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Housing Loans in Philippines

Buying a house in the Philippines can be expensive sometimes. Many people cannot afford to collect the full sum for a house. For them, the option of housing loans becomes a convenient alternative. It is a less complicated way to get the full sum or a missing part to a budget for purchasing a house. There are some ways to apply for the house loan in the Philippines:

  • Loan for purchasing a home. It is the most popular variant of the loan. Banks or loan companies would suggest from 70 to 80% of the price for an apartment or a house.
  • Loan for house construction. Some people want to build their own houses. Banks and loan companies are ready to assist. With this loan, an owner of the land can cover construction expenses.
  • Loan for home renovation. You can apply for the house loan if you want to renovate the house you live in.
  • Loan for the extension of the home. You can also get the credit for extending the living space in your house or building a guest house.

The housing loan application is a challenging procedure. You need to do a lot of paperwork and meet some particular requirements. The best option for you would be doing profound research before getting started. This article will tell you about all the essential features of housing loan Philippines.

Types of Housing Loans

The loans can be divided according to the financing scheme and lenders:

  • In-house financing. It implies taking a loan from a direct property developer. In this case, an applicant has to do less paperwork compared to bank loans. Background investigation is less severe as well. At the same time, this way implies fewer choices, shorter loan terms, and higher interest rates (from 15%) comparing to other options.
  • Bank loans are the most popular option. It implies the lowest interest rates (from 5.25%) and longer terms (up to 25 years). Banks perform severe background investigations, strict requirements to borrowers, and more documents for submission.
  • Loans from the government. It provides housing loans for the Filipino residents through two popular systems: Pag-IBIG Fund and Social Security System (SSS). Some consider them to be the best home loan options, as they imply the most extended terms (up to 30 years), relatively low-interest rates (5.5% for Pag-IBIG and from 8% to 11% for SSS). However, these loan options are available for the members of these funds only. They require paying contributions as well. The sum of the loan will depend on the quality of the member.

Housing Loan Requirements

To apply for the home loan in the Philippines, an applicant must meet the following requirements:

  • To be a citizen of the Philippines or to be a foreigner with permission to buy property in the state;
  • To be from 21 to 65 years old;
  • To have the minimal P50,000.00/month (varies from bank to bank) family income;
  • At least two years of employment or successful and profitable business operation.
  • Documents for special professions (marine documents, legislations for practicing doctors, etc.)
Bank Application Request ID Married Years of Employment/Business operation Trade References for Self-Emloyed Income Tax Return Minimal Family Income Co-Borrower Separate Form
BDO (Banko De Oro) + + + 2/2 + + + +
BPI (Bank of the Philippines Islands + + + 2/2 + + +
ChinaBank + + + 3/3 + +
Security Bank + + 2/3 + +
Metrobank + + 2/2 +

Housing Loan Fees

Along with mortgage payments, the applicant should be ready for the following fees:

  • Insurance. It is not mandatory. However, some banks might insist on ensuring the property from physical damage. In such a way bank tries to cover its losses.
  • Application fees. They might consist of two payments: application fee (it must be paid before your application is approved) and processing fee (it is paid after the loan application is recommended).
  • Prepayment charges. Some banks or credit companies imply penalties for paying off the loan before the estimated terms. On average, these fees equal from 2% to 6% of the loan sum.
  • Penal interest rates. They come if you delay paying money for your loan. On average, they are between 2%-3% of the overdue payment.
  • Repayment change fees. Some banks imply them if you need to change the options and terms of payment.
  • Documentary taxes. In the Philippines, they are equal P1 for every P200 of the loan sum.

Advantages of Housing Loans

Housing loans have some advantages:

  • Credit score improvement. Timely paid EMI’s (equated monthly instalments) will improve your credit score. A good ratio gives you more opportunities for further credits and bank services.
  • Housing loans are cheaper than other loan options in the Philippines. They are secured, they have the lowest interest rates and the longest repayment tenure.
  • Tax benefits. Loan applicants have got a right to reduce their property taxes.
  • Finally, housing loans are the fastest way to get a house of your dreams.

How to Apply for Housing Loan?

To apply for the house loan in the Philippines, you need to undergo the following procedure.

The best initial step is consulting a mortgage broker. The expert will inform you about all options available on the market at the moment. You will get assistance with document preparation as well.

Before applying for the loan, check the market for available options. Compare the offers with your possibilities. Check your finances and the credit score.

Find a trustworthy co-borrower in case you want to use the bank option. Some banks require marriage with a citizen of the Philippines.

Prepare the following documents:

  • Passport
  • Driver’s licence;
  • Clearances from NBI and police;
  • ID’s of SSS, BIR, Government Office, PRC, and OFW;
  • Registration of the resident with permission to buy and own property in the Philippines;
  • Proofs of income: employment or self-employment certificates (an applicant must work for a company or run a legit business in the Philippines for two years), income tax declaration, and statements from the bank.

Once you have prepared all the documents, you need to fill in the application form and pay the fees.

Make sure that your contact information is legit to allow the lender to contact you and inform you about the results, missing documents, etc.

FAQs

Here are the answers for some frequent questions that concern the house loan sphere:

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Why I was denied for housing loan?

There are several factors that might prevent you from getting a home loan in the Philippines. Here are some of them:

Bad credit history. Banks and loan lending companies check the history of your cooperation with banks. They might refuse you if you had problems with credits or payments before. There are several ways to improve your credit score, including deposits and timely paid minor credits.

An applicant might not meet the requirements of a bank. Mind that there are requirements that concern age, employment and place of work, salary, and visa permissions (for foreigners).

Lack of documentation is another reason to refuse. The list of documents is big. Check if you have got everything we have mentioned in previous paragraphs.

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Can I get 100% funding to buy a house?

The situation will depend on the type and purpose of the loan. On average, banks and credit companies are not likely to give away the full sums for buying a house. Some banks have inner restrictions concerning the maximal loan sum (75%-90% of the whole property value).

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How do interest rates work?

Housing loan interest rates are taken for each year. However, the calculations go every month. In case you pay a bit more for the current month, the interest rate for the next one will be lower. Housing loans imply fixed interest rates, i.e. they do not change their value throughout the loan term.

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Is it better to loan or buy a house?

The situation depends on many circumstances. Considering the interest rates, buying a house is cheaper than taking a loan. On the other hand, loans are the best instant decisions. To buy a house, you should save up for several years. With a loan, you can get a place to live in several weeks. Before making a decision, define all the critical factors: if you need the property immediately if you can save up money, how long it will take you to do it, etc.

Disclaimers

The information from this article is presented to you on a fundamental basis. The authors of the article do not convince you to perform any money operations. The text bears educational purposes. The authors place the information about particular services and banks in exchange for minor rewards. The exact information in the article is given freely. Actual parameters and circumstances depend on many factors a loan seeker has got.

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