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A Rough Guide to Property Financing Options

Financing your dream house could be quite a daunting task for the uninitiated. First off, many do not know what options they have. More so, they do not know the advantages and disadvantages of these various options. Below is a rough guide to financing your dream home is the Philippines, which will hopefully give you a birds eye view of the terrain to know where to start, who to ask, and what to ask of the institutions you will choose as your options.

In-House Financing

Most of the new subdivisions that offer houses or lots have the option to do in-house financing. Under this scheme, the buyer pays the amortization for the property directly to the subdivision developer. A deed of conditional sale is usually executed where the title of the property will be transferred to the buyer only as soon as it has been fully paid.

Many of the buyers prefer this set up mainly because there are less hassles. Developers do not impose too many requirements under this scheme. Most often, no background checking is required, hence no waiting for any approvals.

One down side to this, however, is that most developers exact very high interest rates sometimes reaching 16 to 20%. There are rare occasions where a developer can afford to give the property to you with no interest. But even in these cases, the payment period do not exceed two to five years.

Bank Financing

Banks offer greater flexibility when it comes to financing your house. For one, you can get a loan for houses not located in a subdivision. Moreover, they have lower interest rates than in-house financing. These days, the going rate is about 9% per annum for a one to three year loan.  Usually, they adjust the rates upwards to around 12% for a 15 year loan.  Since most banks offer payment periods of up to 15 years, monthly amortizations can be much lower than in house financing.

Financing with a bank can be a thorny matter. Make sure you ask how many years interest rates shall be fixed. Some give you options.  Know what fees are required, such as, processing of your application, annotation of the title, and the like.  Banks normally do not release the loaned amount if the title is not yet transferred to the name of the borrower.  Ask your developer if they would honor a guaranty from the bank so you can stop amortization payments to the developer as you wait for the loan release.

Government Financing

Government offers quite a number of good options with very low interest rates. PAGIBIG is, of course, the foremost institution for housing loans. They can give a loan for as low as 6% interest. Payment period is up to 30 years.  Note, however, that they adjust their interest rates every few years. Make sure you get detailed information on this.  GSIS and SSS also have their housing loan portfolios. Their interest rates are generally higher than PAGIBIG’s but if you are a member here, it might be more convenient for you.

Whichever financing scheme you choose, make sure you ask the details to ensure that there are no unpleasant surprises along the way. Doing your homework will ensure that your experience of financing your dream home will be a rewarding one.


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