Housing Loans

Home Construction Loan — Should You Get One From Pag-IBIG?

As you probably know already, a Pag-IBIG Housing Loan can be used to finance for the following projects:

House and Lot Purchase
Purchase of Lot-Only Property
Purchase of a Condominium Unit
Refinancing an Existing Mortgage
Home Improvement, Renovation, Construction Loan

The first three items listed above are easy to understand and they are the most common types of housing loans that members of Pag-IBIG avail.

The focus of this article is in the last item, which we can simply refer to as Home Construction Loan, but bear in mind the same concepts also apply to Home Improvement or the so called Renovation Loan.

A Tricky Loan?

This type of loan is a bit tricky as you will see later. It’s also something you need to understand very well before even attempting to submit an application. Like the other type of housing loan under the Pag-IBIG Fund, you still need to undergo the same pre-qualification criteria when you apply for such loan. But it is quite different than getting a Housing Loan for the purpose of buying a house, a condo or a vacant lot in. For the Home Construction Loan, you need some more additional documents:

Building Plans
Specifications and Bill of Materials duly signed by the Licensed Civil Engineer or Architect
Real Estate Tax Receipt
Building, Electrical, and Sanitary Permits
Occupancy Permit.

For a review on the complete list of document required when applying for a Pag-IBIG Housing Loan, please refer to this link: Pag-IBIG Housing Loan Document Requirements.

Home Construction Loan From Pag-IBIG Fund — Should you get a Home Construction Loan from Pag-IBIG?

Why did I say in a prior paragraph that Home Construction Loan is a bit tricky? Well, consider these words submitted to use by one Pag-IBIG Fund Member who availed of this loan. There are a lot of lessons to be learned here and we will discuss some of them after.

Learning From Experience

Good day! I am in a dilemma right now and i hope you could answer my query. I applied for a housing loan some 3 years ago for lot purchase thru pag ibig. Early this year we decided to apply for house construction loan as an additional loan to pag ibig. We decided to use our personal money at first and while construction is on going, we processed the loan. It took a while to process our documents and when assessment time came, the assessor informed us that his assessment for our structure would reach 1.9M, while we applied for 1.1M loan only.

However, i was informed that our approved loan amount is only around 600,000 since pag ibig’s basis in on the itr submitted, to be deducted with the existing loan so we will only be able to receive less than 300,000.

Our house is completed this time using our personal money and we spent around 1.5M already. I find it quite unfair that the loan that will be released is only that much while the value of the property would reach around 2.5M including the lot. In case of default of our payment, the value of our property is too big in consideration for the loan that we will get. Is there any way we can ask for reconsideration on this?

I’d like to highlight some important points that we can learn here. Think of the following as Tips and Traps of Pag-IBIG Home Construction Loan.

1. Prepare some money to fund the construction.

You will be needing that money for funding the initial and the succeeding phases of the construction project. It is also important to note that:

Pag-IBIG wants to see that the construction project has been started before releasing some money.
Pag-IBIG will release money on staggered basis, depending on the progress of the project.
Pag-IBIG wants to make sure you don’t use the money for something else.

But come to think of it. The reason why you are getting a loan is so that you won’t have to use your own money, right?

2. Get pre-approved before jumping in.

The amount of loan you will get is not necessarily equal to the estimated cost of the project. Most of the time, far lower than that amount.

Some factors that affect your approved loan include:

Your Salary / Income
You Age
The nature of your job or business
The value of the collateral

Knowing how much you loan money you will be granted definitely equips you from future surprises.

3. Think of the collateral and how much is at stake.

Here comes the part that you should think about very carefully. When you purchase a house and lot package, you will be shelling out for the down payment which is roughly 20% of the total selling price and you use a loan to finance the 80% balance. Normally, the purchase price is also the current market value of the property. Thus, you are essentially just using 20% money to take possession of 100% value. This is called leverage.

( See also : Loan Collateral )

On the flip-side, when you get a Home Construction Loan, you only get a small fraction of the total cost of the construction project in exchange of a much bigger collateral value – the land where the house stand plus the new and improved house on top of it. Not only that, you don’t even get the loan money up-front.

Questions is, does it make sense to you?

In conclusion, as a Pag-IBIG Member, getting a housing loan is one of the best things you can do about your membership. But getting a Home Construction Loan is something you should really spend time thinking through. The whole point of buying a house and perhaps using a mortgage loan to finance the purchase is to enjoy the property. If the type of loan you are getting will only cause some headaches, it’s best to avoid it in the first place.

Pag-IBIG Housing Loan Basics. Plus: Dividends, Lost Land Title, etc

by Pag-IBIG Financing Admin 18 Comments

Starting this month and every end of the month thereafter, we will be posting a set of questions we receive from site visitors — especially, highlighting the most important ones that every Pag-IBIG Fund member should know — plus, our respective replies.

If you are like them you and there is something that you want to ask about your membership, home loan, buying plans, Pag-IBIG Fund policies and processes, please don’t hesitate to send your questions by filling up the Contact Form here.

We’ll do our very best to answer your questions.

Meanwhile, on to the Question and Answer for this month of April 2014.

Subject: How Pagibig Financing Works?

I would like to buy a house and lot for 500,000 pesos, but i have 250k only. How will Pagibig help me on this?Can they pay the remaining to the seller then I will pay Pag-ibig through their terms? How does the system works?

Our Reply:

That’s a good set of questions and every beginner should try to understand the whole process of a housing loan.

Pag-IBIG can definitely help you in this area, you don’t need to have P 500k to be able to buy a P 500k worth of property. With only a small amount of your own money (Down Payment), you can acquire a much larger-valued

property by availing of a housing loan. This is called Leverage. And that is a general characteristic of a housing loan — be it from Pag-IBIG, from a bank or any other financing institution.

Some articles to help you understand:

Subject: Co-Borrowing To Purchase

Here is a set of follow-up questions from our visitor named Denice.

1. So it’s perfectly legal to loan for a lot even if I’m using the money to build the house? Because we really don’t have to spend much for the lot i.e. we’re just paying for the capital gains tax and the transfer fees.

Yes

2. How do I compute my net disposable income? Is this the same with gross less tax, GSIS (yes, I work for the government), Pag-ibig, and Philhealth? Or should I also deduct the common monthly expenses per month?

You are correct. There is no need to deduct your other expenses, since it varies greatly from one person to the other.

3. I’ve heard from colleagues that there’s another government agency for housing loans with lower interests compared to Pag-ibig. I’m sure it’s not GSIS since they’ve already stopped offering housing loans. Can you verify if this is true? If so, what’s the agency?

Hmmm… Perhaps it’s the National Housing Authority (NHA) or there is another one I forgot the name but they mostly entertain and serve only the “urban poor.” They’ll have to check the community where the property is being bought and make sure it’s that overly decorated with bells and whistles and other amenities you would expect from a high-end or even mid-level subdivision.

You’ll have to check this out yourself since I’m only speaking from what I’ve known about those agencies. I may be wrong in that area, though.

Subject : Lost the Land Title

Message :

20 years ago I purchased house and lot I and has fully paid it now with updated tax payment. I move in Japan to marry with Japanese husband so I ‘m living here with my family but on that time I lost my Land Title of my property in the Philippines. What is the procedure for inquiring and where I have to inquire a replacement of Land Title in the Philippines.

Our Reply:

You have to consult a lawyer to assist you on that one. The government office in-charge of record keeping for all Land Titles in the country is the Registry of Deeds. You may have to check where their office is located in your respective city or town.

Subject: How to Become a Pag-ibig member?

Message:

Hello.I want to know,I want to become a member,but i dont have any business.but I sell vegetables in market only.Can i become a member?And how?

Our reply:

Pag-IBIG Membership is not just limited to employees. If you are self-employed or you run a business, you can still become a member.

Here is a useful guide to give you an idea:

https://www.pagibigfinancing.com/articles/2010/voluntary-membership-to-pag-ibig-fund-the-self-employed-freelancers-and-non-employees/

To apply for your membership, you have to go to the branch, but it would help if you prepare the documents already before going there. So please read that article.

Subject: Dividends / other option

Dividend -- A way of earning money through Pag-IBIG Fund Membership. — Dividends — One way of earning money through Pag-IBIG Fund Membership

Message:

Good morning to all the staff of PAG-IBIG . I am presently working in K.S.A for the last 21 years but before I left Philippines,I worked for 11 years. I was told by one of the staff of PAG-IBIG last year when I paid my PAG-IBIG that I have paid since 1988, and I have my dividends. Unfortunately, I was notable to follow up because I was out of time

I would like to inquire if , what are my benefits that I can get or avail from PAG-IBIG?

I want to know about the dividends. I am at present building my house and about to be finished. Can I get any cash to financed my house ? Or any suggestions that I can avail? thank you so much.

I am coming home for vacation this March 28,2014 and I am from Cagayan de Oro.

Good Luck and more power to PAG-IBIG

Our Reply:

Here are three of the most important benefits available to you once you become a member of the Pag-IBIG:

1. Provident Savings:

It is here where your money grows. Each year the Pag-IBIG Fund declares dividend and distributes the money to all Pag-IBIG Fund members. Your money, the money contributed by your employer (if you have one), plus the dividends all form part of the so called Total Accumulated Value.

2. Housing Loan:

Planning to buy a house? Pag-IBIG can help you finance your home purchase.
3. Cash Loan a.k.a Multi-Purpose Loan:

To learn more, here is a good article to read: “Benefits of Becoming a Pag-IBIG Fund Member”

We apologize for not updating this website for so long already. But we do intend to keep it active as evidenced by the replies we sent to the site visitors who are sending their questions.

Again, feel free to send us your questions. Use this form to contact us.

How To Become An Expert in Pag-IBIG Housing Loan in 25 Minutes or Less

by Pag-IBIG Financing Admin

One of the requirements before a member can avail of a Housing Loan from the Home Development Mutual Fund or simply Pag-IBIG is to attend a housing loan seminar. If you have not been to that kind of seminar before, here are the essential things that they cover:

An overview of the Housing Loan Program. Luckily, most of the contents of this website are focused on this topic, too. That means if you have been browsing around for quite some time, you already have a good deal of knowledge about the Housing Loan in general.
Question and Answer. For those who are really serious about taking a home loan, you can ask the presenter of the seminar any topic that you want to raise that’s related to the program or your particular situation. If there have been questions bothering you regarding the housing loan, this is a good time to ask those and get official answer. So before to ever go to the seminar, it would be good if you prepare a list of your questions.
Membership Status Verification. Before you can even apply for a housing loan, the Pag-IBIG Fund has to take a look at the details of your membership. They will ask you to fill up this small slip and submit it to the Pag-IBIG staff who will be checking on your membership status while the seminar is going on. Just before the seminar ends, you then get a verification whether you qualify for a housing loan or not.

It’s really that easy. Take note that a big part of the seminar is spent discussing the details of the Housing Loan Program. Indeed it is very important that you know more about it.

But don’t you wish you can attend an online Housing Loan Seminar so you can do it from any place in the planet?

Good news: Now you can, right here on this very page! Thanks to Youtube, your wish is granted!

As a side effect of watching these videos, you can actually become an expert in Pag-IBIG Housing loan. You can be proud to discuss it with your circle of friends. Or, better yet, share this article with them.

Videos On The Pag-IBIG Housing Loan

Part 1:

Part 2:

Important topics discussed in the video:

Eligibility Requirements. Things like age, years of membership, etc. You can also read them here.
The Loan Amount You can Take. Please read this article for the details. The video also discusses concepts like Capacity To Pay and Loan-To-Value Ratio.
Loan Document Requirements. Different types of loans require different documents. Read this to find out which one fits your needs.
How to pay for your Housing Loan. Read this especially if you are based overseas or you salary deduction is not possible for you.
Advanced Payments. There is no pre-payment penalty on your amortization, but do you know how to do it right? Here are some tips on how to retire your loan earlier than its designated term.

Special Notes:

However helpful you find this video to be, this is not a replacement of the actual seminar, which is a requirement when you apply for a housing loan.
Just recently, the Pag-IBIG Fund has raised the ceiling on Housing Loan Amount to P 6 million, from previous P 3 million. The interest rate on socialized housing loans has also been subsidized byPag-IBIG to encouraged low-income members to avail of the program. We’ll have more of this in the up-coming articles.

There you have it. Enjoy watching the videos. It’s like attending a Pag-IBIG Housing Loan Seminar from anywhere in the world.

3 Stupid Things People Do With Their Mortgage Loan

by Pag-IBIG Financing Admin

You should consider yourself lucky if ever your housing loan application is granted by the Home Development Mutual Fund (or simply Pag-IBIG Fund).

Though it is one of the many benefits available to Pag-IBIG Members, not everyone is privileged enough to qualify for a housing loan.

Getting your housing loan approved simply means…

The Pag-IBIG Fund is investing greatly on you using the money pooled from the other members of the fund just like you. That’s using the power of leverage.
You have passed a very strict qualification process which includes the capacity to pay for the housing loan.
By having your own home, you are helping the country in its nation-building efforts. It is a sign that you are a responsible citizen, too.

But remember this: with your housing loan comes a number of obligations that you have to be responsible for.

And your first responsibility is… TO PAY THE LOAN. When it comes to paying their mortgage, here are the top three stupid things people do that lead them into trouble.

1. Not Knowing Where or How to Pay

This is not so much of an issue if you are an employee in the Philippines and you have arranged a salary-deduction scheme with your employer. After all, they are required by Law to pay a part of your membership contribution (that’s P 100 per month) and remit the whole amount (P 200 in total) to the Pag-IBIG Fund every month (some do it quarterly).

Now, what if salary deduction is not possible? This is the case for many self-employed and OFW members. Well, the surest way is to pay over the counter at the branch where you got the housing loan. You can also pay from companies that are accredited by Pag-IBIG to collect payments for housing loans such as SM Payment Centers, iRemit branches overseas, and branches of Land Bank nationwide. Take however, that the list of accredited companies may change from time to time, so it prudent to check at the Pag-IBIG branch every once in a while. When paying from collecting agencies, always make sure that you keep your Official Receipts or whatever evidence of payment they may issue as proof of the transaction.

2. Not Paying On the Due Date

We recently got a message from a site visitor, which says in part:

“What if i cant continue paying my monthly housing loan? What is the best option to do? Like for example if I have no more work. Can i withdraw my housing loan? if so, can i collect my payments?”

mortgage past due — Don’t make it a habit to not pay your housing loan on time.

As a home buyer, it is your duty to remember the due date of your monthly amortization and to pay it on time. If you pay beyond the due date, Pag-IBIG imposes a penalty for late payment. The penalty may be minimal and affordable, but it is not a good habit to develop. And it would lead into trouble sooner or later. Don’t wait for this to happen.

On a positive note: Pag-IBIG sometimes offers rebates to people who pay their housing loans on or before the due date.

Important note to employees: If you are on a salary deduction, always make sure that your employer is remitting the right amount and at the right time. Lapses on their part may put your account at risk.

3. Allowing Foreclosure To Take Place

It only takes 3 consecutive missed payments against your mortgage before your property may be endorsed for foreclosure. If you ever care about your property at all, I’m telling you, don’t ever allow foreclosure to kick in. It’s very expensive in terms of paying the accumulated interest and penalties. It’s also very stressful emotionally. You’d be wise to prevent this from happening first and foremost.

Well, if you are already deep into this problem, I suggest that you contact immediately the Pag-IBIG branch that handles your account and that granted you the housing loan. One of the ways you save your property is to apply for a restructuring of your loan.

Again, it is worth repeating that a housing loan is a long term commitment and you have an obligation to pay for it. Be responsible.

How To Assume A Loan

by Pag-IBIG Financing Admin

Loan Assumption is one of the misunderstood concepts in real estate even among professionals like brokers and agents. A lot of them just don’t know how to go about it or can’t simply do it right.

While it’s true that a Pag-IBIG Housing Loan is assumable, it should be approached very carefully and with the help of a competent lawyer. Once you do it wrong, it could lead to a lot of problems, stressful situations and possibly loss of money.

If you are the one assuming the loan, for instance, one of the worst things that could happen is this: You religious pay the monthly obligation to the loan until such time that it is already fully paid. Suddenly you realize that Pag-IBIG doesn’t recognize you as the buyer and won’t transfer the title in your name. It’s like the original buyer is using “your money” to pay for his loan. How would you react if you are in this situation? Naturally, you would feel deceived. Sadly, a lot of people have been into this situation. And if you know someone who is into this, please do them a favour by sharing this article.

Here, we’ll show you two documents that you can use when assuming a loan and we also provide an sample of each.

The Assignment of Contract

This form is essentially used when one party (the original buyer) to a contract wants to assign his full interest in the contract to another party (the new buyer). In other words, nothing is changed in the contract except the fact that one party is being substituted by another.

When crafting this contract, it is important for the assignor (the party assigning the contract to another) and the assignee (the other party to whom the contract is being assigned) to agree and include an “indemnify and hold harmless” clause. Essentially, this means that the assignor releases full responsibility of the contract to the assignee.

Note: A copy of the original contract should be attached to this form and both parties (and their lawyers) should keep copies of this document.

Sample Form: Assignment of Contract

This assignment of contract is made on (date here) between (assignor name and address) and (assignee name and address).

For valuable consideration, the parties agree to the following terms and conditions:

(list your terms here)

Both parties have signed this assignment on the date specified at the beginning of the document.

(Assignor Name and Signature)

(Assignee Name and Signature)

Notice of Assignment of Contract

Sometimes a third party is involved and needs to be notified in writing when an agreement such as the one above is made. This should be the case when you assume a Pag-IBIG Housing Loan from someone else. The Notice of Assignment of Contract is a document meant for this purpose. On the part of the third party, they are now aware of the fact that a new party takes over the contract and should be the one responsible for all its benefits and obligations.

Sample Form: Notice of Assignment of Contract

Date : _____

To: (Home Development Mutual Fund)

RE : Assignment of Contact

Dear _________________:

This notice is in reference to the contract described in the attached document. (Please see the attachment.)

Please be advised that as of (date of assignment), all interest and rights under this contract which were formerly owned by (name and address of assignor) have been permanently assigned to (name and address of assignee).

Please be advised that all of the obligations and rights of the former party, the assignor, to this contact are now the responsibility of the new party to this contract.

(Name and signature of the Assignor)

Further Notes:

Always consult a competent lawyer when drafting documents of this kind. Don’t make the mistake of just relying on your broker to go about this. I’ve heard lots of stories and complaints from people who did this kind of transaction only to wind up with problems later on. Don’t be one of them.

Top 4 Reasons Why You Should Not Buy A House

by Pag-IBIG Financing Admin

I understand that most of you are visiting this website because, in one way or the other, you are contemplating a home purchase and that you want to use Pag-IBIG Home Loan to finance your investment. Indeed, we have come a long way in explaining the essentials of Pag-IBIG Housing Loan. From home buying preparation to the housing loan process and buying foreclosure units, we have already covered the most important stuff.

This article is a little bit different from the others we have made so far. It’s about not buying a house.

Yes that’s right. This is about NOT BUYING your piece of real estate. There are cases and situations when buying a house is a wrong move. As a matter of fact, there are people who should not even dare to look at a show house on display at a subdivision development or a condominium project. That’s harsh, I know. Bu if you belong to these groups of people, you would eventually thank me for giving that kind of suggestion. I’m doing this so you can keep your sanity intact and your money where it truly belongs: in your bank account.

You should not buy a house if…

1. You are a new kid in town

People do this all the time: they move from one place to another. They relocate to a new city as a result of their work assignment. They have a new business venture from out of town and they decide to move there to live. If you are in this situation, you should not buy a house immediately. Give yourself six months to one year to become familiar with your new place, its landscape, its people, and its political climate. If you are a family man and your wife and kids will be moving with you, you have to involve them in the decision process. Get input from your family members and your friends. You should use your common sense as well as your power for “feeling” a particular place.

Home buying is not like shopping for your grocery items. It takes a keen observation and careful attention to details. In choosing a place to live, you should consider such factors are the flow of traffic, location of schools, where people are shopping, the toxic and noisy areas of town and other similar factors.

My suggestion is for you to rent a place for six months to one year, before you jump into the home buying decision.

2. You can’t personally see the house

Consider the following messages we receive from Overseas Filipino Workers:

“Please help me buy a house in the Philippines. I’m still here in Canada, but I want to have my own house when I go back home for vacation.”
“Can I apply for a housing loan even if I’m here abroad?”
“Can you send me the Form to fill up when buying a condo?”

While it’s possible to buy a property even if you are based overseas, it may not be to your advantage. In fact, it invites a lot of surprises and frustrations later on when you have already made your commitment. Can you actually rely on the map sent to you by the real estate agent? How about the sleek brochures and presentations online on the developer’s website? Do you find them attractive? Can you tell which information and defects are not being shown to you?

Nothing beats actually seeing the property yourself.

3. Your marriage is down the sink

More Home Buying Tips If your Facebook Civil Status says, “Complicated,” you should consider a second opinion, or even third, when deciding to buy a house. Well here’s my short opinion: Don’t buy. Put the reservation money back in your wallet.

There are couples who think that buying a home could somehow save their already dysfunctional relationship since it would require committed efforts from both parties. But isn’t sticking to a commitment the primary reason for the shaky relationship in the first place? While I am not a marriage counselor, I’ve seen enough marriage problems being finally brought up eventually when applying for a loan or transferring the land title to your name.

Like it or not, remember that we still don’t have divorce here in the Philippines. So, think twice before buying your dream house.

4. You are not financially fit to buy

Your home is one of the most expensive items you’ll ever buy in your lifetime. Can you buy in a single spot cash payment? For many of us, that’s unlikely to happen. That’s why we need a mortgage loan. And remember a loan will cost you money. It comes with an obligation you have to keep for a much longer time. Otherwise, the consequences would be dire and stressful.

Think about the 20% to 30% down payment. Where would you get that money? How much loan can you possibly afford to pay on a monthly basis?

(Related article: Income Requirement vs Loan Amount)

Are you aware of the other expenses that you need to prepare? We suggest that you prepare at least another 5% of the cash price for miscellaneous expenses and another 20% or so to buy your furniture and appliances.

Further Notes:

Perhaps for ethical reasons or due to the nature of their business, you probably won’t hear a real estate broker or agent give you any of the advice against buying a real estate. For them it’s always time to buy. But hopefully, after reading this article, you already know much better.

You have to know what you are doing. After all, you’re the one paying for the property.