents.

For the loanable amount, some might not need the maximum loanable amount of Pag-IBIG Housing loan, which is up to P6,000,000 or 80% of the total accumulated value (TAV), and others might need bank financing loanable amount and fixed interest rate for about one to five years.

If you are looking for properties under reputable developers and accredited by Pag-IBIG Fund and bank financing, you may visit ALL PROPERTIES.