Pagibig Financing

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

Pag-IBIG Housing Loan

Pag-IBIG Loans: Interest Rates, Penalties And Defaults, Part 1 of 2

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There’s more to loans than just getting the money and paying for it. If you have been a frequent visitor to this website and you are constantly in the look out for new articles, you should already know that Pag-IBIG Loans (both Housing Loan and Multi-Purpose Loan) come with interests.

Borrowing Money Comes With A Price

No one in his “right mind” will take the risk of lending you money knowing that you won’t pay it back! Well, only friends and relatives do that. And I can’t tell you the number of horror stories I’ve heard related to that. Someone puts it best, “A fool and his money are soon parted.”

That’s why banks, non-profit foundations and other lending companies always impose interest on loans. Well, it will not be called a loan if it doesn’t come with an interest.

Going back to the topic, the interest actually serves as an incentive to the one loaning you the money. Think of it this way: When you borrow money from someone, you are actually using his money for your own purpose and the other guy is risking his money to you in the hope of getting a reward as an exchange. In this context, the interest serves as the reward, or incentive for lending you the money.

On the part of the borrower, the interest is also the cost of borrowing the money in the first place. And naturally, the cost of borrowing money is directly affected by three important factors: loan amount, loan term and interest rate.

time value of money -- pag-ibig loansAfter using the Mortgage Calculator presented here on this website, one visitor concluded as follows: “I see it’s better to buy a property in cash than finance through PAG-IBIG. The interest almost exceed the principal, you can even buy another house with that interest!”

He was right about his observation on the “interest almost exceed the principal“. But if such is the case, why would people still use a Mortgage Loan to finance their property investment? One answer is that, most people can’t afford to pay a house in a single Spot Cash payment.

(See also: Pag-IBIG Housing Loan 101.)

Housing Loan Interest Rates

The Pag-IBIG Housing Loan Interest Rates have been presented here on this website for quite a while already. (As far as I can remember, way back when the site was still in its pre-launch stage.) You can find it at the Right Sidebar of this website, just directly above the Mortgage Calculator.

But for your convenience, and since we are already on this topic, we are presenting them below.

Housing Loan Interest Rates Table

Loan Amt Int. Rate
Up to P 400 k 6%
Over P 400 k to P 750 k 7%
Over P 750 k to P 1.0 M 8.5%
Over P 1.0 M to P 1.25 M 9.5%
Over P 1.25M to P 2.0 M 10.5%
Over P 2.0 M to P 3.0 M 11.5%

From the table, it is clear that the interest rate for Pag-IBIG Housing Loan is 6% per annum for loan amount of up to P 400,000. And the maximum housing loan amount that you can get from Pag-IBIG is P 3 million with a corresponding interest rate of 11.5% per annum.

Note: The minimum amount that you can get from Pag-IBIG Housing Loan is PhP 100,000.

A reader of this website once dropped us a message: “Is the interest rate of Pag-IBIG Housing Loan fixed for the whole duration of the loan term?”

Good question and every Pag-IBIG Member who plans to avail of the Housing Loan should know about it.

The answer? That’s reserved for the next article of this series, plus the following will also be discussed:

  • Housing Loan Defaults
  • Pag-IBIG Multi-Purpose Loan Interest and Penalties

So stay in touch for the part 2 of this series and all the other articles we will be posting soon.

Update Notice: Part 2 has just been posted. Check out to learn more about Housing Loan Repricing, Defaults and Penalties for late payments.

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This is the first part of a two-part series of articles on Pag-IBIG Loan Interest rates, penalties and defaults. This article is written by Carlos Velasco.

Pag-IBIG Housing Loan Amortization Demystified

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This is one of those topics that a lot real estate buyers are clueless about. Many of them just don’t know how the monthly amortization is determined. This is true for both the first time as well as the seasoned home buyers — and a few real estate agents I’ve met. They simply let the bank, or any lending institution for that matter, handle the computation for them.

Take this particular question shown below which is commonly encountered by real estate sales people.

“How much is the monthly payment for this house which is priced at P1.2M?”

First, any attempt to give a figurative amount to answer that question is meaningless. For one, the question itself is already wrong.

Home Loan Computation: The Amortization Formula

The monthly amortization — or the monthly payment, if you will — is a figure that is dependent on three factors:

  • Loan Amount. The actual amount borrowed, usually the selling price less the down payment.
  • Interest rate. This figure is usually expressed as per annum value, likewise known as annualized interest rate. If you are familiar with bank financing, you have probably noticed that the interest rate is different for each bank. In the case of Pag-IBIG Housing Loan, the interest rate is dependent on the loan amount.
  • Loan term. This tells how long the loan is going to be fully paid; also normally expressed in terms of the number of years. In Pag-IBIG Home Financing, the loan term is usually 15 years or 30 years, though, you may also opt for a shorter loan term.

To determine the monthly amortization, we can simply use this equation:

Amortization Equation -- For Pag-IBIG Housing Loans or Bank Loans

Essentially, this amortization formula says that

  • Given a fixed interest rate and loan term, your monthly amortization is directly proportional to the amount of loan. The bigger the loan amount, the bigger the monthly amortization due.
  • Given a fixed interest rate and a particular loan amount, the monthly amortization is inversely proportional to the payment period. The shorter the payment period, the larger the amortization; the longer the payment period, the smaller the monthly payment due.

In other words, while you may be paying a higher monthly amount for a 15-year mortgage compared to a 30-year mortgage, the primary advantage to you is that the loan if fully paid in a shorter period of time.

The main advantage of using the formula above is that it is very handy and versatile. Anyone can use it given any amount of loan, loan term and interest rate.

However, a lot of people are simply lost with Mathematical equations. And not amount of explanations will ever want them to use any formula to determine any figure.

Luckily for them, there is also another way of determining the monthly amortization and that is by using an Mortgage Factors Table such as the one shown below.

The Pag-IBIG Mortgage Factors Table

Take note that this table is made especially for The Pag-IBIG Housing Loan with interest rates effective at the time of this writing (April 2011). You can use it for loan terms starting from 1 year to a maximum of 30 years loan term.

The annual interest rate shown is only the following: 6%, 7%, 8.5%, 9.5%, 10.5% and 11.5%. For interest rates other than these, the table is not applicable anymore. It’s best to use a Mortgage Calculator – a tool which will become available on this website soon.

Pag-IBIG Home Loan Amortization Factors

Given the table above, it is now very easy to determine the monthly amortization by simply following this understandable formula:

Monthly Amortization = (Loanable Amount) x (Factor Rate)

Sample Computation

Consider this hypothetical case: You are buying a Pag-IBIG Home worth P 1.2M and you are planning to put a down payment of P 240,000 which is 20% of the selling price. How much then would be the monthly amortization if you are to pay it is 15 years? How about if the loan is to be paid in 30 years?

Please be guided by the formula above and the interest rates of Pag-IBIG Housing Loan shown below.

Pag-IBIG Housing Loan Interest Rate

From the case in point and looking at the Factor Rates shown at the Table, we can gather the following:

Loan Amount: 960,000 (this is Price 1,200,000 less Down Payment of 240,000 )

For 15-Year Mortgage, the Factor Rate = 0.00984740.

Monthly Amortization (in 15 years) = (960,000) x (0.00984740) = 9,453.50

For a 30-year mortgage, the factor rate = 0.00768913

Monthly Amortization (in 30 years) = (960,000) x (0.00768913) = 7,381.56

When using this formula, take note we are not putting into consideration some other trivial payments like fire insurance, mortgage redemption insurance, membership dues and others. We are leaving that for the sake of simplifying the illustration.

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Update: A more detailed article about the Amortization and Mortgage Calculator has been made on this website. Please check it now.

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“Pag-IBIG Housing Loan Amortization Demystified” is written by Carlos Velasco.

On Collateral And The Pag-IBIG Housing Loan

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Can you imagine life without mortgage loans?

To say the least, only a very few families would be living in their own homes. The reality is, most people can’t really afford to pay Spot Cash on a piece of property. Even a 2-year interest-free, installment payment is still hard on the average family’s budget.

But thanks to financing programs like mortgage loans (or housing loans), many families now enjoy having a roof over their heads while still paying the property over a series of monthly payments on a longer term.

The concept is actually very simple. Given the appraised value of the property, a lending institution can assist the buyer in purchasing the property by financing part of the price. Normally, the lending company may shoulder up to 80% of the property’s price and the borrower should be able to raise the 20% cash down payment.

See also :

Pag-IBIG Member Benefits and Responsibilities

As a member of the Pag-IBIG Fund, one of the benefits you can enjoy as member is becoming eligible for Pag-IBIG Housing Loan and paying it in longer periods of up to 30 years.

One of the most important things you need to understand about Pag-IBIG Housing Loan, or any mortgage loan for that matter, is that, it is a secured form of financing. This means that when you sign a housing loan with Pag-IBIG, there are two points that you need to keep in mind:

  • You promise to repay loan on time as set in the agreement.
  • You put the property as collateral to backup your pledge.

The moment you fail to pay on the scheduled monthly amortization, that’s when the Foreclosure clock starts to tick.

It’s a very stressful event and you should do everything in your capacity to contact the Pag-IBIG Fund branch where you applied for the housing loan before it’s too late.

Collateral Requirement of Pag-IBIG Housing Loan

You should already know that Pag-IBIG Housing Loan is only applicable to residential types of properties; not commercial properties.

The collateral requirement of Pag-IBIG Home Loan is very simple: A clean Title (TCT/CCT) issued by the Registry of Deeds.

Important points to remember:

  • The tax on the real property must be updated.
  • The borrower is required to submit a copy of tax receipts.

Furthermore, the following properties / Titles are not acceptable as collateral:

  1. Free / Homestead / Miscellaneous Sales Patent Titles
  2. Properties with Encumbrances
  3. Properties with Liens

See the following related articles:

Buyer, Beware

Take note of the above-mentioned list of “unacceptable collateral” because they are very important especially if you are buying from individual sellers; that is, not from developer corporations.

When buying a property, insist on getting a copy of the Title — (TCT for Lot, or CCT for condominium unit). Once you have it, verify its status at your local Registry of Deeds. Always avoid buying properties that belong to any of the three categories mentioned above.

Foreclosure properties are another type of properties you should avoid at all costs until you have educated yourself already on the whole idea. However, if you are not that confident yet, forget about all those money-making schemes they preach in Foreclosure Seminars. These properties are much more complicated and a much more painful investment than seminar experts would want to believe.

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“On Collateral And The Pag-IBIG Housing Loan” is written by Carlos Velasco.

Pag-IBIG Housing Loan Alternatives

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Real Estate Loan is indeed the most popular service available to the Pag-IBIG Fund Members. In terms of the interest rate, it is very competitive (in many cases even lower) compared to the other mortgage loan financing alternatives in the Philippines. (The other Real Estate Financing alternatives will be discussed in the succeeding paragraphs) Another great advantage is the longer payment term of up to 30 years.

Some Uses of the Pag-IBIG Housing Loan

If you have not yet stumbled on it from the other articles, here are some uses of the Pag-IBIG Housing Loan.

  • Lot-Only Property Purchase
  • House-And-Lot Purchase
  • Construction of A Residential Unit
  • Home Improvement
  • Refinancing of Existing Mortgage Loan

Looking at that, it’s hard to imagine how an eligible Pag-IBIG Member should not take advantage of this benefit. Go for it if you have the chance.

Housing Loan Eligibility

But then again, to even qualify for the loan, a member should at least meet the minimum requirements listed below.

  • Must be a member for at least 2 years and has contributed at least 24 months. Take note: no more one-time payment of the 24 months contribution this time.
  • Must not be more than 65 years old at the time of loan application.
  • Must not be more than 70 years old at the date of loan maturity.
  • Must have NO outstanding Pag-IBIG Housing Loan either as principal or as co-borrower.
  • Must have NO outstanding Pag-IBIG Multiple-Purpose Loan in arrears at the time of application.
  • And most importantly, must not have a previous Housing Loan that was foreclosed, cancelled, bought back or subjected to dacion en pago.

For some becoming a member of the Pag-IBIG Fund is already too much of a hassle. There are membership dues to remember; seminars to attend to when applying for a housing loan; the difficulty in sending the monthly dues, etc. Some members have been inactive for a number of years already. Still others are not even eligible for Pag-IBIG Housing Loan.

If this is your case, there are still home financing alternatives for you. Consider the following…

Bank Financing

The first big daddy of Real Estate Financing in the Philippines is, of course, The Bank. They offer a variety of Home Financing Products that you can choose from.

The good thing about Bank Financing is that there are a lot of competitions going on. You should shop around and decide for yourself the best one based on the following factors:

  • Professional Service – How cool is it if your banker treats you like a King? I can tell you don’t get that kind of professional attention in Pag-IBIG.
  • Interest Rate – The lower, the better for you.
  • Payment Method – As painless as possible especially if you are working overseas. Check for the Internet Banking feature.

Tip: When you approach a loan officer, you may want to do away with that expensive Clive Christian Perfume. It will be to your advantage if you wear something that smells like money instead. I hope you know what I mean by that.

Other Similar Financial Institutions to Consider:

  • Credit Cooperatives
  • Money Lenders

In-House Financing

This one is very simple. There are only two parties involved: you, the buyer and the seller, which is usually the Real Estate Developer.

If you are constructing a house, the developer acts as if it were The Bank. It finances the home construction and you, in turn, pay directly to the developer.

Like the Bank Financing, In-House Financing almost always requires that you put a down payment (20% of the selling price or so) and amortize the balance for a given term. This Financing Scheme also bears an interest. The series of monthly amortizations will reflect your payment for the principal amount borrowed plus the interests.

The primary advantage of In-House Financing is its simplicity.

Bank Financing vs In-House Financing

The primary downside, however, is the stiff interest rate that goes with it. At the time of this writing, the going interest rate of many In-House Financing Schemes is in the range of 18% to 21% per annum. Compare that with the going interest rate the banks are charging, which is in the range of 8% to 12%, and you will be in for the shock of your life.

When it comes to Home Financing, simplicity can be very expensive.

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“Pag-IBIG Housing Loan Alternatives” is written by Carlos Velasco.

The Pag-IBIG Housing Loan Process

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This can be filed as one of the frequently asked questions: “How can I apply for a Pag-IBIG Housing Loan?”

This article addresses that question in a very straight-forward and easy-to-understand manner.

So without further ado, here are the steps to take.

Step #1: Attend The Loan Orientation. Officially, it’s called Loan Counselling Session. It’s conducted at any Pag-IBIG Office all over the Philippines. Check your nearest Pag-IBIG Fund office to check their scheduled Loan Counselling Session.

Step #2: Fill Up Some Documents. Normally, you will be asked to accomplish the following documents:

  1. Preliminary Counselling Questionnaire – Some basic questions that are easy to answer.
  2. Membership Status Verification Slip (MSVS) – This will be used by the assigned staff to check your records and contributions to the Pag-IBIG Fund.
  3. Housing Loan Application (HLA) – This is the official document where you signify your intention of getting a loan.

If you are qualified for a loan, you will be given the Checklist of Requirements (COR) depending on the purpose of your housing loan. Fill-up the HLA only after knowing your status. (Read Step 3)

Related: Are you qualified for a Pag-IBIG Housing Loan? Click here to find out.

Step #3: Submit HLA And Other Required Documents. This will probably take a couple of days to comply. But once all of the documents in the requirement checklist are ready, submit them together with the Loan Application Form. You will be asked to pay the processing fee, which is non-refundable.

Step #4 Wait for The Notice of Loan Approval or Letter of Guaranty. Or if you can’t wait on your mail box, phone them to follow-up the status of your loan application.

Step #5. Sign Loan Documents. There are some and will be provided at the Pag-IBIG Fund office.

Step #6: Visit the Bureau of Internal Revenue and Registry of Deeds.

  • Pay for the documentary stamps and capital gains tax at the BIR.
  • Have the Registry of Deeds put an annotation of mortgage on the Land Title.

Step #7. Get Loan Proceeds. But you have to show Pag-IBIG Fund the following documents:

  • Original Transfer Certificate of Title (TCT) in the name of the applicant with annotated mortgage
  • Deed of Absolute Sale with original stamp from the Registry of Deeds
  • New Tax Declaration in the name of the applicant
  • Updated Real Estate Tax Receipt (for house and lot, if applicable)
  • Occupancy Permit (secured from LGU Engineering Office, if applicable)
  • Assignment of Loan Proceeds

That’s it for the Pag-IBIG Housing Loan process — only seven steps.

Most likely, you will also be asked to make an advanced payment on the first monthly amortization immediately following the loan release. So have your cash or check ready.

Further Note: If you are buying a property from a real estate developer, this whole process would be easier. All that are needed is for you to follow Steps 1 to 3. Ask your agent or broker if he/she can assist on the housing loan application most often you will be extended an assistance.

Other Articles Related to Pag-IBIG Housing Loan:

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The Pag-IBIG Housing Loan Process is written by Carlos Velasco in response to website visitor requests.

Pag-IBIG Housing Loan Default and Foreclosure

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Most real estate purchases and investments are made with the use of borrowed money; that is by mortgage loans.

In an ideal world, these mortgages are paid on time and are eventually fully paid including all the interest incurred by borrowing the money. But unforeseen circumstances do sometimes happen, which lead to loan defaults and, worst of all, mortgages being foreclosed.

Foreclosures are often painful on the part of the borrower and a hassle on the part of the lender. This is the reason why lenders are very strict in evaluating loan applications. It is not uncommon for lenders to ask for very detailed personal and financial information from their clients.

Why Loan Defaults Happen?

Given the fact that Housing Loan Default is something to be avoided, there are some reasons why they happen. Here are some common ones:

  • Personal and Financial Problems — the loss of a job, emergencies, calamities, or being assigned to another city.
  • Physical Flaws Of the Property — weak structure, dilapidated roads, flood-prone area, etc.
  • Legal Problems — land title disputes, marital problems

Loan Default Leads To Foreclosure

For regular Pag-IBIG Housing Loans, loan default happens when the borrower or any of his co-borrowers…

  • fails to pay three consecutive monthly amortizations
  • fails to pay monthly membership contributions
  • fails to comply other obligations of the loan

In the case of Pag-IBIG Rent-to-Own units, a default happens if you fail to pay three consecutive monthly rentals.

If the borrower defaults on a loan, the outstanding loan, accrued interest, penalties, fees and other charges become immediately due and demandable. Aside from that, Pag-IBIG also imposes that the “unpaid monthly payments shall continue to be charged with a penalty equivalent to 1/20 of 1% of the amount due for every day of delay.”

What To Do If Foreclosure Is Underway?

A foreclosure is a very stressful situation. Once you are at a point near that, knowing the options to take can greatly help.

If you find yourself unable to continue to make the scheduled payments on a mortgage loan, consider the following alternatives before it’s too late:

1. Sell the property and repay the loan. If you are lucky to have a friend or relative who has ready cash to pay for the property, this is the way to go.

2. Have someone assume the loan. Announcing to the whole world that you are in financial distress may help after all. Who knows, someone down there might be a good candidate and he could be interested in assuming your loan.

3. Restructure the loan. Discuss this with the lender; the Pag-IBIG Fund, in this context. A Loan Restructure might help reduce the payments temporarily.

4. Just let it be. That is, just allow the lender to continue with the foreclosure. Some properties really deserved to be foreclosed, most especially those that are really giving you a lot of headache instead of a roof over your head.

Prevent Foreclosure By Avoiding Loan Defaults

As a member of Pag-IBIG Fund, loan defaults and foreclosures are things to be avoided like a dreaded virus. Remember that once you have faced a foreclosure in your Pag-IBIG Housing Loan, you may be denied housing loans in the future.

One of the ways of preventing loan default is by first being honest with your finances. Before deciding to use a housing loan, consider your monthly expenses, you may have to do away some if your house is on top of your priority list. This requires a lot of discipline.

It is also very important that you know how to buy the right property that fits your needs. Don’t even consider buying in depressed areas and unsecure or unsafe neighborhood.

Note From The Website Administrator :

This website is not just about giving you inside information on Pag-IBIG Financing. We also intended to help everyone who is facing a foreclosure. If you know someone who has a property financed by Pag-IBIG and is on the verge of a foreclosure, please refer him / her to this website. The property can be listed here FREE of charge for every web visitor to see.

Again, that’s a FREE listing offered to distressed Pag-IBIG Members.

To avail of the FREE service, please send the details or leave us a message using the contact form provided on this website.

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This article on Pag-IBIG Housing Loan Default and Foreclosure is written by Carlos Velasco.