Pagibig Financing

Pag-IBIG Fund, Housing Loans, Mortgage, Membership, Foreclosures, etc

Pag-IBIG Financing Admin

Home Financing For The Clueless Buyers

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“What was I thinking?” a home buyer asks himself in disbelief after learning that he cannot actually finance his latest investment in an exclusive subdivision.

What he should have actually asked himself was, “What was I not thinking?”

Buyer Beware

Buyers, buyers, buyers. You should think twice, thrice, a hundred times, before you actually invest in real property.

Yes, you may be too excited to place a reservation on an attractive property perhaps because of the low supply and great demand for your dream house model, a pending price increase, or just because of your plain impulsiveness, but you must think and reflect before investing. A simple mistake in a Million–Peso investment will cost you a lot, and I mean a lot.

To shed light into this almost arcane world of real estate investments, here are some tips that you could utilize to establish how much you can actually afford to shell out to finance your home investment:

Tip #1: Be Honest With Yourself About Your Finances

Review your current financial status and contemplate on your future financial status. You could ask yourself these questions:

  • “How long am I in my current work?”
  • “Am I sure that my work visa will be extended”
  • “Is my employer at least happy with my current performance and would he be willing to extend my contract for a longer term?”
  • “Is my business doing well for the past couple of years?”
  • “Is my Cash Flow showing positive signs or is it indicating a downfall?”

Tip #2: Know The Formula

Planning to finance your investment through installment financing? Let me give you a formula that you can use to determine how much you can safely spend for your investment monthly.

Many financing institutions (banks, mortgage lenders, credit unions, etc) in the country are using this.

M = (I – D) / 3

Where:

M = the monthly payment that you can actually afford
I = your monthly income (plus your co–borrower’s, if any)
D = the monthly payment for any long term debt that you have, if any (example: car loan)

Example: Your monthly salary is PhP 250,000 and you are currently paying a whopping PhP 54,000 per month on your shiny, brand-new car. How much should your monthly real estate investment budget be?

Given:

I = Php 250,000 ; your monthly salary
D = Php 54,000; your car’s monthly amortization

Your maximum monthly budget is…

M = (Php 250,000 – Php 54,000) / 3
M = Php 65,333.33

This means that you have to get the “M” at a high amount so that your be labeled as a “risky borrower.” You wouldn’t want that to happen, right? It would just be demeaning. You see, banks would rather not grant the loan than to do the hassle of property foreclose.

So make sure that “M” results a high value so that bank executives will come knelling down your face while handing you the loan application.

Tip #3: Know The Alternative Financing Schemes

Some developers offer a “Deferred Cash” financing scheme. You might want to avail of this type of financing because it is payable at a short term only, plus it won’t be incurring any interest. Interesting, ain’t it?

Pay a visit to other banks and financial institutions searching for their loan interest rate and what they have to offer in general. Going for the shortest loan term and the lowest interest rate available is generally good for you. You will be saving more this way in the long run.

Again, exercise some common sense before you make any commitment.

So to my future home buyers, always think ahead. Check your savings and cash flow. Anticipate any possible financial problems that may arise in the future and take preventive measures before they happen. As the clichéd adage goes: “A fool and his money are soon parted.”

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Home Financing For the Clueless Buyers is written by Kyro Jo.

Mortgage Loan Fundamentals

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Real estate properties are seldom bought on spot cash. The vast majority are purchased with a little down payment and mortgage loans on the balance.

A mortgage loan is a form of secured financing; that is, the lender gives you the needed financing and in return you pledge the property as collateral.

In a mortgage loan, there are two very important documents that you will be committed to:

  • Note – is a promise to repay the loan on a timely basis
  • Mortgage or Deed of Trust – is a pledge to secure the loan with the real estate in question in case the borrower fails on his loan obligations.

A mortgage creates a lien on the property, which gives the lender the right to foreclose the property in question.

A loan default happens when you fail to repay the loan “on time” as stipulated on the contract. If that happens, the lender can foreclose the mortgage and take on the property.

Interest Rate and Loan Term

A mortgage loan has two very important components that you need to be aware of.

  • Interest rate – is the price of using the lender’s money and is applied to the principal balance. A lower interest rate means a cheaper use of the lender’s money and should be good for you.
  • Loan term – the time it takes to pay off the whole amount borrowed. Loan term usually spans a number of years.

These two factors primarily affect the installment payments, which is usually on a monthly basis.

The amount shown on the monthly installment schedule always remains constant. When you pay off a loan, a portion goes to the interest payment and another portion goes to pay off the principal amount. In other words, the principal balance is reduced with each payment that you make. And as a consequence, the interest is also reduced as the loan matures. Early installments mostly go to the interest payments while later installments mostly cover the principal.

Down Payment and Mortgage

Most lenders will not grant you a loan that is equivalent to the selling price of the property. In many cases, they will have to appraise the property and you will be asked to put a down payment and loan the remaining balance of the appraised value.

The down payment is sometimes referred to as equity on the property.

The standard down payment is 20% of the appraised value of the property; 80% being your loan or the financed amount.

The more money you put as down payment, the lower your loan will be. And always remember that the loan bears an interest.

Now comes the question: Which is better of the two?

  1. A low down payment and large loan.
  2. A large down payment and small loan.

There are arguments favoring one over the other. It’s all up to you and your circumstances. But sometimes, the lender will force you to take on lower loan (with large down payment) to lower their risk of loaning you the money to finance your real estate purchase. That’s just pure business.

Pag-IBIG Mortgage Loan

Depending on the property and where you are buying it, Pag-IBIG Fund may give you a large amount of loan which is almost equal to the selling price of the property. But always bear in mind the maximum loan amount the Pag-IBIG Fund can grant you. If you find the amount too small for the property you are considering, you may need to come up with a large down payment or you may use an alternative financial institution.

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Mortgage Loan Fundamentals is written by Carlos Velasco.

The Pag-IBIG Overseas Program

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For many Filipinos, times seem so hard these days in their homeland. That is why more and more Pinoys try their luck abroad, where the grass is perceived to be greener. They work in foreign lands that promise them the financial freedom that their native country cannot seem to give them.

For those who are lucky enough to return to their native land with sufficient money they have accumulated abroad, the first sound investment that would come to mind is an investment in real property. Home ownership is in every responsible Filipino’s wish list.

Overseas Investment

But waiting for a good sum of money to pay Spot Cash for a property in the Philippines is not only a good idea, but would also take a long time for most Overseas Filipinos. After all, there are other expenses, family remittances and obligations to take care of also.

Wouldn’t it be nice if they can start building their home in the Philippines while they are building their nest of cash overseas? In other words, building a house in the Philippines, without requiring too much upfront cash and pay for it in installments (mortgage amortizations).

Enter: The Pag-IBIG Overseas Program

To help the Overseas Filipino Workers, along with immigrants and naturalized citizens realize their dream home, the Pag–IBIG Overseas Program (POP) was created.

The Pag–IBIG Overseas Program is a voluntary Savings Program, wherein members are given a chance to set aside money for their future housing investments. With the program, members may avail of a housing loan of as much as Php 3,000,000 (at the time of this writing).

The Pag-IBIG Overseas Program is open to the following:

  1. All Overseas Filipino Workers (OFWs) with valid Visas or Employment Contracts
  2. Filipino immigrants and naturalized citizens

Money Talk – Member Contributions

Members of the program are to contribute monthly an amount equal to $US 5, at a minimum.

An upgraded membership is required for members, who would like to avail of a higher loan amount.For instance, if a member wishes to avail of a housing loan ranging from P1,500,000 to P1,600,000, he or she will have to contribute monthly an amount equal to the US dollar equivalent of PhP 750 at the point of availing the loan.

The upgraded membership contribution will form part of the housing loan monthly amortization.

POP As Savings / Investment

The Pag–IBIG Overseas Program not only serves as the OFW’s aid in fulfilling his dreams of owing a home. It also serves as a savings investment in the mutual fund company, that promises positive gains on the investment money. Note: The Pag-IBIG is a government controlled Mutual Fund corporation.

As a Pag – IBIG Overseas Program member, one is entitled to variable dividends from the excess earnings of the Fund. These dividends are distributed annually to the members and are credited to their Total Accumulated Values (TAV).

Members of the program have the option to withdraw their accumulated savings at the end of five (5), ten (10), fifteen (15), or twenty (20) years upon membership.

Foreign denomination contributions shall be converted to the Philippine Peso based on the prevailing US dollar exchange rate. As such, withdrawals of savings shall be made in Philippine Peso.

Member Benefits

Members of the Pag-IBIG Overseas programs are illegible to the following benefits:

  1. Housing Loan
  2. Multi-Purpose Loan
  3. Dividends

It is good to know that the Pag–IBIG Overseas Program is there to reward the efforts of OFWs through an effective savings and home financing scheme. Somehow, through POP, the OFW’s return to their native land will grant them the freedom that was somewhat denied them in the first place.

Indeed, perhaps one’s best investment in life is one’s own home. It reflects one’s status and achievement in life. This is especially true for Overseas Filipino Workers, who take chances and make sacrifices abroad for their future and that of their families.

Related Links

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The Pag-IBIG Overseas Program is written by Kyro Jo.

Voluntary Membership To Pag-IBIG Fund: The Self-Employed, Freelancers, And Non-Employees

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Self – employed? Unemployed? How about Non-Employed? In other words, are you not connected with a single company that considers you on its monthly payroll?

The good news is, you can become a member of the Pag-IBIG Fund as a Voluntary contributor.

The bad news is you have to shoulder of the contributions yourself without the aid of a company or employer. But if you are self-employed or you are on a business by yourself, you already know that you are in control of your financial direction, right?

In this article, we’ll show you how to become a member of the Pag-IBIG Fund as a Voluntary Member.

How To Join Pag-IBIG As A Voluntary Member

  1. Accomplish and submit two (2) copies of the MDF and all required supporting documents to the Marketing and Enforcement Division of the concerned Pag-IBIG branch office (bring all originals for authentication).
  2. Secure a Payment Order Form (POF) from the Marketing and Enforcement Division, and then proceed to the Cash Division for payment of initial Membership Contributions (MC).
  3. Present all verified/stamped documents to the Marketing and Enforcement Division.
  4. Secure a Payment Order Form before proceeding to Cash Division for payment of contribution.

Requirements For Individual Payers

Here are the respective requirements for different categories of Individual Voluntary Members. Please check with group you belong.

1. Self-Paying Empployee (Waived Company)

You may be employed by one or more companies, but for some reasons, you choose to pay your Pag-IBIG contributions by yourself without their aid.

  • Certificate of Employment & Compensation
  • Latest Pay Slip
  • Company ID

2. Self – Employed

Freelancers, professionals, consultants and owners of small businesses belong to this category. (See also item #5.)

  • Latest Income Tax Return (ITR) with Financial Statement of the previous year certified by a CPA
  • Certificate of Remittance/ESAV (for old members)
  • Two 1×1 ID pictures
  • SEC or DTI Registration (should be under the member’s name)
  • Business Permit or Mayor’s Permit

3. Franchise Holders or Operators

  • Franchise Permit (under the member’s name)
  • Official Receipt or Car Registration (under member’s name)
  • Latest ITR (previous year)
  • Two 1×1 ID pictures
  • Certificate of Remittance or ESAV

4. Overseas Filipino Workers (reactivating members)

  • Latest Contract of Employment
  • Passport or any valid ID / POEA License
  • Latest and valid Contract of Employment (with POEA original stamp)
  • Certificate of Remittance or ESAV
  • Two 1×1 ID pictures
  • Special Power of Attorney (SPA), in case a representative shall submit the documents and pay the member’s contributions

5. Self – Employed Professionals

These are government licensed professionals practising their expertise.

  • PRC / BAR License
  • Latest ITR (previous year)
  • Certificate of Remittance or ESAV (for old members)
  • Two 1×1 ID pictures

6. Unemployed Spouse

Yes, if you are unemployed you may still qualify provided your spouse is employed and a Pag-IBIG member.

  • Written consent from member-working spouse
  • Certificate of Employment and Compensation of member-working spouse
  • Affidavit of Unemployment

7. Member – Spouse with Business

This is similar to #6 above, but the spouse is in business.

  • Latest ITR
  • Written consent from member-employed/working spouse
  • Certificate of Employment and Compensation of member-working spouse (notarized)
  • Affidavit of Unemployment
  • Two 1×1 ID pictures
  • ITR (previous year)
  • Business Permit or Mayor’s Permit
  • SEC or DTI Registration

Important Notes:

  • Monthly contributions of unemployed members (reactivating or non-working spouse) shall be P100.00.
  • The unemployed member has the option to upgrade his monthly contributions, but may not downgrade the amount.
  • Unemployed members may avail of the Multi-Purpose Loan, but not a housing loan from Pag-IBIG.
  • Individual payers or voluntary members have the option to choose their terms of payment, e.g. monthly, bi-monthly, quarterly, etc.

8. Unemployed (reactivating member)

Well, let’s admit it, times are tough. One day, your employment may just be gone in a flash. You may still continue your contributions provided you provide:

  • Affidavit of Unemployment

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This article on Voluntary Membership To Pag-IBIG is written by Kyro Jo.

For Employees : How To Become a Pag-IBIG Fund Member?

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Are you a regular employee who always wonder how that Pag-IBIG deduction got in to your pay slip? Or you don’t really care since it is as normal and as inescapable as the income tax?

This article shows you how to become a member of the Pag-IBIG Fund if you are an employee here in the Philippines.

Pag-IBIG Membership For Employees

Earning at least P 4,000 a month? Thanks to Republic Act 7742, membership to the Pag-IBIG Fund has become mandatory for all employees covered by the Social Security System (SSS).

That’s right, all you have to show is you are earning a minimum of PhP 4,000 and you are working in a legitimate company, then you can be a member of the Pag-IBIG Fund.

As for employees earning less than P 4,000 a month, membership to the Pag-IBIG Fund is only voluntary.

So How Do You Exactly Become A Member Of Pag-IBIG Fund?

In most cases, you don’t even have to bother about it since your employer will file your membership to the Pag-IBIG Fund and remit your contributions on your behalf.

In a perfect world, everything is taken care of. In reality, that’s not always the case.

If your company won’t even bother, you can always be in control take the necessary steps yourself. This is especially true if you are considering getting a housing loan anytime soon. You want to show them that you have “perfect contributions” and is ready to take a loan.

Here are some guidelines:

  1. Locate the Pag-IBIG branch that is nearest to your place of work. Usually, this is the regional office of Pag-IBIG Fund.
  2. Proceed to the Marketing and Enforcement Division of the concerned branch.
  3. Request for a copy of the Membership Registration/Remittance Form (MRRF).
  4. Accomplish and submit two copies of the MRRF together with the following supporting documents to the Marketing and Enforcement Division:
    • Members’ Data Form (MDF)
    • Certificate of SSS Coverage and Compliance (for the current year), if private employer
    • GSIS Certificate of Membership, if government employer

Pag-IBIG For Employers

Yes, local employers are taking part in contributing to “your membership.” That’s why some of them (the small businesses, especially) feel a little bit itchy when complying to this mandate.

A problem arises when your company is not even a member of Pag-IBIG. (And this is not uncommon for very small business outfits.) In that case, here are some guidelines for employers.

  1. Accomplish two copies of the Membership Registration/Remittance Form (M1-1).
  2. Prepare the following documents (2 photocopies):
    • SEC registration or the company’s DTI and SSS registration
    • R3 and R1A forms (SSS registration and remittance forms)
  3. Present all documents (M1-1, Registration and SSS forms) to the Marketing Division of the concerned Pag-IBIG branch office for verification (bring all originals for authentication). Secure a referral slip from the Marketing staff.
  4. Proceed to the office’s Cash Division for payment of the first monthly remittance.
  5. Submit the referral slip prepared by the Marketing staff and all verified documents to the cashier.
  6. Succeeding remittance dates shall depend on the schedule of payment of the office. Accomplished M1-1 shall serve as the remittance form for succeeding payments.
  7. Submit to the Marketing office two copies of the accomplished Member’s Data Forms (MDF) of all qualified employees to the Marketing Division on the second month after the first payment of contributions.

The names of newly-hired employees, who are covered by RA 7742, should be included in the accomplished M1-1 form and their corresponding contributions duly remitted to the Fund. The accomplished MDF of the new employees shall be submitted on the following month.

For Sole Proprietorship

  • DTI Registration
  • Mayor’s Permit/ Business Permit

For Partnership/Corporation

  • SEC Registration
  • Articles of Partnership/Incorporation and By-laws

Important Notes:

  1. The original copy of the documents shall be presented for authentication.
  2. Upon submission of complete documents, the Marketing and Enforcement Division shall issue the Payment Order Form
  3. Proceed to the Cash and Administrative Services Division and pay the 1st monthly membership contributions (MC).
  4. Upon payment, present the Pag-IBIG Fund Receipt (PFR) to the Marketing and Enforcement Division.

Summary of Pag-IBIG Fund Membership For Employees

Once you have verified your membership to the Pag-IBIG Fund, your employer should be able remit your monthly contributions (which is deducted from your salary) to the Fund since your employer also acts as a collection agent of the Fund.

Pag-IBIG Housing Loan 101

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One of the main concerns of Pag-IBIG Members is getting a Housing Loan. And why not? That is one of the privileges they can get as members of the Fund Company.

This article will address a number of those basic concerns about Housing Loan.

Who can avail of Pag-IBIG Housing Loan?

Pag-IBIG Loans are allowed only to Pag-IBIG Members who are at least two years already and who have contributed at least 24 months. Of course, there are other requirements, before the loan is finally granted, but the point is Loans from Pag-IBIG is only open to its members.

How much can I loan from Pag-IBIG?

The maximum housing loan amount that can be granted to any member is only PhP 3,000,000. So that means if the property you are considering is priced more than PhP 3M, you need to come up with some form of up-front payment (or equity) to settle the price difference virus the loan amount. Or, you may opt for another financial institution. Please refer to the Mortgage Loan Fundamentals.

What type of Real Estate or Real Estate Projects can be financed with Pag-IBIG?

Pag-IBIG Housing Loans can be used to financed any of the following:

  • Lot-Only Property — It could be a raw land or parcel of land in a subdivision development.
  • House Construction or Improvement — The residential unit should be constructed on a lot owned by the member.
  • House and Lot Purchase — New or old house with lot. If you are buying from a developer, please check with your broker/agent if Pag-IBIG can be used to finance the property you wanted to buy.
  • Refinancing Of An Existing Mortgage Loan

Always bear in mind that you can only get a maximum of PhP 3M loan and you are limited to residential projects only.

How much is the interest rate of Pag-IBIG Housing Loan?

Good question! Most buyers of real estate in the Philippines have no idea of the interest rate that comes with the loan. As a buyer, you should make it a top priority to know about the interest rate and be able to compare it to competing lenders.

(Interest rates are also discussed in Mortgage Fundamentals article.)

Luckily for Pag-IBIG Members, the interest rates are among the lowest in the market! Depending on the amount of loan, the interest runs from 6% to 11.5% per annum.