Know your home-buying options with this guide to housing loans offered by Philippine banks
This updated article was originally published in July 12, 2016.
For most working-class Filipinos, buying a house is the pinnacle of years of hard work and dedication. However, not everyone can pay for their dream home outright, and saving enough cash to pay for a property in full takes a great deal of time.
This is why many buyers resort to housing loans, and fortunately, as the Philippine economy continues to grow and the need for residential space increases, many banks and financial institutions in the country now offer a variety of programs with flexible terms that make purchasing property easier for those on a budget.
If you are a first-time homebuyer, the number of options available can be overwhelming, and it is important to remember that buying a home not only involves your life savings, but it also your foreseeable financial future.
Almost all leading banks in the Philippines offer housing loans worth considering. Therefore, it is important to be best informed of each to choose the right one, which Lamudi has made a little easier by collecting basic housing loan details that the providers has made available online.
But First, What Exactly Is a Housing Loan?
A housing loan is financing option utilized for the purchase of a vacant lot, a house and lot, a townhouse unit, an apartment, or a condominium unit, or for funding a house construction or renovation. This can also be used to refinance already existing housing loans or to reimburse acquisition costs. There are currently two types of housing loans.
1. Conventional Housing Loan
This type of housing loan allows borrowers to make fixed payments for a specified period of time. In the Philippines, this period is commonly 20 years for a minimum housing loan of Php500,000.
2. Flexible Housing Loan
This type of housing loan is one that is connected to a current banking account, with the owner able to decrease the interest rate charges by way of depositing payments, as well as beginning principal repayment at any time.
Housing Loan Eligibility
Of course, before you can get a loan, you have to go through the needed approval process. Each bank has its own processes, which are generally based on the following criteria.
Generally, most banks require that home loan borrowers be at least 21 years old, with the maximum age at 65. However, as mentioned, there are a number of small differences between financial institutions. Union Bank, for example, is favorable to you if you happen to be an older borrower, as the limit is 70 years old, not the standard 65. Sterling Bank of Asia, on the other hand, only allows for a maximum borrower age of 60, you may still apply if are above this age if doing so with a co-maker.
All banks require borrowers to be duly employed as they apply for a housing loan, often for at least 2 years. If you are self-employed or run a business instead, you would still be considered for approval, and would likely just have to submit more information regarding your taxes, income, and profits, as well as business permits and other related documents.
This can get very specific depending on which bank you apply to. For example, if you earn income via transportation, EastWest Bank would require you to submit copies of your Certificate of Receipt (CR) and Official Receipt (OR) from the Land Transportation Office, as well as your Land Transportation Franchising and Regulatory Board franchise documents.
Like with any loan at any financial institution, banks also require borrowers to earn a specified minimum monthly income to ensure their borrowers’ capacity to pay. Depending on which bank you borrow from, this could be your individual earnings, but is often the gross monthly income of your household.
China Bank, like most banks, generally requires a minimum monthly gross income of Php50,000 if you are a resident of Metro Manila or Metro Cebu. If you live and work outside of these locations, the minimum monthly gross income for you to be eligible for a China Bank housing loan is Php30,000. Metrobank, on the other hand, requires a minimum monthly income of Php30,000 regardless of the applicant’s place of residence.
All Filipino citizens are eligible to borrow housing loans from banks in the Philippines, but foreign borrowers, or Filipinos who are no longer citizens of the country, would have to look into financial institutions that can lend to international clientele. Among those known to cater to both foreign nationals and Filipino citizens are the Philippine Bank of Communications (PBCom), the Philippine National Bank (PNB), and Rizal Commercial Banking Corp. (RCBC).
Housing Loan Terms, Amounts, and Interest Rates
An important factor to consider when choosing the best housing loan is the interest rate, and in choosing the best rate, the devil is in the details. Housing loan interest rates in the Philippines are highly influenced by the key rates of the Banko Sentral ng Pilipinas (BSP), which is currently at around 7.45 percent. Each bank has different terms, but most tend to offer a fixed interest rate in the first year, and the following years are subject to re-pricing.
Apart from the one-year fixed rate, you as an applicant can apply for multiple years at a fixed rate. The benefit to this is that it protects your loan from market fluctuations (such as economic shocks) that may cause your interest rate to shoot up, which in turn may cause your monthly amortization to become higher. However, should there be any significant dip in prevailing interest rates, your loan cannot benefit from it during the fixed period.
Banks tend to heavily promote their interest rates, as a low rate is indeed very favorable to borrowers. For example, a loan of Php1.4 million is borrowed to pay for a property worth Php1.5 million. With a Php100,000 down-payment in place, a loan tenor of 10 years, and a fixed rate of 10 percent, the monthly amortization roughly amounts to Php18,500 per month. Under the same terms but with a fixed rate of 9 percent, the monthly amortization becomes Php17,735 per month. This means that Php9,180 is saved per year or Php91,800 for the entire 10-year term when taking the lower rate.
These calculated figures, of course, are only estimates. Banks and other financing institutions have their respective factor rates and processes of calculating the monthly amortization, so the actual figures may vary. To get a good idea of what it could be, the following are the rates among banks that have openly marketed the exact interest they currently offer online.
Maximum Loan Terms
Minimum Loan Amount
Maximum Loan Amount
*Rates as of September 2017. These are indicative figures only and actual interest rates will be the prevailing rates during the time of loan availment.
AUB, Asia United Bank; BDO, Banco de Oro; BPI, Bank of the Philippine Islands; CB, China Bank; CBS, China Bank Savings; CTB, China Trust Bank; EWB, East West Bank; HSBC, HSBC Philippines; LBP, Land Bank of the Philippines; MaB, Maybank; MeB, Metrobank; PBCom, Philippine Bank of Communications; PNB, Philippine National Bank; RCBC, Rizal Commercial Banking Corp.; RB, Robinsons Bank; SB, Security Bank; SBA, Sterling Bank of Asia; UB, Union Bank; VB, Veterans Bank.
Are the Lowest Interest Rates the Best Interest Rates?
If considering only this factor, then yes. However, when factoring in the loan amount and the loan terms, then the right loan cannot be based solely on a low interest rate. You would also have to factor in how much you need to borrow, your current financial status, and your financial capacity to pay regularly for the foreseeable future.
It is important to remember that a longer loan tenor means lower monthly amortization, which is favorable for borrowers with limited monthly budget. This also means, however, that the life of the loan will be a longer, and the total interest charged for the duration will also be higher. Also, some banks have more stringent qualifications than others, so based on your eligibility, one lender might be more favorable than another.
Proof of Requirements – Locally Employed
BPI and PNB have additional requirements for self-employed borrowers, which depends on their line of work. PNB also requires additional documents from overseas Filipino workers (OFW) depending on the country where they are employed. On the other hand, Metrobank requires self-employed applicants to submit bank statements that include a BOO Certification of “No Overdraft” charges. It also requires a COE and ITR and pay slips to be submitted by applicants who are locally employed.
Proof of Requirements – Self-employed
Meanwhile, Security Bank requires one of either COE, ITR, 3 months’ worth of pay slips, or bank statements, but then requires at least six months of consecutive pay slips to credit commission. For self-employed applicants, Security Bank requires one of the following documents: financial statements, bank statements, or lease/rental contract.
Collateral Requirements – For Property Purchases Only
Given that a huge amount of money is normally involved in home purchases, it is understandable that banks are very thorough when it comes to housing loan applications and the list of requirements they ask for. Apart from the aforementioned requirements, there is also the following to consider with each lending institution.
These fees and taxes
vary with each bank, and their corresponding rates are subject to change without prior notice. In addition, while a great deal of effort has been exerted in putting together this guide, the information presented here were sourced from the banks’ official websites and there are other details, requirements, and qualifications that may only be disclosed upon your personal inquiry with a loan officer.
Sources: aub.com.ph, bdo.com, bpiexpressonline.com, cbs.com.ph, chinabank.ph, ctbcbank.com.ph, eastwestbanker.com, hsbc.com.ph, landbank.com, maybank.om.ph, metrobank.com.ph, pbcom.com.ph, pnb.com.ph, rcbcsavings.com, robinsonsbank.com.ph, securitybank.com, sterlingbankasia.com, unionbankph.com, veteransbank.com.ph
Main image via Deposit Photos