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How to apply for a mortgage loan in the Philippines

Kamla Villanueva Kamla Villanueva
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Looking forward to buying that dream home? Today, Homify will help you and guide you with simple steps in order to obtain a mortgage loan in the Philippines. Most real estate companies would ask for 30% downpayment which is a very large sum. In order to pay this bulk, there are lenders that could help you pay this, in exchange, you get to pay the bank or financial institution in installment basis with a fixed interest rate.

Let's go over the process shall we?

1. Canvas the interest rates of banks and lending institution for home loans

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As of date, HDMF (formerly Pag-IBIG) has the lowest interest rate for loans that are up to P450,000, provided that your gross monthly income is P15,000 and working in NCR; and for other regions, it's P12,000. Also, you will have to be a member first in order to avail the loan that allows you to purchase a house and lot not exceeding 1,000 sqm. But if you're going to loan a higher amount, let's say P750,000, then the interest rate would be 6.5 which is on the same range as other banks. More so, you can get an estimate of how much you will be able to borrow by prequalifying for a housing loan with the help of your loan officer or a mortgage broker. The instalment payment terms may range from 25 years for banks and up to 30 years for HDMF. But of course, if you have the capacity to pay the loan in less than 5 years, then we recommend you take that option in order to free yourself from financial obligation as soon as possible. There really is no telling how secure your economic conditions will be after a decade or two.

You may also opt to use financial loan calculators for an idea of your possible monthly amortisation. 

2. Getting pre-approved

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エヌ スケッチ

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エヌ スケッチ

To get pre-approved, you will be asked to submit your recent bank statements, proof of income, employment information, latest income tax return, and other documents that will allow the lender to verify your ability to pay off the housing loan.

If you do qualify, then you will be given a good faith estimate (GFE) that shows the terms and type of loan as well as the interest rate and closing costs.

3. Consider all the other expenses

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Before going all out on purchasing a home, you must also calculate your average monthly spending. We suggest that you save enough by spending only 25% of your monthly income to cover all your expenses, thus avoiding problems of having unpaid debts. Also, you must consider the expenses that are related to purchasing a home: taxes, title transfer fees, monthly dues, study of title, appraisal and notary etc.

Also, you should consider the debts, insurance that the bank charges in case of illness or death of the debtor, and insurance against earthquakes or fires. 

Other expenses to consider are the ones that are needed for your new home. These may include purchasing new furniture, kitchen accessories, washing machine, refrigerator and or other surprise expenses that may arise that are related to its maintenance like plumbing and electrical rewiring. 

4. Tighten up your belts

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Atres Arquitectes

Transitioning from being single to a married life would divert most of your earnings into building a life together as a couple/family. Taking up this responsibility is going to take a lot of dedication and hard work. But the rewards are tenfold, seeing your family living comfortably and having the fruits of your labor make a dream come true.

5. Making a house your home

Once you've purchased the house, you may do with it as you please. A warm haven where you can feel secure and be at peace. You can decorate it or even renovate it according to the needs of your family. For some awesome design ideas, Homify has a few in store for you: 5 affordable bungalows: Which one would you pick?

5. Being free from debt

Once you're done paying your mortgage loan, you'll be able to relax a little bit more and actually enjoy life. You can think about traveling and doing things that you would enjoy. You can take family trips where you could have bonding time together. But of course, to be free from debt, you will have to pay your mortgage religiously. 

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