When is the perfect time to purchase a home? The shortest and simplest answer is: when you're ready, both personally and financially. Owning a real estate property, or specifically a house and lot, in the Philippines presents different challenges, especially now that real estate prices are gradually increasing. That’s the exact reason why a lot of potential home buyers read lots of homebuying guides and seek advice first before entering into a transaction. With the current market, you may be wondering whether it is more practical to buy a house as soon as possible or to secure a housing loan first in order to get the lowest housing loan interest rate.
What is a Housing Loan?
A housing loan, also known as a home mortgage, is a loan given by a bank, mortgage company, or other financial institution that the Bangko Sentral ng Pilipinas accredit for the purchase of a residential property. A housing loan is a type of debt commonly used and recommended to those looking to acquire or purchase real estate. It is a secured loan because the property is regarded as an asset and serves as collateral for the loan. Mortgage interest rates are typically lower and either the lender is given a fixed interest rate and a loan term ranging from three to thirty years. Once the mortgage has been paid off by the buyer, that is the only time he can acquire it.
The recorded number of real estate loans provided for all types of new housing units in the Philippines increased by 51.1% in the third quarter of 2021, according to the Bangko Sentral ng Pilipinas. 84.7% of real estate loans were for the purchase of new housing units. This only means that, despite rising property prices, you can still get your dream home in the Philippines with the help of a housing loan. Furthermore, a housing loan in the country typically provides a large loan amount as well as a competitive housing loan interest rate for longer amortization periods.
A home loan is typically available from a bank, a real estate developer, or through the Pag-Ibig Fund. Its purpose is to provide funds for any of the following:
● Purchase a condominium or residential house and lot.
● To finance the construction of your own residential property.
● To provide funding for the renovation of your residential property.
● To refinance an existing mortgage.
Types of Housing Loans in the Philippines
There are two kinds of housing loans in the Philippines: conventional and flexible. You can select either of these two depending on the terms you prefer.
1. Traditional Loan
A conventional mortgage requires you to make fixed payments over a set period of time. This is ideal if you want a consistent payment method and want to plan your funds ahead of time.
2. Flexible Loan
This kind of home loan is typically provided by banks. Depending on how much you deposit, you can manage the interest rate on your flexible home loan.
Your Options in Looking for the Lowest Interest Rate Housing Loan Philippines
Here are your housing loan options based on your financing plan.
1. Bank Finance
Nowadays many banks in the country not just lend money to their clients but as well as housing loans. The available amount for lending and terms differ from one bank to the next. Further, a thorough application process is required before one can obtain a housing loan. Many banking institutions are trying their best to offer the lowest interest rate housing loans Philippines with a fixed rate for about one to five years.
Benefits of getting a bank housing loan
a. Low housing loan interest rate
The house loan helps make purchasing a home easier for the average Filipino income worker. If you meet the minimum requirements, you don't have to be a rich man to buy a house. Home loans frequently have extended payment terms of 15 to 20 years, making monthly payments less and more doable. You can enjoy all of the benefits of home ownership by taking out personal loans.
b. Easier way of obtaining a home loan
The fact that the interest rate on a home loan is lower than the interest rate on other types of loans, such as a personal loan or a mortgage, is often overlooked. This is because the bank uses your house and lot as some kind of insurance in case you failed to pay the loan.
The interest rate on a home loan is among the lowest of any type of loan. However, interest rates vary greatly between banks and loan products. Make sure you do your research so you can choose the lender with the lowest interest rate, as even a small difference in the interest rate can save you thousands of pesos in the long run. These additional savings can go a long way.
2. Pag-IBIG
Pag-IBIG, a government agency, typically provides housing loans to its members. For those looking to purchase a condominium, house and lot, the maximum loanable amount is Php 6,000,000.00. They also make the Pag-IBIG housing loan interest rate at a lower rate.
When most Filipinos consider how to pay for a home loan in the Philippines, the Pag-IBIG housing loan has always been the first option that comes to mind. This means that banks are only used as a last resort if a Pag-IBIG loan does not materialize for whatever reason.
Benefits of getting a Pag-IBIG housing loan
a. The primary advantage of Pag-IBIG loans is that they have less stringent eligibility requirements than bank loans, making almost any individual who is an active Pag-IBIG member eligible. If you make regular contributions, are under 60 years old, and have no other existing debt, including home loans, your Pag-IBIG loan approval is almost guaranteed.
b. Pag-IBIG is more accepting of low-income borrowers. If you are a first-time home buyer or have a limited budget, a Pag-IBIG loan is a better option.
3. Internal Financing
In the Philippines, real estate developers also provide housing loans through in-house financing. This loan option typically has a maximum tenure of 5 years.
How Are Interest Rates Determined?
The combination of the supply and demand for resources in the money market determines the level of interest rates. The Bangko Sentral ng Pilipinas is authorized by law to make interest rate decisions. There are three factors that affect the interest rates in the country.
1. Inflation Rate
There is more need for inflation to increase when there is an excess of currency in the system. The Banko Sentral ng Pilipinas may raise its policy rates in order to reduce inflationary pressures brought on by excessive liquidity in the system. The Banko Sentral ng Pilipinas signals to the market that interest rates are on the rise by raising its main policy rates.
2. Economic Policy Position
The need for borrowing on the domestic or international markets to fill the government's funding gap increases as the public debt of the government rises. In particular, when the government borrows from a less liquid domestic market, this puts upward pressure on domestic interest rates.
3. Cost of Intermediation
When financial organizations expand or maintain their services, expenses are incurred. When the cost of intermediation is high, interest rates have a tendency to be high.
The maturity time of the financial asset and the perceived risks associated with the asset are other variables that influence interest rates.
Effects of Interest Rates on the Housing Market
Interest rates have many effects on the housing market, one of which is the price of houses and lots. When purchasing a home, the total mortgage cost is determined based on the total amount owed to the lender over the life of the loan. The total cost of the mortgage is determined by interest rates and the value of the property.
Impact of Lowest Interest Rate Housing Loan Philippines
If interest rates are low but home prices are high, the overall cost of the mortgage may be lower than if interest rates are high but home prices are low.
When interest rates are low, the marginal efficiency of capital or profitability in housing is high. This increases the investment demand for home purchases. Property prices will eventually rise due to high demand and limited supply.
When interest rates are low, it is also easier to obtain a home mortgage. Because interest rates are low, prospective buyers are not afraid or have second thoughts about obtaining a mortgage because they are confident in their ability to pay for it on a monthly basis.
Impact of High-Interest Rates
Mortgage rates can also rise as interest rates rise. High mortgage payments will discourage prospective homebuyers, particularly low- and middle-earners, and first-time homebuyers from buying or looking for properties for sale because renting is more affordable than buying.
High mortgage prices can also result in an increase in the number of home foreclosures or homeowners being forced to sell their mortgaged property to avoid repossession. If property foreclosed homes continue and there are more property sellers than buyers, property prices will eventually fall as the supply of properties exceeds the demand.
Getting the Best Housing Loans in the Philippines
Obtaining a home loan from a bank can be stressful if you don't know which one to choose. Here are some banking firms to consider when looking for home loans to help you have a smooth home-buying experience.
1. BPI Family Savings Bank
A BPI Family Savings Bank home loan is one of the best home loan options available today in the country due to its low down payment and low cash out. The Step Up Payplan, introduced by BPI, allows lenders to endure the lowest monthly payments starting from the first year of monthly payments and increasing every year.
● PHP 400,000 is the minimum loan amount.
● The maximum loan amount varies accordingly: 70% of the house and lot's appraised value; 60% of a vacant lot's or residential condominium's appraised value; and a maximum of 80% of the appraised value of the house and lot (if the value does not exceed PHP 5 million).
● Rate of interest:
a. Fixed 6.25% for one or two years/s
b. For three years, the interest rate will be fixed at 6.75%.
c. Fixed-rate of 7.25% for four or five years
d. 9.50% fixed rate for ten years
e. Fixed at 10.50% for 15 years
f. Fixed at 12% for 20 years
● Terms of the loan: A maximum of 25 years for the house and lot
For the following: vacant lot, condominium, business loan, refinancing, or multi-purpose loans, the maximum term is ten years.
2. Banco De Oro (BDO)
● The minimum loan amount is PHP 300,000 for a single lot and PHP 500,000 for a house and lot.
● Total loan amount: up to 80% of the appraised value of the property
● Rate of interest:
a. Fixed rates as low as 6.25% for one to two years
b. Fixed rates as low as 6.75% for three years
c. Fixed rates as low as 7.25% for four to five years
● Loan duration: up to 20 years
3. Security Bank
● Php 1,000,000 is the minimum loan amount.
● Maximum loan amount: up to 80% of the appraised value of the property
● Rate of interest:
a. Fixed rates as low as 6.25% for one to three years
b. Fixed rates as low as 6.75% for five years
c. fixed rate of 7.75% for ten years
● Loan term maximum: 20 years
Obtaining a housing loan in the Philippines, it can enable you to achieve your dream of owning your dream home. It can also aid in transforming your humble abode into a comfortable paradise. That’s why BRIA Homes prime itself on giving the chance to every Filipino, to acquire their own quality house and lot at an affordable price
However, before taking out a home loan, you should give it some serious thought. Check your cash flow to see if you can afford to cover the monthly payments. Compare loan offers on the market to find the best home loan and lending institution for your conditions. While the whole home loan process can be challenging and conflicting, the end result is well worth the effort!
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