Philippines

Types of Home Loans in the Philippines

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It’s a dream of every Filipino family to buy a home. The great news is that you can apply for home loans depending on your ability to pay and the amount you need.

Your quest to fulfil your family’s dream should start from being a wise financial steward through assessment of your priorities in finances and reviewing the types of loans that you think you can commit to in the long-term.

#1 Bank financing (lower interest rates, but stringent on requirements)

Borrowing money from commercial banks is one of the most popular home loans among Filipinos. Bank financing in the Philippines offers lower interest rates than third-party financing companies and more flexible terms. Banks offer about 4.99 to 8 percent with fixed rate terms of 1,2,3,5,10 years which are payable from 5 to 25 years.

However, the downside is that most banks have stringent requirements for applicants. So, it’s important you’re qualified as a principal borrower. Having a good credit history is a plus and you often need collateral in order to borrow between 60 to 80 percent of the principal amount. Therefore you need to prove you have a stable income, a job, or a thriving business.

#2 In-house financing (higher interest rates, lenient on requirements)

You can also take a look at in-house financing, depending on the terms and rates of the property developer from which you want to buy your home. In this option, you can pay in instalments and you have flexible terms that can fit your financial status and ability to pay.

An in-house financing scheme has more lenient requirements compared with banks. You’re likely to get approved and the processing of paperwork is less of a nuisance when it comes to background checks. The downside is that you’d be paying higher interest rates (up to 18 percent).

You’re likely to get approved but just be careful on the terms, as you’re in it for the long haul.

#3 PAG-IBIG Fund (slightly higher than banks’ rates, suitable for employed and active members with monthly contributions)

If you’re employed and an active contributor at PAG-IBIG, you can apply for the government’s home fund program whether you want to buy a brand new house, condo unit, or pre-owned house.

The maximum amount of loan you can borrow as a PAG-IBIG member is up to P6M, but also subject to terms and conditions. The amount you can borrow also depends on the actual principal amount you need, financial capacity, and your monthly contribution.

The interest rates are slightly higher than banks but lower than the in-house financing, ranging from 5.5 to 10 percent as of the time of this writing. The terms of the loan can be up to 30 years.

#4 SSS (higher than banks’ rates, suitable for employed and active members with monthly contributions)

The government’s social insurance program, Social Security System (SSS) for employed Filipinos also offers home loans but specifically for overseas Filipino workers. SSS aims to provide low-cost housing and also loans for home construction.

The interest rates are almost the same as PAG-IBIG, but ranging from 8 to 11 percent. As a member, you can loan up to P2 million at a maximum of 30 years.

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