Housing Loan

Forget About That Dream House, Buy A Functional House Instead

Have you ever entertained that thought of buying a home of your own?

If not yet, beware! It’s one of those nasty things that could give you sleepless nights… next only to Facebook.

From the design of the house and the size of the lawn, to the number of rooms and the kind the furniture to buy, we all want to have the best house as much as possible.

Large lawn with a nice garden, a 3-car garage, a relaxing view of the city, friendly neighborhood, spacious living room, sound-proof entertainment room for the guest, large kitchen for the chef in you, close to downtown, and finally just within budget.

There’s just one problem: You can’t have it all – especially if you factor in the money, money, money.

A Dream House Is Good, But…

Whether you like it or not, everything comes with a price. If you want to have a high life and experience the most luxurious living on earth, you have to be ready to pay for it.

Want to buy your dream house?

Sure! But first, wouldn’t it be nice if you reach the level of income that you have been dreaming about?

A Functional House — Your First Home To Call Your Own

house plan - bungalow The wise buyer keeps everything in proper perspective. You want to be able to enjoy living in your house with your family so that eventually you can call it a home. And at the same time, you don’t want it to be too much of a drain on your finances.

Of course that’s possible. But first you need to wake up from dreaming about your “dream house”. Getting a reality check and thinking about owning a functional house that fits your needs and your budget is far more rewarding.

Second House As Dream House? Yes, Way!

Forget about that dream house, especially if you are just buying your first home. You can always buy that dream house later, or get to build a custom-designed one, once you are able to afford it.

First things first: you need a functional house.

To this end, let the following tips guide you along the way.

Tip #1: Your Budget — Buy A House That You Can Afford.

That means you have to work on your budget. If you are like most real estate buyers, you would probably need a housing loan to purchase the house. Thanks to Pag-IBIG Housing Loan, that should not be a problem.

You need to determine how much you can comfortably set aside each month and send it to the mortgage company – that’s the Pag-IBIG Fund or your favorite bank. A good rule of thumb to follow is that, your monthly amortization should not be more than one-third of your gross income. If you want to be really safe, use Net Income instead of Gross Income — that’s even better. If you are a two-income family, it’s best if you can use just one income to cover the monthly amortization expense.

It may come as a surprise to you, but one of the mistakes made by real estate buyers is buying a house they cannot afford.

Yes, you read it right. It’s possible to buy a house that you can’t afford. And that involves being dishonest about your income and finances. But sooner or later, it’s this kind of buyer who eventually winds up eating the dust and losing the property. Avoid this kind of trick as much as possible.

Tip #2: Location – Accessible, In Good Neighborhood.

Did you know about the top three most important things to consider when buying or investing in a real property?

It’s location, location, location.

That’s called hammering it down your head. And I hope, you’re getting it so far.

A good location is one that is highly accessible to public transportation. This is especially true if you have kids who are going to school.

Another thing to consider is the property’s proximity to the amenities and facilities of your city or town. Are there malls and recreational centers nearby? How far is it from the market?

Take note that a good location could also affect the value of the property. For example, properties that are closer to the business center tend to be priced higher than those farther down the town. You need to strike a balance between this and the budget that you set.

Above all, is the neighborhood safe and flood-free? Buying in a good neighborhood is one of the keys that determine whether your property will go up or go down in value.

Tip #3: House Features and Specifications – Must Be Functional

What is a functional house? Only you have the right answer to that one. After all it has to do with your needs and of those people who will be living there.

Before you even begin taking a look at a house, consider that you have the following nailed down on your list:

the number of bedrooms
the number of bathrooms and toilets
car park
single-storey or two-storey?

That’s the basic. You could go on and on with the list — things like the hot and cold shower, built-in cabinets, fancy faucets, etc. Of course, the more you have those, the more price add-ons you can expect. You need to decide at the onset if those things are necessary upon move in or you can do away without them and just have them later on when you are already living in the house.

The best part about following the suggestions above is that you get to enjoy the house and have a peace of mind knowing that you have invested on the right thing.

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“Forget About That Dream House, Buy A Functional House Instead“ is written by Carlos Velasco.

I Won PhP 850,000 in Pabahay ni “Binay” and You Too Can

by Pag-IBIG Financing Admin

Yes, you too can…

…get scammed if you are not very careful.

Let me explain.

I was supposed to be feeling lucky this morning.

The first text message I got was from a friend saying, “Thank You.”

What a lovely day! This is the kind of SMS message I’d like to read first thing in the morning, every morning. I could not be more happy than that.

A single round at the toilet and a quick tooth brush later, then… beep, beep — the Android kind of beep.

Oh, I have a new message.

The second message was an appeal to the greediness in me. The text message goes this way

D/MILLIONAIRE’S CLUB OFFICE OF THE PHILS., nforming u dat ur cel# Won!, in PABAHAY NI “BINAY” 2011!, Worth, Php850,000, DTI-NCR permit# 1603s11, Pls.call me now!!..I’m Atty. VLD.

Note: I intentionally put only the initials of the lawyer’s name (that’s VLD) used by the sender to protect his identity and reputation. I have not heard of the lawyer’s name before I personally believe that the scam artist could be using someone else’s name for obvious reasons.

The message was sent using this number: +639067546784.

I have no reason to apologize exposing that number publicly on this high-traffic website. Whoever you are, shame on you!

Obviously this is scam attempt that has gone high tech, using cellular phones. By the time this article is posted on the website, it should have circulated a thousand times already waiting for its naïve victim who is apt to believe in getting something out of nothing.

Of course, nothing is free nowadays. Or, it’s best to carry that kind of mindset wherever you go.

scam money trap

These scammers might be hoping that out of the thousand messages they send, a few would actually fall prey and send them whatever they are asking, which could be

an initial deposit sent through Western Union or whatever.
a cell phone load, which is kind of funny for a member of the so called Millionaire’s Club
or your credit card information

If you care about your friend or family, please share this article to them so that at least they get warned.

Did I Get Scammed?

Of course not… I mean, not yet.

But, who knows? I could get victimized one of these days. I hope not.

This morning, I won over the scammer. I’m still feeling lucky I have my common sense intact.

So how did I know it was a scam?

Here are some points or defects that I detected from that message.

I Can’ t Win In A Raffle — Why on earth would I win in a raffle I did not even join?
D/MILLIONAIRE’S CLUB OFFICE OF THE PHIL — The Philippine Government is not stupid enough to use that kind of name in any of its agencies.
Erroneous Punctuation Marks — The message sender apparently doesn’t know how to use proper punctuation marks and therefore the whole message is Non-Official.
The cell number — This is just like any ordinary cell phone number. Big companies and government agencies are using specially reserved numbers for official notifications and correspondence.
“Please call me now!” — What? I call you? Wow, here’s a first-class jerk… a member of the Millionaire’s Club, but… he can’t even afford to give me a quick phone call to inform me that I won in a raffle, which I did not even join.

It’s possible that you, or someone you know, could be getting this kind of SMS message.

Again, please share this page to someone you care. You don’t get to see this kind of article in any place.

Another Note: This is a scam alert in general. But since it uses the name “Pabahay Ni Binay”, it gets mentioned here in this website, which is primarily focused on Pag-IBIG Financing. This is in line with our intention of helping our site visitors get educated about the Pag-IBIG Fund and its programs and services.

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This article is written by Carlos Velasco.

Mortgage Calculator and Amortization Schedule… Plus, How To Save On Your Loan Payments

by Pag-IBIG Financing Admin

In the previous article about amortizations, you learned how to determine the monthly amortization given a particular loan amount, loan term (in years) and interest rate (per annum).

It is very important to bear in mind that these three factors primarily determine the scheduled amount of the monthly amortization.

This article somehow extends on the previous one and here I’ll discuss the following topics with the help of an online mortgage calculator, which is also included here:

How to generate the Monthly Amortization Schedule.
The two components that go into the monthly amortization: interest and principal dues.
As the title of this article says, “How to save on your loan payments.”

The Mortgage Loan Calculator

With the help of the Mortgage Calculator shown below, let’s see how the amortization schedule looks like on a monthly basis.

Important Note When Using The Mortgage Calculator: When you click on the Calculate Button, the result displays in a pop-up window. To close the window, simply click the Close Button located at the upper right corner of the resulting pop-up window.

As you can see, the tool has some default values already and if those values perfectly match your loan, all you have to do is click on the Calculate Button to show the results. But for most of us, our cases are of course different from the default example.

Let’s say your property costs P 2,000,000 and you are to put 20% down payment up-front — that should be P 400,000 out of your pocket. Furthermore, let’s say that the going interest rate in the market is 10.5% per annum and that you plan to pay the PhP 1,600,000 loan in 3 years only. From here, you want to determine the following:

Monthly Amortization Amount
Monthly Amortization Schedule

If you have entered the right values from the calculator shown above, you should get the monthly amortization at PhP 52,003.91 and that the total amount paid in interest for the whole 36-month duration of the loan should be PhP 272,140.75 (see at the bottom part of the resulting Amortization Table).

Here are some graphics to visually guide you on the results.

Monthly Amortization Schedule Table

Figure 1 : Monthly Amortization Table for P 1.6M loan payable in 3 years at 10.5% interest rate.

The Amortization Table above only partially shows 9 months out of a total of 36 months amortization schedule.

You will find the total Principal and Interest Payments at the bottom of the Tabular data when you scroll it down. It should look like this on your screen:

Pag-IBIG Loan Table

Figure 2 : Monthly Amortization Table continued from the previous Table. This time, only the last part of the amortization schedule is being shown.

If your results don’t match with this one, please do it all over again until you get it right. This is a very powerful tool of analysis right at your disposal.

More On Interest and Principal Dues

Take another look at the resulting Amortization Schedule Table.

If you add up the Interest amount due and the Principal amount due at any row, it always results to 52,003.91.

That magic number is not at all magical. That’s your monthly amortization!

In other words, the amortization consists of two components, namely: the principal due and the interest due. Each payment that you make against your scheduled amortization, a portion of it goes to the principal payment and the other portion goes to the pay the interest.

From the example above, your first monthly payment of 52,003.91 pays for the PhP 14,000.00 interest and the PhP 38,003.91 principal. On the second month, PhP 13,667.47 is allocated for the interest payment and PhP 38,336.44 for the principal payment.

How To Save on Your Loan Payments

Have you noticed that at the early part of the schedule – that’s the first few rows of the tabular data – so much goes into the interest payment and only a small portion goes into the principal payment? And at the later stage of the schedule, a small amount is now allocated to the interest while the bigger part now goes to the principal.

(Actually, this will become more apparent at longer loan terms, say 15 or 30 years.)

This is always the case for mortgage loans: it follows the Declining Balance Model. That is, assuming your payments are religiously made on schedule, the principal balance is reduced over time and the next schedule is also smaller since the interest is always applied on the remaining balance.

So in other words, if you make a payment that is greater than the scheduled amount, the excess value is deducted from the principal, reducing the remaining balance further.

Actually there is a two-fold effect when you make advanced payments against your mortgage loan:

you save on the interest payments
you pay off your loan earlier

From here, we can say that one of the ways you can save on your loan payments is to make advanced payments. This way, you are actually save on paying the interests.

There are methods that help you determine the effects of advanced payments at any period of your amortization schedule, but we won’t discuss that in this article yet. Suffice it to say, that making advanced payments is almost always to your advantage.

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This article on Mortgage Calculator and Amortization Schedule is written by Carlos Velasco.

Pag-IBIG Housing Loan Amortization Demystified

by Pag-IBIG Financing Admin

This is one of those topics that a lot real estate buyers are clueless about. Many of them just don’t know how the monthly amortization is determined. This is true for both the first time as well as the seasoned home buyers — and a few real estate agents I’ve met. They simply let the bank, or any lending institution for that matter, handle the computation for them.

Take this particular question shown below which is commonly encountered by real estate sales people.

“How much is the monthly payment for this house which is priced at P1.2M?”

First, any attempt to give a figurative amount to answer that question is meaningless. For one, the question itself is already wrong.

Home Loan Computation: The Amortization Formula

The monthly amortization — or the monthly payment, if you will — is a figure that is dependent on three factors:

Loan Amount. The actual amount borrowed, usually the selling price less the down payment.
Interest rate. This figure is usually expressed as per annum value, likewise known as annualized interest rate. If you are familiar with bank financing, you have probably noticed that the interest rate is different for each bank. In the case of Pag-IBIG Housing Loan, the interest rate is dependent on the loan amount.
Loan term. This tells how long the loan is going to be fully paid; also normally expressed in terms of the number of years. In Pag-IBIG Home Financing, the loan term is usually 15 years or 30 years, though, you may also opt for a shorter loan term.

To determine the monthly amortization, we can simply use this equation:

Amortization Equation -- For Pag-IBIG Housing Loans or Bank Loans

Essentially, this amortization formula says that

Given a fixed interest rate and loan term, your monthly amortization is directly proportional to the amount of loan. The bigger the loan amount, the bigger the monthly amortization due.
Given a fixed interest rate and a particular loan amount, the monthly amortization is inversely proportional to the payment period. The shorter the payment period, the larger the amortization; the longer the payment period, the smaller the monthly payment due.

In other words, while you may be paying a higher monthly amount for a 15-year mortgage compared to a 30-year mortgage, the primary advantage to you is that the loan if fully paid in a shorter period of time.

The main advantage of using the formula above is that it is very handy and versatile. Anyone can use it given any amount of loan, loan term and interest rate.

However, a lot of people are simply lost with Mathematical equations. And not amount of explanations will ever want them to use any formula to determine any figure.

Luckily for them, there is also another way of determining the monthly amortization and that is by using an Mortgage Factors Table such as the one shown below.

The Pag-IBIG Mortgage Factors Table

Take note that this table is made especially for The Pag-IBIG Housing Loan with interest rates effective at the time of this writing (April 2011). You can use it for loan terms starting from 1 year to a maximum of 30 years loan term.

The annual interest rate shown is only the following: 6%, 7%, 8.5%, 9.5%, 10.5% and 11.5%. For interest rates other than these, the table is not applicable anymore. It’s best to use a Mortgage Calculator – a tool which will become available on this website soon.

Pag-IBIG Home Loan Amortization Factors

Given the table above, it is now very easy to determine the monthly amortization by simply following this understandable formula:

Monthly Amortization = (Loanable Amount) x (Factor Rate)

Sample Computation

Consider this hypothetical case: You are buying a Pag-IBIG Home worth P 1.2M and you are planning to put a down payment of P 240,000 which is 20% of the selling price. How much then would be the monthly amortization if you are to pay it is 15 years? How about if the loan is to be paid in 30 years?

Please be guided by the formula above and the interest rates of Pag-IBIG Housing Loan shown below.

Pag-IBIG Housing Loan Interest Rate

From the case in point and looking at the Factor Rates shown at the Table, we can gather the following:

Loan Amount: 960,000 (this is Price 1,200,000 less Down Payment of 240,000 )

For 15-Year Mortgage, the Factor Rate = 0.00984740.

Monthly Amortization (in 15 years) = (960,000) x (0.00984740) = 9,453.50

For a 30-year mortgage, the factor rate = 0.00768913

Monthly Amortization (in 30 years) = (960,000) x (0.00768913) = 7,381.56

When using this formula, take note we are not putting into consideration some other trivial payments like fire insurance, mortgage redemption insurance, membership dues and others. We are leaving that for the sake of simplifying the illustration.

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Update: A more detailed article about the Amortization and Mortgage Calculator has been made on this website. Please check it now.

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“Pag-IBIG Housing Loan Amortization Demystified” is written by Carlos Velasco.

How Your Income And Contributions Affect Your Housing Loan Entitlement

by Pag-IBIG Financing Admin

In case you are wondering how much loan amount you are entitled, this article intends to address that.

By now, you should already know that the maximum housing loan amount Pag-IBIG can possibly grant to a member is P 3,000,000 while the smallest amount is only P 100,000. And the corresponding interest rate is actually shown at the Right Panel of this website.

Basically, there are two very important factors that affect the loan amount you will be entitled to:

The amount of your contribution
Your Net Disposable Income

Naturally, if you want to avail of a bigger loan amount, you need to increase your contribution and demonstrate that your Net Income is also large enough to cover the monthly amortizations.

These things are easier to understand with the following Tables.

Loan Entitlement Based On Pag-IBIG Contribution

So looking at the table, if you need, for example, to get a loan amounting to P 2,000,000 your contribution should be P 950 / month. Now PhP 950 /month is easier for most Pag-IBIG Members. Quite frankly, there is no problem in that area.

Special Note to OFWs / POP Members: Since you are contributing in US Dollars, the table essentially means to need to contribute the US Dollar equivalent of that amount in Philippine Peso. As you know, there is a constant swinging of values between these two different currencies so there is also a corresponding adjustment.

Loan Entitlement Based On The Capacity To Pay

Take note of this part and this is very important.

According to the Pag-IBIG Fund Primer on Housing Loan, “A member’s loan entitlement shall be limited to an amount for which the monthly repayment on principal and interest shall not exceed 40% of the member’s net disposable income…”

In other words, the monthly amortization should be less than 40% of your net disposable income.

The following Table should guide you.

For example, if you are looking to get a PhP 1,000,000 loan and plan to pay it in 10 years (monthly amortization is P 12, 398.57 at 8.5% interest per annum), your net disposable income should be PhP 30,996.43 or higher (the higher the better).

So to avoid having problems paying for the property, that means you have to work backwards: Determine your net disposable income first, then buy a property based on the amount of loan that you can comfortably pay.

Let’s see if you really understand the Table shown above.

Question: You are planning to get a Pag-IBIG Housing Loan amounting to P 2,000,000 and pay it in 10 years. How much should your monthly income be?

Answer: Your monthly income should be P 67,467.50 or higher. And your monthly contribution should be P 950.

Additional Notes on Borrower’s Eligibility For Housing Loan

To be eligible for the housing loan, a member should:

Be a member for at least 24 months and has remitted at least 24 monthly contributions.
Be 65 years old or younger at the time of loan application.
Not be more than 70 years old at the maturity date of the loan.
Have no outstanding housing loan from Pag-IBIG.
Have no Multi-Purpose Loan in arrears at the time of housing loan application.
Have no Pag-IBIG Housing Loan that was foreclosed, cancelled, bough back or subjected to dacion en pago.

Related Articles To Check:

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This article on Income, Contributions and Loan Entitlement is written by Carlos Velasco.

Online Concerns: Housing Loan Applications, Membership Status And Contributions Inquiry, Etc.

by Pag-IBIG Financing Admin

Most visitors coming to this website are Overseas Filipino Workers based from different places abroad. And many of them are asking about the online facilities of the Pag-IBIG Fund (the official website is at http://www.pagibigfund.gov.ph) so they can do some transactions anywhere they are comfortable. Some of the most common questions we encounter are listed below.

I want to become a member of the Pag-IBIG Fund. Can I do it online? Do you have an online form that I can fill up and send back to you?
Can I apply for A Housing Loan Online?
May I request for my Pag-IBIG ID Number? Please send it through email.
How will I know about my past contributions?
Can I send my payments (contributions/amortizations) online?

Of course these are valid concerns as legitimate members of the Pag-IBIG Fund.

In this article, we’ll address each of these questions.

#1. Membership Application: I want to become a member of the Pag-IBIG Fund. Can I do it online? Do you have an online form that I can fill up and send back to you?

Yes, this is possible. Simply download Member’s Data Form. Print two copies and send back to the Pag-IBIG Fund.

While doing that is very convenient, the good ole way of actually handing it to the office is still best way to do it. That way, you get someone to give you an acknowledgment that your form has been received.

The most ideal way of doing it should be to just fill-up and online form — as opposed to downloading it — and waiting for a verification via email. Unfortunately, this one doesn’t exist yet. So, let’s make the best use of this one.