Real Estate Finance

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.

5 Home Buying Strategies When Money is Tight

by Pag-IBIG Financing Admin 9 Comments

So you have been searching for a house to buy in your area? Maybe you have already discovered for yourself that prices could vary depending on many factors such as:

the features and amenities of the subdivision or condo project
the distance from the business district
the quality of schools near the community
the economic activities of the place
the crime rate of the city

and so many others that come into play.

Depending also in which city or town in the Philippines you are looking at, you may have so many projects to choose from or you may only have a few.

But eventually, it still boils down to the question: “Can you afford to buy that house?”

It is very important that you buy the property which you can afford to pay instead of buying one which you will eventually lose when financial disasters strike. This is especially true for the young couples who are just starting out or those whose finances are really tight, but having a home to call their own is a top priority.

( Good read: Are you qualified for Pag-IBIG Housing Loan? )

I believe many Filipinos are in that category. So here are some tips to buying a house on a budget.

1. Save up.

Buying a piece of real estate requires a different approach compared to buying your grocery items. You just can’t use your credit card and hope to live in the house immediately.

There are up-front fees that you need to prepare:

The down payment or equity as they call it. It could range from 5% to 30% of the selling price.
The processing fee, attorney’s fee, and various forms of taxes

Plus, you have to buy some appliances and furniture to put inside that house and turn it into a livable place for your family.

2. Move farther from downtown.

In general, the closer the place is to the downtown area and the business district, the more expensive it is compared to communities located farther away.

So if it doesn’t hurt a lot, you may opt to buy a house farther from that area. Though it could mean that you sacrifice your travel time going from your house to your place of work, this is the kind of trade-off you have to consider.

3. Buy a small house with a large lot.

Which is more important: the house or the lot on which it stands?

Most would agree that it’s the lot or land. You can demolish the house, expand it or turn it into something else, but the land generally stays the same.

A more common technique that you can use is to buy two properties adjacent to each other. One lot would have the house while the other remains vacant for future expansion.

4. Buy “dirt” and clean it up.

fixer upper property philippines — Buying a fixer-upper and doing some repairs may be a good deal.

Dirt here means any of the following:

Fixer-upper properties
House with slight structural problems
Abandoned house
Marginal house

These types of properties are generally cheaper due to the problems they have. But please approach with caution. Make sure that you are really adept at real estate appraisal before trying this technique. A lot of houses need a lot of work put into it and may not be worth the hassle. If you do decide to invest in a property like this, consult a contractor like Chase Construction North West so they can tell you exactly how much money you’re going to have to spend.

5. Buy foreclosure properties

There are different stages of foreclosure and on stage there is an opportunity to find a good deal.

But beware: Buying foreclosure properties requires a lot of hardwork, patience, negotiation skills and a good knowledge of the real estate market. If you lack any of those, just forget about it. Your time is better spent doing something else.

( Check also: Buying Foreclosed Units )

The above home buying tips are just some ideas you can use if money is really tight or you are looking for cheaper properties. Some of those may be useful to you, while others are simply not practical. It’s really up to you to find technique that really fits your situation.

And most importantly, find the best housing loan in the market and use it to finance the property that you want to buy. It’s no use buying a cheap property and get an expensive loan. Remember that, a mortgage loan makes up a large portion of the total cost of acquiring the property.

Home Buying Tips Video Presentation

Here is the ever video presentation of Pag-IBIG Financing. I hope you like it, we will be making more and more of these in the next couple of days to supplement the articles written here in this website.

Enjoy!

Meanwhile if you have some ideas or questions, please use the comment form and send it to us for everyone to answer. Or, follow us on Facebook for an exciting discussion.

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.

Capital Gains Tax, Other Real Estate Fees You Should Know

by Pag-IBIG Financing Admin

Real estate ads are all over the place these days. You see them in the pages of sleek magazines, in the local newspapers, and of course from the Internet. If you are like most buyers, you would probably notice first the price and then the other details next.

But did you know that the list price doesn’t tell you the whole real story? There could be a lot of other information and fees that are hidden from you and which could be a real shocker once the transaction starts to be formalized.

Many ads, not just with real estate but with other products as well, are subtly crafted to catch one’s attention and entice the prospective buyer into part ways with his money?

In real estate, there is a popular phrase that goes, “Caveat Emptor”, which translates to “Buyer Beware”. And when it comes to buying a property, you really have to know what you are getting into. As they say, the devil is always in the details.

This article is written to arm you with the right knowledge of the most important fees and charges related to a real estate purchase. Especially if you are cash strapped, that’s where the headaches really originate.

Outlined below are the various fees and charges — plus, who pays for what — that you need to be aware of.

real estate deal

1. Reservation Fee or Earnest Money (Paid by the buyer). The main purpose of this fee is to initially hold the property and assign it to the account of buyer so that no other interested buyers can take it for a specified period of time. Normally non-refundable, but should the prospect proceed with the transaction, this money will also form part of the down payment.

2. Down Payment (Paid by the buyer). Also called equity payment, this is normally in the range of 10% to 30% of the selling price which can be paid either in one-time or in a series of installments up to 24 months. The down payment is only required if the buyer is planning to finance the purchase by securing a mortgage loan from a financial institution like Pag-IBIG or a bank.

(Related Link : Mortgage Loan Fundamentals)

3. Appraisal Fee (Either paid by the seller or the buyer). Sometimes this is done only if the property is to be financed by a loan from bank or other lending institution. Usually, the appraisal is also conducted by the financing company through their Appraisal Team. The payment for this is collected together with the loan application fee before the loan is even processed. In the case of For Sale By Owner, the seller may also wish to have the property he is selling appraised by a third-party, independent appraiser.

(Related Link: Equity, Appraisal and Loan Amount.)

4. Loan Charges (Paid by the buyer-borrower). When you apply for a home loan, the lender has to make sure that you are a good borrower. And that implies a lot of work on their part. From documentary charges, to credit investigation and processing some documents, they have to make sure that you pay them for the time and efforts they spend doing the tasks.

5. Attorney’s Fees (Paid by both the buyer and the seller). These are fees for the services rendered by a lawyer and are needed by both parties to formalize the legality of a real estate deal . Some legal documents could involve the Special Power of Attorney, Contract To Sell, Deed of Restriction, Waiver of Rights, Deed of Absolute Sale, etc.

6. Agent’s Commission (Paid by the seller). Real brokers and agents are paid by commission based on the selling price of the property, typically in the range of 3% to 7%.

7. Value Added Tax (Paid by the Buyer). If you think the agent is a sucker for taking 5% off the transaction, remember that there is an even bigger sucker who takes on a bigger piece while doing nothing. The rate of VAT is 10% of the selling price, but some real estate properties are exempted from this tax, especially those which are very cheap. Please check with your agent or seller to know if the property could be exempted from EVAT.

8. Capital Gains Tax (Paid by the seller). This kind of tax is usually imposed if the property is being sold at a higher price than it was purchased. Hence, the term “Capital Gains”. But the BIR has pegged this value to 6% of the Selling Price, or Zonal Value, or Market Value whichever is higher.

9. Documentary Stamp Tax (paid by the buyer). This innocent-sounding tax is set to be 1.5% of the Selling Price or the Zonal Value whichever is higher.

10. Transfer Tax (Paid By the buyer). The rate of this tax depends on the location of the property. The range is from 0.25% to 0.75% of the Selling Price or the Zonal Value of the property, whichever is higher.

11. Registration Fee (Paid by the buyer). Graduated rate based on the selling price of the property. This one is determined at the office of the Register of Deeds, they have a table there of the updated rate of charges.

12. Realty Tax (Paid by the buyer). The rate also varies from place to place, but you can consult your respective local government for the computation.

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This article is written by Carlos Velasco.

Home Loan Restructuring Program

by Pag-IBIG Financing Admin

It all started with delayed or missed payments against the home loan obligation.

Those who have been granted a Housing Loan by the Pag-IBIG Fund should be aware that three (3) missed payments on the monthly amortization could lead to foreclosure — a sort of disaster.

What would you do if your property is on the brink of foreclosure and you are facing financial difficulties as well?

We can’t tell how many of our visitors are into that situations.

If you know someone who is facing foreclosure, or has already defaulted on their amortizations, please help them out by sharing this article. This article could save them, or their house for that matter.

A Visitor’s Comment: “Last year my husband applied for a housing loan and it was approved, but now we have missed more than 3 payments. Is it possible to repay the missed payments and reduce the mortgage term of the loan? What step should we do? Thanks!”

Special Note: Pag-IBIG Fund is currently running a Housing Loan Restructuring and Penalty Condonation Program. The program started last January 2, 2012 and will end June 30, 2012. After June 30, only the loan restructuring will be entertained. Members who have missed paying their monthly amortizations for more than three (3) months may avail of this program.

Condonation means the relief given by law in the payment of penalties, surcharges and a portion of accrued interest to be determined by the Pag-IBIG Fund.

Loan Restructuring refers to a process where the principal terms and conditions of the original loan are modified in accordance with an agreement setting forth a new plan of payment or a schedule of payment on a periodic basis.

Loan Restructuring : Refinancing Under Financial Distress

Pag-IBIG Housing Loan Restructure There are many reasons why borrowers default on their loan payments. Luckily for the Pag-IBIG members, there’s a Loan Restructuring program that they can take advantage of as a remedy to their delinquent accounts.

Here are the benefits of the Loan Restructuring Program:

It allows the home owner to save the property from being taken away from them through the foreclosure process.
It allows the borrower to shorten or lengthen (and thus the term “restructure” ) the term of the loan, whatever is deemed an affordable loan term for him.
Interests and penalties due during the delinquency period could be waived.

Who Can and Who Can’t Apply For the Home Loan Restructuring Program?

Member-borrowers who have not yet availed of any penalty condonation program from any Government Financial Institution, for example, HDMF, GSIS, SSS.
Borrowers who have missed payments on their monthly amortizations for at least 3 months.
Borrowers whose property was already endorsed for foreclosure, but whose redemption period has not yet lapsed.
Borrowers whose property was already foreclosed but the winning bidder is the Pag-IBIG Fund.
Legal heirs of deceased borrowers with unpaid loan balances after application of the proceeds of the Mortgage/Sales Redemption Insurance (MRI/SRI).
Successors-in-interest of borrowers who have assumed the original mortgage as supported by legal documents duly approved by the Fund.

However, Pag-IBIG is very strict against some accounts that should not be eligible to avail of this program. The following accounts are exempted from tapping this benefit:

Any account without a single payment since takeout, including those whose only payment resulted from its deduction from the takeout proceeds.
An account in which the housing unit has been abandoned by the borrower for more than one (1) year from date of delinquency.
An account in which the housing unit is occupied by a third party other than the original registered beneficiary or his/her legal heirs or successors-in-interest.
An account that has been foreclosed and another party is the winning bidder.
An account that has been foreclosed and with expired redemption period.
An account under a Contract-to-Sell that has been cancelled.
An account that has been surrendered to the Fund through Dacion en Pago, the title of which had been consolidated or transferred in the name of the Fund.
A Contract-to-Sell account covered by the developer’s buyback guarantee.

About The New Restructured Housing Loan

The following are among the most important things you should know about the new restructured loan.

Loan Term — The Home Development Mutual Fund offers a very generous loan term of up to 30 years on the newly restructured housing loan. However, it should be noted that the age of the borrower must not be more than 70 by the time the loan matures.

Interest Rate — The interest rate is 12% per annum or the rate of the original loan, whichever is lower and must be applied against the interest-bearing portion of the loan amount.

Penalty — If the borrower fails to pay any amount due on or before the due date he will charged a penalty of one-twentieth of one percent (1/20 of 1%) of the amount due for the month per day of delay.

Repricing — If the original loan amount is more than Three Hundred Thousand Pesos (P300,000.00), the new restricted loan shall be subject to repricing every three years, reckoned from the date of approval of loan restructuring.

Compare This With: The Current Rates of Interest and Penalties of Pag-IBIG Loans

What To Do Next?

If you are now so eager to restructure, please visit the Pag-IBIG Office that has the jurisdiction of your account and possibly your mortgaged property. Inquire about the full details of this program.

Plus, remember that the penalty dues will only be condoned when you apply not later than June 30, 2012. (As far as this current program is concerned.)

After reading this article, I hope that you will share this to a friend who is also a member of the Pag-IBIG Fund just so he/she knows what to do when foreclosure clock begins to tick.

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“Home Loan Restructuring Program” is written by Carlos Velasco.