Real estate properties are seldom bought on one-time, spot cash basis. Many buyers usually finance their homes for a longer payment period, say 10 years and even 30 years.
When purchasing a real property using long term financing such as Pag-IBIG Housing Loan, the buyer is usually asked to put a minimum down payment. This down payment is also called equity and represents the buyer’s stake (also called interest) on the property.
The majority of the cost of ownership is determined by the amortization payments; that is by the combination of the following factors:
- Loan Interest
- Loan Amount
- Payment Terms
But, did you know that the amortizations are not the only expenses you have to shoulder when financing a property? A prudent buyer should be aware of other costs involved in purchasing a property.
Here are some of the charges you need to be mindful of when using Pag-IBIG Housing Loan.
1. Processing Fee — Pag-IBIG Housing Loan comes with a non-refundable processing fee of PhP 3,000 only, which is divided as:
- Upon Loan Application, PhP 1,000
- Upon loan take-out PhP 2,000
2. Mortgage / Sales Redemption Insurance (MRI / SRI): Borrowers sixty – five (65) years old and below as of the date of the loan application shall be covered by the MRI / SRI, provided that he / she will not be over seventy (70) years old on his / her birthday closest the date the loan expires. The schedule of the Pag–IBIG Fund Master Policy shall subject the MRI / SRI coverage of the borrower.
As for borrowers, who are bound into a single loan, it is only the principal borrower who will be covered by the MRI / SRI to the full amount of the loan. Therefore, in the event that the principal borrower dies, the MRI / SRI will extinguish the entire loan. However, in the event that one or more of the co – borrowers die, the principal borrower will continue to amortize the entire loan.
- Interim Coverage: On the date of issuance of the Notice of Approval (NOA) or Letter of Guaranty (LOG) by the Pag–IBIG Fund, the interim MRI / SRI coverage on the principal borrower shall take effect.
- Regular Coverage: This will be a non–medical, yearly renewable term insurance (YRT) for which the borrowers will pay an even premium rate effective upon loan – take out. The amount of coverage will be the entire amount of the loan.
3. Fire and Allied Perils Insurance: The borrower is to acquire this insurance on the mortgaged property or subject of the Contract to Sell. The amount of insurance is the lower of the appraised value of the residential unit or the amount of the loan. Note if you buy overseas you may also need strata insurance, there is an example at Flex Insurance.
4. Premium Payments: For the first year of coverage, the yearly premium will be prepaid. This prepayment will be deducted from the loan proceeds upon take – out of the loan. After the first year, the insurance coverage will be prepaid on a monthly basis and will be collected simultaneously with the monthly loan amortization.
5. POP Charges: An additional two pesos per thousand of coverage per annum (Php 2 / Php 1,000 / annum) will be charged to all loan applicants under the Pag–IBIG Overseas Program.
6. No Evidence Limit (NEL): The amount of the NEL will be two million pesos (Php 2,000,000). All borrowers aged up to sixty (60) years old, who have loans of up to Php 2,000,000, will not be subjected to underwriting approval.
7. A Health Statement Form (filled out by the applicant in his / her own handwriting, dated, signed and witnessed by at least two persons) will be submitted by borrowers over sixty (60) years of age for underwriting approval.
8. Full Medical Examination for Pag–IBIG Overseas Program (POP) Members over sixty (60) years old: The FME report may be done away with for POP members over sixty years old. In lieu of the FME, the Health Statement Form will be submitted. The applicant will also be required to submit a copy of the result of his / her medical examination done before his / her assignment overseas.
Once the applicant’s health is assessed to be “sub-standard”, he / she will be charged the additional premium.
Insurance, Processing Fee and Other Pag-IBIG Housing Loan Charges is written by Kyro Jo.