PERSONAL FINANCE: HOW TO CHOOSE THE RIGHT HOUSING LOAN
Lamudi lists the ways on how to choose the right housing loan
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MANILA, 10 OCTOBER 2014: A house purchase can daunt the most determined buyer without a substantial bank account. But the common home-buyer, with the right housing loan, can score a big-ticket investment like a house even without millions to their name. It just takes some guts and a whole lot of planning.
To help prospective home-buyers, Lamudi offers these tips on choosing the best housing loan.
1. Know Your Financial Capacity
The best way to get a housing loan is to think like lenders and evaluate the three things they consider when assessing loan applications: your income, your credit history, and your debt service ratio. Your income is important because it helps lenders determine your capacity to repay a loan, while your credit history sends a signal to them if you have your finances properly manage. Debt service ratio refers to the proportion of your monthly take-home pay that will go to your monthly amortization. As a rule of thumb, you should not spend more than 30 percent of your income on housing.
2. Determine the Amount You Should Borrow
Aside from your paying capacity, the loan amount is also determined by the property’s appraised value. Banks may lend a minimum of Php400,000 to up to 80 percent of the property’s selling price.
An important thing to remember: borrow only an amount you can pay back to avoid facing foreclosure and losing your investment altogether.
3. Study Your Financing Options and Choose the One That Works Best for You
Now that you know what you can afford, it is time to evaluate which home financing scheme offers loan terms and monthly amortizations you can live with.
To help you weigh your choices, here is a rundown of the four home financing schemes available to Filipino home-buyers.
a. Bank Loans
Commercial and universal banks are home-buyers’ first resort when looking for housing loans. Compared to other lenders, banks granter longer loan tenor and more competitive interest rates. Although bank loans’ interest rates are adjusted after a certain number of years, the home-buyer will still pay lower monthly amortizations than they would under a developer’s in-house financing.
However, banks are rather stringent when it comes to approval and require more documents, which include valid government IDs, income tax return for employees, certificate of employment, and pay slips, among others. The number of requirements depends on how strict the chosen bank is, so you are advised to seek the help of a loan officer to help you sort this out.
b. In-house Financing
Applying for in-house financing is simple and straightforward. Most of the time, developers require nothing more than the down payment and a verifiable proof of income, and little or no background checking is done. But this less stringent application process comes with a steep price: interest rates in in-house financing can be prohibitive (14–18 percent) and loan tenor is short, rarely exceeding 10 years.
c. Social Security System (SSS) Home Loan
An SSS member or an overseas Filipino worker not older than 60 years old may apply for a housing loan, provided he or she has made 24 continuous contributions prior the application. The payment term is five to 30 years, and the interest ranges from 9 to 14 percent per annum. Although the interest rate is reviewed every six months, it may be fixed for loans not exceeding 15 years.
d. Pag-IBIG Fund
Officially named the Home Development Mutual Fund (HDMF), this government-mandated provident program offers long loan tenors (20–30 years) for members who have made at least 24 monthly contributions and with no existing loan with another bank or a Pag-IBIG housing loan that had been foreclosed. The maximum loanable amount is Php6 million, with an interest of 8–11.5 percent.
Three qualified members, as long as they are related within the second degree of affinity (spouses, siblings, etc.), may apply for a single loan to finance the same property.
Arguably the most affordable and flexible home financing option, the Pag-IBIG Fund enables minimum wage earners have a home of their own.
Buying a house can be intimidating, but any apprehension can be dispelled by clarifying your needs and getting enough information. By making an informed decision, you will sleep easy at night, secure within the walls of your very own home.
Launched in 2013, Lamudi is a global property portal focusing exclusively on emerging markets. The fast-growing platform is currently available in 28 countries in Asia, the Middle East, Africa and Latin America, with more than 600,000 real estate listings across its global network. The leading real estate marketplace offers sellers, buyers, landlords and renters a secure and easy-to-use platform to find or list properties online. For more information, please visit http://www.lamudi.com.ph
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