Equity, Appraisal And Loan Amount – What You Should Know About These

Allow me to start off this article by quoting the question recently posted by a visitor of Pag-IBIG Financing Website:

“My husband and I are planning to buy a condo or a townhouse that’s worth P1.5M. We understand that the loanable amount is 3M. But the loan pag ibig can give is based on the monthly income of both husband and wife, is that right? The usual problem that we have is that how to pay for equity…. My question is, can we loan a full amount of 1.5M to Pag ibig so that we don’t have to pay for equity?”

That question is very important because it raises a lot of topics every Pag-IBIG Member should be aware of. Let’s tackle the following as it relates to the article:

  • Equity
  • Appraisal
  • Maximum Loan Amount

Your knowledge on these topics may save you from facing a possible foreclosure – something that you don’t want to happen with your property.

Now, before discussing the above terms, a general introduction on home loan is worth mentioning.

In general, when you apply for a real estate loan, you will be asked to pay for a down payment; say 20% of the appraised value of the property, that’s the standard down payment. The loan amount will actually be based on the appraised amount less the down payment.

To illustrate, assume for a moment that the appraised value is P 1,000,000 and you are asked for a 20% down payment. That means you are to personally raise P 200,000 before you are granted the P 800,000 loan. And if you are qualified for the P 800,000 loan, your monthly amortizations will be used to cover the interest and principal payment against the borrowed amount of P 800,000.

(See also: Mortgage Loan Fundamentals)

Now, back on track…

Equity

pag-ibig housing loanThis is another word for Down Payment, a term mostly used by Banks; Pag-IBIG uses the term equity to mean the same thing.

The equity refers to your stake (or interest) on the property. This concept is very important because, in the eyes of the money lender (Bank or Pag-IBIG Fund), the more equity you have on the property, the more serious you are in paying the loan.

If you initially put down an equity of 20% of the appraised value the property, it means that you own 20% of the property; the other 80% is owned by the money lender. As you pay off your loan, your equity also grows over time.

Appraisal

Pag-IBIG Fund, or any lending institution for that matter, can’t just loan you any amount. They base it, first and foremost, on appraised value of the property and then on your capacity to pay.

Appraisal is simply the process if estimating the value of the property. Take note of the word “estimate,” … however advanced the tools being employed, appraisal is really just an estimate. That’s why it is not uncommon to see that the selling price of the property is very different from the appraised value of the property by a big factor. It would appear that the Seller has a different appraised value of the property he is selling compared to the Lender.

If you are getting a loan, its always the Lender’s Appraisal that determines the price and therefore your loan amount. After all, the flow of money is from them to you.

In the example above, just because the selling price of the condo unit is P 1.5M doesn’t mean that Pag-IBIG will also base it on the P 1.5M. This may be the case for Pag-IBIG accredited projects with their partner developers; otherwise, Pag-IBIG will conduct an appraisal on the property.

Maximum Loan Amount

Okay, you should know by now that Pag-IBIG Fund grants a maximum of P 3M only. That doesn’t mean you are also eligible for a 3-million loan. There are other factors that come into play.

Actually there are two maximum loan amounts that you must be aware of.

#1. Amount based on the appraised value minus your equity. If you are lucky, you will be granted with this amount.

#2 Amount based on your income, in other words, based on your capacity to pay. It goes to say that the bigger your income, the more advantageous on your part, because you are eligible to get a bigger loan amount also.

Don’t miss: Your Income, Contributions and Loan Entitlement.

~~~

Equity, Appraisal And Loan Amount – What You Should Know About These is written by Carlos Velasco.

  • edlyn

    my husband is a member of pag ibig fund he is an ofw and wre planing to have a pag ibig loan for the renovation of the house my husband is now 3 years mamber of pag ibig and paying 1000 pesos per month.. do i aplicable to process the loan? and please send to me the necessary requirements if im applicable to process it.thanks.

  • BONGZKI

    Pede po mag avail ng loan pag dalawa kami na gusto kumuha ng property or housing loan as joint buyer.

    Thanks.

  • http://www.pagibigfinancing.com admin

    @edlyn:
    Yes, you can apply it on behalf of your husband. Please check this link for the Home Loan Document Requirements.

    @bongzki:
    Yes, you can tuck-in up to three Pag-IBIG Members on one home loan.

  • armando lomboy tique

    ofw po ako d2 dubai,nagbayad po ako ng membership na 10 dirham or 100 pesos sa owwa office,pero wala po pag ibig no.na binigay…dati na rin po akong my pag ibig number and almost 2 years ko nahulugan dyan sa pinas…yong contribution ko ba as in ofw ay maisasama sa dati kong pag ibig fund?

  • Georgie

    Hi!

    I reserved a house and lot property worth 890K. The estimated monthly amort is 9.8k. Sabi ng agent liliit pa daw un up to 8k+ but not more than 9k. The thing with this property is that it does not have equity or down payment, reserv lang then after pag ibig approval lipat na. Medyo skeptical ako sa part na ito, the agent just told me that as long as 20+K monthly net income ko maaprove naman daw ung loan ko and that there’s nothing to worry about. Nabasa ko ung “Loan Entitlement Based On Pag-IBIG Contribution” it seems that si employer ko 100php lang ang kinokontribute kay pagibig, so I’ll fall sa braket ng 200php. Which does not match the table for “Entitlement Based On The Capacity To Pay” Q#1:Will pag ibig ask me to pay the difference? Although, sa previous employer ko nasa 500php braket ako. Q#2:Mas maganda ba na wala akong equity? Although they required me to issue 12 post-dated-checks.

  • Georgie

    Hi!

    Gusto ko pong mang loan ng bahay sa pagibig, ung nakita kong house, walang equity or down payment required. Reservation lang and pag ibig na lahat. Posible po ba ito?

  • http://www.pagibigfinancing.com admin

    @Georgie:
    Thanks for the good points you have raised. I hope a lot of people will read this.

    1. During Loan application, Pag-IBIG will assess your capacity to pay and if you are qualified for a bigger loan amount, they will be
    requiring you to upgrade your contributions from the usual P 200 / mo. Note that the loan amount will be based on their appraisal of the property. They may or may not require you to put more money as down payment.

    2. If you don’t pay for equity, that means you have to shoulder on a bigger loan amount.

    Here is a related article that discuss this further:

    http://www.pagibigfinancing.com/articles/2010/mortgage-loan-fundamentals/

    @armando:
    They will be combined, but you should personally request it at the office of Pag-IBIG.

  • rhodalor

    Hi good day, ask ko lng po kung pwede po ba akong mag loan kahit my existing loan ako? maliit lng nman po yun 4k first loan, kaso mag papaayos po ako ng bahay ko renovation po, ask ko po kung pwede ko bang bayaran na ng buo ang loan ko pra mka loan ako for renovation ng haus.? pls reply admin..matgal na rin po akong naghuhulog sa pagibig..

  • Mae

    Hi. For example, my husband is earning 65,000 a month. Can we apply a housing loan (for construction) worth 1.5M? Thanks.

  • P Lyx

    Admin, good day. Im eyeing a house and lot and the equity is payable in a year and may take out the remaining balance via Pagibig. What are the ways para hindi magkasabay ang paghulog ko sa Equity and sa Pagibig? Someone said that tapusin ko muna yung equity then tsaka ipasa yung mga requirements sa pagibig. Thank you Admin

  • http://www.pagibigfinancing.com christine

    I have existing house which I got when I was still single at that time thru PAGIBIG which I am currently paying on a monthly basis for more than two years now. I wish to have it renovated and would like to loan again but this time using my husband’s PAGIBIG, is it possible? What is the process? My husbnad has been continuously contributing to PAGIBIG fund for more than 8 yrs. he just stopped when we went abroad to work. Pls advise

  • http://www.pagibigfinancing.com caroline vargas

    How much would it cost us if we wanted a property to be appraised, what are the requirements needed? Thank you so much..

  • http://yahoo.com sandy santillana

    hi! good day ask ko lang po sana kasi ung house na gusto namin i apply sa pag ibig is worth 850k so kung i appraised ng pag ibig ung house and lot it would be higher or lower to the price of the house kaya? na estimated sukat na 100 -150 sq. meter…thanks a lot…