Still looking for the best home loans in the Philippines? Are you comparing interest rates and looking for the most flexible payment terms?
But before you choose the one with the lowest rates, make sure you read the fine print and understand what a long-term home loan entails.
Buying a home is a very exciting affair and an important milestone, but it can also be financially burdensome if the decision is made out of impulse.
In this article, we will discuss what you need to know before making that long-term commitment.
What kind of home loan can I avail in the Philippines?
The most common home loans are for purchasing a house and lot, a townhouse, a condo unit, or a vacant lot. There are also home loans to fund home constructions. You may refer to this table below:
|Bank||House & Lot/ Townhouse/ Construction||Residential Condo Unit||Vacant Lot|
|BPI||25 years||10 years||10 years|
|BDO||20 years||15 years||10 years|
|Metrobank||25 years||25 years||10 years|
|RCBC||20 years||20 years||20 years|
|HSBC||20 years||20 years||20 years|
|Security Bank||20 years||20 years||20 years|
|Maybank||20 years||20 years||20 years|
|China Bank||25 years||10 years||15 years|
Other home loan applicants can avail other home loan packages such as:
- House construction on an owned lot
- Home equity
- Multipurpose loans
If you are not happy with the interest rates of your current bank, you can also opt for refinancing to save on your mortgage. Visit your nearest preferred bank for actual computations based on the type of property you wish to purchase.
By default, banks offer payment terms with a minimum of 10 years and a maximum of 25 years. There are some, like EastWest Bank, that offer up to 30 years.
If you are a member of PAG-IBIG and eligible to apply for a PAG-IBIG housing loan, you can borrow with a maximum payment term of 30 years.
Bank home loan vs PAG-IBIG housing loan
If you’re an active member and your contributions are up to date, you can apply for a PAG-IBIG Housing Loan.
Applications are still subject to review, of course. But compared to banks, there’s a higher chance of approval with PAG-IBIG.
A PAG-IBIG Housing Loan offers a maximum payment of 30 years, while most banks offer up to 20 to 25 years, depending on the purpose of the home loan.
When it comes to fixing periods and interest rates, PAG-IBIG also offers competitive rates.
Check this table below indicating a 1-year, 3-year, and 5-year fixing period for a purchase (plus the cost of transfer) of a residential house and lot, townhouse, or condominium unit.
These are indicative rates only and are subject to change.
|Home Loan Provider||1-year fixing period||3-year fixing period||5-year fixing period|
|Security Bank **||6.25%||6.25%||6.75%|
|HSBC||Rates vary||Rates vary||Rates vary|
** Security Bank home loan rates are valid only for home loan applications from 04 January 2020 to 15 April 2020.
PAG-IBIG Housing Loan offers the lowest rate for a 1-year fixed period, which is subject to repricing after a year.
Following closely are BPI and Metrobank which offer the same annual interest rates for home loans.
Home loan fixed rates vs floating rates in the Philippines
With fixed interest rates, your monthly housing loan payments remain fixed regardless of dropping or skyrocketing interest rates in the market.
This is beneficial for borrowers who have a strict monthly budget. You won’t have to think of how much you’ll pay for the next month since you already know how much you will be paying for the duration of the loan.
Usually, in the fifth year, the loan will be reviewed and repriced. Either your monthly payments will increase or decrease, depending on the market conditions.
In short, fixed rates offer a sense of security for borrowers, especially if there are significant changes in the market.
The only downside is when the market is good, your interest rates remain the same or locked. And sometimes the availed fixed rates are higher than what the market is currently offering.
Floating rates, on the other hand, can go higher or lower every month. You can opt for floating rates if you understand the movement of the housing market in the Philippines in the coming months.
Interest rates per month can go higher or lower than what the fixed interest rates offer. The downside is that you’re exposed to risks, and you can’t allocate a fixed monthly payment.
What else should I consider before committing to a home loan?
Apart from choosing which type of interest rates are suitable for your monthly payment, you also need to consider the miscellaneous fees prior to loan release. Most banks have appraisal and insurance premium fees.
Below is a table of fees that you need to consider to make sure you’re within budget. The costs are estimates only. Contact your nearest preferred branch for the exact computation.
|Appraisal fee||P4,000 to P5,500 (depends on the location)|
|Notarial fee||P100 – P250|
|Doc Stamp Tax||Varies|
|MRI (Mortgage Redemption Insurance)||Varies|
|Credit Life Insurance (CLI) Premium||Varies|
Penalty fees and late payments
Late payments of your monthly amortization are subject to penalty fees.
BPI charges 3% of the monthly amortization or short payments. To avoid these penalties, it’s best to enroll in ADA (Automatic Debit Arrangement) or pay via post-dated checks (PDCs).
PAG-IBIG home loans have other modes of payment, such as salary deduction through your employer’s Collection Servicing Agreement (CSA) and through accredited collection partners for local and overseas remittances.
How can I get lower home loan rates in the Philippines?
Since you already have an idea of the rates offered by most banks in the Philippines, the best way to get lower home loan rates is to check what’s published on their websites. Their interest rates change every month or so.
Some banks even offer free appraisals or lower interest rates if you apply within a specific promo period.
If you’re not happy with your current home loan, you can always switch and refinance your home loan package with the same bank, to a different bank, or avail of PAG-IBIG’s Housing Loan package.
What do you think of these home loans? Did you find one that matches your budget?