Affordability and ease of financing are two important factors when considering the purchase of a new home. In many cases, buyers opt to buy a condominium unit instead of a house due to cheaper transaction costs and lower down-payment requirements. There are several condo projects all over the Philippines that feature different types of units and amenities that you may want to ponder. For those of you who are planning to finance the purchase, here is an overview of some financing options you may want to consider when buying a condo in the country.
How does a condo mortgage work?
In addition to analyzing your finances, the mortgage lenders evaluate the financial viability of the condo association. Lenders will assess the following variables to determine if the condominium is warrantable: The number of units sold is the total amount of units owned by investors or the non-owner occupied.
Amenities lawsuits that involve the condo association. The number of unit owners who have not paid their special assessment dues. First-time homeowners on a tight budget who want to avoid the headaches of upkeep, repairs, security, and landscaping may find condominiums to be the best housing alternative. No exterior property maintenance or groundskeeping required. Often less expensive than a single-family home.
Yet, if you want to earn additional money by renting out your apartment as a vacation homes rental, you need to do research first. Not all condo association permit the use of a unit as a vacation rental, and financing may be more difficult for those that do.
When you apply for a housing loan for condo purchase, you should learn all there is to know about home loans in the Philippines so that you are not overwhelmed when you begin the application process. To assist you, we have compiled a detailed guide on how to get a home loan.
How to finance a condo in the Philippines?
1. Spot Cash
Cash, typically referred to as spot cash, is the method of payment in which the whole remaining amount of the condominium is paid in advance. In addition to this, it is an excellent method for acquiring real estate property without incurring any interest charges; but, it is possible that doing so may consume all of your money if you have a tight budget.
After the first reservation of the dream condo, you may have a maximum of one month to complete the payment; however, the length of time you have may vary based on the agreement you have reached with the broker or condo developer.
Rather than extending the repayment plan to five years or more, which will also include annual interest rates, it is your best condo financing advantage to make a single payment. This will save you a significant amount of money.
If you pay for everything with cash, there is a risk that you may run out of money. To be able to make a spot cash payment, you will need to have an existing property that you intend to sell to finance the loan for condo purchase. If you do not have an existing property that you want to sell to fund the purchase of your condo or real estate, you will not be able to make a spot cash payment.
You don’t have to go through the hassle of having your credit history checked in order to get discounts from lending institution, such as reductions for one-time payments.
2. Bank Loan
Home financing may also be accomplished via the use of bank loans. They have access to a broad variety of financing alternatives, some of which go as high as 80 percent of the property’s overall worth. Your home will serve as loan collateral until such time as all of your balance payments have been completed.
The most banks provide housing loans, and these home loans often have more adaptable conditions and cheaper interest rates than those offered by third-party financing institution. Yet, the procedures to submit an application might be strict.
In order to be considered a primary borrower, you will be required to provide evidence that you either have a employment certificates, a consistent income, or a successful company. The most banks are quite restrictive when it comes to loan for condo purchase approvals as well as missed monthly payments.
In addition, bank loans may provide you with extended payback periods of up to 25 years, but this will depend on your current financial capabilities. They are less difficult to get in touch with, which means that you can always contact a broker anytime you don’t comprehend a policy associated with your loan.
3. In-house financing
You may make an application to your property developer for a condo loan or home loan at the head office . You may also be able to get a loan from the developer in order to acquire a condominium unit. You may put down a minimum of 10–30% of the property’s worth via in-house financing, and you’ll be able to pay off the remaining amount through monthly amortizations.
They provide various terms and methods for making payments over time. The restrictions for in-house financing are often less stringent than those imposed by banks. On the other hand, interest rates might be very higher (even up to 18%).
As compared to bank financing and Pag-IBIG loans, in-house financing is simpler to get since the condo developer is the only one whose signature is required on the necessary papers. The down payment is not too high, and the flexible payment terms.
4. Pag-IBIG Financing
A Pag-IBIG loan is one of the most frequent types of condo financing used in the Philippines for the acquisition of residential real estate. You may take advantage of cheap interest rates for a lengthy period of time, up to 25 years, depending on the length of the repayment term.
Condominium unit owners’ monthly amortizations may be withdrawn straight from their paycheck if they are a Pag-IBIG member, which practically everyone in the Philippines is. In addition, Pag-IBIG has a relatively cheap interest rate, allowing you to borrow up to 6 million Philippine pesos for just around 1–6% of the loan (subject to terms and conditions). Additionally, the interest rates are slightly higher. There is a very wide range of flexibility in terms of repayment possibilities, starting as little as three years and going as high as thirty years.
Pag-IBIG Fund If you’re a Pag-IBIG member and active contributor, you can apply for a housing loan from this government agency own financial institution. You’re qualified for a home loan application if you are not more than 65 years old and are self-employed, salaried, or an overseas Filipino worker (OFW).
5. Social Security System (SSS)
In addition to providing retirement benefits, the Social Security System (SSS) also makes housing loans available to workers of private companies. The most fundamental need is that you must be a member of SSS who is actively contributing and either employed or self-employed. In addition, you can’t be older than 65 years old! In order to be eligible for some SSS Salary Loans, you also need to have a certain quantity of monthly payments.
Employed Filipinos and Overseas Filipino Workers (OFWs) who are actively contributing their monthly payments are ideal candidates for this form of housing loan. You have the ability to borrow a loan amount up to P2 million from this organization, with a maximum payback duration of 30 years.
Your repayment of the SSS Salary Loan will be spread out over a period of 2 years and 24 monthly payments. In addition, the formal monthly amortization period is the second month from the date of the loan. It is expected to be paid on or before the payment due date.
Now that you’ve found out about multiple ways you can finance your condo buying decision, now is the right time to start saving up and invest in one. Make sure to research well before buying to ensure you make the right decision.