Tips and Traps

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.

Credit Card and Globe G-Cash — New Ways to Send Your Payment to the Pag-IBIG Fund

by Pag-IBIG Financing Admin 2 Comments

“How can I send money for my Pag-IBIG membership contributions and housing loan payment when I am out of the country?”

That is a recurring question we always get from Pag-IBIG Fund Members who are based overseas – Overseas Filipino Workers and Migrant Filipinos.

Indeed it is very inconvenient to have a representative go to a Pag-IBIG Branch and pay over the counter if that is the only way to send the payment. Slowly but surely.. and yes, still very inconvenient.

In a previous article we listed five ways to send payments to the Pag-IBIG Fund which includes:

Salary deduction, for the locally employed.
Over-the-counter payment; meaning at the branch.
Bank Payment (Housing Loan Only)
Using Remittance Companies and Agents like those of SM Business Center
Though post-dated checks

You can read more by following this link.

Luckily, there are some newer and more modern ways to send your payment. And if you are an OFW or in a place where access to a Pag-IBIG Branch or payment center is not possible, you may want to explore the following options. 

Note: This is also applicable if you are locally based in the Philippines.

Credit Card and G-Cash Payment For Pag-IBIG Fund — Credit Card and G-Cash Payaments are now accepted by the Pag-IBIG Fund.

Option #1 : Using Credit Card

First thing you need to do is get a Pag-IBIG Membership Identification (MID) Number / Registration Tracking Number (RTN).

You have to do that online from this link:

https://www.pagibigfundservices.com/PubReg/Starter_Page.aspx

Once you have that information, you need to prepare your credit card information. It is also important that you have a valid email address and a cellphone number. The system
will send confirmation of the transaction via email and/or SMS.

Next, to follow the link:

https://www.pagibigfundservices.com/ccpayment/

Make sure you are on a SECURE Website by checking at the Browser Address Bar. It should bear the HTTPS (with S) protocol. From there, everything should be
easy to follow.

IMPORTANT NOTE: Upon completion, you will see on the screen the Merchant Reference Number and the Payment Reference Number. Make a note of these number as they serve as your proof of payment.

Option #2: Using Globe G-Cash

Simply stated, Globe G-Cash turns your cellular phone into a virtual money that you can use to pay for anything where it is accepted as a form of payment.

To be able to send payment through G-Cash, you need to register your Mobile Number first. There are basically two ways of doing this.

Via Unstructured Supplementary Service Data (USSD) Protocol. To do so, simply dial mobile network (*143#) and select “GCASH” and “REGISTER.”
By sending SMS to Globe with this format: REG 4-digit MPIN/Mother’s Maiden Name/First Name/Last Name/Address. Remember not to put SPACES before and after the ‘/’ symbol

IMPORTANT NOTE on G-Cash Registration: Always make sure that you use the name you register for your G-Cash Account is the same with your Pag-IBIG Fund Member’s Name. Correct spelling and all.

Everything should go smoothly and easily.

Once you have registered, the next thing is to deposit funds to your G-Cash. You can do this through:

G-Cash Outlets
Online Bank Transfer
Mobile Phone Banking
BancNet ATM

Once your G-Cash is funded, you can now proceed paying for:

1. Pag-IBIG Contributions. You need to prepare your Pag-IBIG Fund Member ID. You are limited to sending only the amount of P 100 or P 500 — that’s for the regular contribution and for Pag-IBIG II Savings.

2. Housing Loan. A 20-Digit Reference Number will be needed. This is the number that appears on your Housing Loan Billing Statement.

If using G-Cash is something new to you or you are in the process of exploring this option, my suggestion is for you to visit a G-Cash Outlet and ask for assistance.

Common House Types in the Philippines

by Pag-IBIG Financing Admin

Are you thinking about buying a house?

Do you know what’s available in your area?

Should you buy a ready-made house or build one according to your design preferences?

These are some of the most common questions you are likely to ask especially if you are a first-time home buyer.

We have been advocating that before you even start searching for a house, it is best to take an honest look at your finances unless you are paying Spot Cash. Here are some of the most helpful tips from the previous articles:

Of course, once you have already figured out how to finance a house and you are ready for a long term commitment as a result of becoming a home owner, now is the right time to search for that home. And as you search, bear in mind the following house types that you are likely to encounter:

1. Bungalow vs. 2-Storey House

These are all too common in the local housing market. A bungalow is simply a single-storey house with all the rooms located in the same floor; that’s the ground floor.

You are unlikely to find a house design beyond the 2-storey — 2 floors. But there are rare designs that have extra room at the attic or some have the so-called mezzanine floor.

2. Single-Family vs. Multi-Family

Apartment Building in the Philippines — This apartment complex is an example of a multi-family house. The houses are attached next to each other.

A single-family dwelling unit is a house that clearly has its own lot — with spaces probably at the front, the sides and at the back of the house. In other words, it is a house that stands on its own lot and offers space and privacy to the home owner. A nice, single family house will likely have its own lawn and extra space for car garage.

A multi-family house is one that is attached to each other at the sides. Some examples of multi-family dwelling units are row houses, apartments, condominium units and town houses.

3. Detached vs. Attached

Single Family, Attached House — This beautifully designed house is an example of a single family, attached house or simply single attached. The term “attach” here refers to the fact that one side of the house is attached to one side of the lot boundary. Take of the firewall at the side of the house. A firewall is necessary for attached houses.

A completely detached house has lot spaces at the front, at the back and at both sides of the house. This type of house is the most preferred by home owner since it offers the most privacy and they may install fence in all sides to secure the whole house. You are most likely to find this type in areas where the price of land is cheaper.

An attached house is one where one side of the house is attached to one boundary of the lot where the house stands. That side is most likely to have a firewall that separates it from the other house next to it.

In Conclusion

As you begin looking around for a house to buy, you will discover the some houses fall under the combination of the above house types. For example, you will see a 2-storey house which is also single-attached.

The above categories serve as useful guide in understanding what type of house you will encounter in the local housing market in the Philippines.

So, which type of house is good for you?

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.

Real Estate Agents: Should You Work With Them?

by Pag-IBIG Financing Admin

Some people have a lot of misconceptions about real estate agents in the Philippines and the kind of work that they do. This one is the most common among them: “I don’t want to deal with a real estate agent. It is more expensive to buy from them than straight to the seller.”

Well, actually it is both true and false, depending on the case and the kind of property the agent is selling. Let me explain.

If you are buying a new property from a developer, chances are good that the price is already fixed by the company’s Marketing Department. The real estate agent or broker can’t do anything about the price. He can’t lower the selling price or jack it up higher. Can you just imagine if the developer allows their agents do their own pricing? It would be a disaster since the prices would naturally be different and would therefore confuse the buyer.

The story would be different if the property is owned by an individual investor or seller. Here is a typical scenario if an individual seller would enlist the help of an agent in selling his property:

The seller comes up an amount he wants to pocket for the property. Naturally, this price already includes his profit. Sometimes he would price the property so much more to leave room when the buyer tries to negotiate the deal.
The seller would then say to the agent, “That’s already the NET price. It’s up to you to put your mark-up price. I want to take nothing less than that amount and the buyer will be the one to shoulder all other expenses.”

Questions: If you were the agent, at which price would you sell the property if the owner wants to take a net amount of P2,000,000.00? Would you be so kind to sell it at P 2M also without taking a profit? Or, would you mark it up to compensate for your efforts and marketing expenses? How do you think would other agents come up with their price?

Well, I hope that leaves you with something to think about, whether you are selling or buying a property. Take note that most agents are uncomfortable with marking up the price. They are always afraid that the buyer will discover the seller’s asking price and will try to out-maneuver them from the deal.

Technically, a real estate broker is different from a real estate agent. But for simplicity, here we treat them as the same way and refer to them using the term real estate agent or simply agent.

Again remember that if the property is being sold by a developer, the price is dictated by the company. In other words, it is much comforting (no negotiations, no counter-offers, etc) on your part if you buy from a developer instead of buying from an individual seller.

That said, it is worth mentioning that there are numerous advantages when you work with a competent real estate agent, among them are the following:

An agent saves you time and money looking for a property and the right financing.
A good agent is also updated with the latest in the local property market.
A buyer’s agent can help you negotiate the price.
An experienced agent has a network of other professionals like lawyers, interior designers, home builder, etc.
A good agent can assist you when something goes wrong with the deal, which is very likely to happen.

Who Should Get An Agent?

You already know the advantages of working with a competent real estate agent. It’s true that you can skip the services of an agent and buy direct from the seller, who is either a company of an individual. If you have all the time in the world, or you are confident enough of the whole process, you can do that. But I believe there are people who should be working with an agent to save them from trouble. If you belong to the following groups, I suggest that you really should hire the services of a good agent.

1. First-Time Home Buyers. If this is your first time to buy, don’t ever make a mistake of buying on your own. Buying a property is a complicated transaction which involves a lot of legalities you should be aware of. As much as possible get the help of an expert lawyer. And a competent real estate agent should be able to guide on the intricacies of buying and financing.

2. Relocating Buyers. It would be best if you are thoroughly familiar with the place where you wanted to buy. But for many relocating buyers, this is not always the case. This is where an experienced and long-time real estate professional can help.

3. Overseas Filipinos. The Philippines could seem a little strange if you have been away for a number of years. If you are based abroad, you will need at least two persons when buying a property here in your native country: a trust-worthy representative (usually a relative) and a good real estate agent. We are so low-tech here that a simple transaction is enough to make you lose your temper.

(Related article: Joining the Pag-IBIG Overseas Program.)

4. Busy People. Buying a property is very time consuming and very stressful, too. If you are so busy with work or business, you really should consider getting an agent.

5. Foreigners. We have some ways of doing things here that you may be doing differently at home in your country. Before you go nuts, it would be wise to have a good, competent buyer’s agent on your side to help you explain things.

Also don’t forget to do your part as a buyer of real estate. Use the Internet to conduct your own research of the property that you want to buy. This website alone offers a wealth of information that helps you become an educated buyer. Take time to read the other articles which interest you.

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This article on working with real estate agents is written by Carlos Velasco.