In’s and Out’s of Home Loans in the Philippines.
(Last Updated 18 June, 2017)
- 0.1 Home Loans in the Philippines
- 0.2 Current (2017) Typical Home Loan Rates Philippines
- 0.3 Ouch!
- 0.4 But I Have Good Credit and I’m Willing To Pay, Why Wouldn’t I Be Approved For a 20 Year Mortgage?
- 0.5 But Dave, You Have a Home Loan and You’re Over 60? How Did That Happen, a Fixer?
- 0.6 If You Do Get A Home Loan, 80% Is The Max!
- 0.7 How About a Bank Loan To Rebuild/Modernize and Existing Home?
- 0.8 Progress Payments
- 0.9 Who determines those completion points?
- 0.10 Last But Hardly Least — The Payments.
- 0.11 Would I Do It Again?
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I was asked by a reader a month or so back to write a bit on this subject, since I (a US citizen) have now chalked up two different home loans living here in the Philippines.
Home Loans in the Philippines
The first thing I want to say about home loans in the Philippines is, there’s a very good chance YOU DON’T WANT ONE!
If you’re like most of my fellow Americans or my readers from other “sophisticated” countries, the idea of buying a home without signing up for years of slavery to a bank or mortgage institution is so foreign it’s really hard to imagine.
But you can do it, people do it every day here in the Philippines, and it might be well worth your while to scrimp and save and then pay cash and treat yourself to a real celebration when you finally move into your new (or new to you) home without facing years on interest slavery.
Current (2017) Typical Home Loan Rates Philippines
Here’s what is typically available today from BDO Unibank, one of the “big three” in the home loan business. Others, such a BPI (Bank of the Philippine Islands) are very comparable.
As you can see, these rates are well above what’s current on today’s US market.
The interest rates for new Home Loan applications are as follows:
|Fixing Period||Interest Rate*|
|1 year||5.50% p.a.|
|2 to 3 years||6.50% p.a.|
|4 to 5 years||6.88% p.a.|
|6 to 10 years||8.50% p.a.|
|11 to 15 years||11.00% p.a.|
|16 to 20 years||11.50% p.a.|
What’s also important to notice, longer loans, such as you are typically used to in the USA, cost a LOT more than short-term loans. Of course, for many of you reading this, since my average readers are often in their 50’s and 60’s, these much higher rates for long-term loans don’t matter so much, because you aren’t going to get one anyway.
But I Have Good Credit and I’m Willing To Pay, Why Wouldn’t I Be Approved For a 20 Year Mortgage?
Good question. Simple answer:
You’re too damn old!
No Philippine bank which I am aware of will approve a home loan which runs past the borrower’s 60th birthday. Period (same goes for car loans, etc.).
Unlike the USA where age discrimination is pretty much forbidden (or at least has to be elaborately disguised), age discrimination in the Philippines is very openly displayed in many ways. At age 60 a person is deemed to be stripped of all earning power and relegated to the ranks of the retired and infirm.
Don’t write me and tell me how unfair this is, if you chose to live here you are going to have to accept that the Philippines is NOT a “paradise” and age discrimination is just one of the reasons it fails to attain “Paradisal Standards”, IMO.
But Dave, You Have a Home Loan and You’re Over 60? How Did That Happen, a Fixer?
No, no, now fixer was involved. The loophole which allowed me to get my last two (over age 60) loans is the fact the loans were made jointly with my dear wife, who is not yet age 60. Under Philippine Family Law, her income is my income and my income is her income, so no problem in qualifying.
But for a single person or one whose spouse is close to 60? Not going to happen.
If You Do Get A Home Loan, 80% Is The Max!
This is another area where things are vastly different in the Philippines from the USA. At the most any loan is going to be for a maximum of 80% of the home’s assessed value. So if you want to buy a P5,000,000 home about $100,000 USD at today’s rate, you’re going to have to have at least P1,000,000 in cash (plus probably P100,000 fees for appraisals, loan processing, title search, contract preparation and such) before the bank will turn over P4,000,000 to the seller to complete the purchase.
There are no “zero down” VA mortgages and other low down payment programs here.
How About a Bank Loan To Rebuild/Modernize and Existing Home?
This is exactly what my wife and I did after our little basic 3 bed, one bath bungalow was paid off.
We selected an architect/builder who had already done several expansion/refurb projects right here on our own street. Thus we were familiar with her work and liked the finished products.
She prepared formal plans and a proposal contract quoting a price of approximately P2,800,000 to add a second story, new American style kitchen, covered car port/garage, outside living area, roof deck over the garage, steel truss framed long-span steel roof, modern windows and screens, new water tank, etc.
My wife and I asked the architect to add about P560,000 to the basic estimate for items we felt we could change or leave off after work started., making the final contract cost come out to about 3,340,000.
So the bank then evaluated the plans and contract, sent another appraiser to check the property and neighborhood and then approved the loan for (drum roll please), P2,560,00 which is, you guessed it, about 80% of the final price sent forward for approval.
Trust me you’re going to get about 80% of what you ask for, period.
So when the loan approval came through my wife and I deposited about P500,000 of our own money into the builder’s bank account and work commended. The bank promised to pay in three “tranches” (it’s a word originally from the French loosely translated to a piece of pie or cake, in the business would here it means a portion of something, especially money.
The tranches were to be released at 3 points during the construction (often called “3 goes” here in the Philippines). 20% at 10% completion of the work, then 40% more at the 45% complete point and the remaining 40% when the work was 90% complete.
Who determines those completion points?
Well the bank gave me a detailed checklist of milestones in the project that defined the percentage completion points.
The contractor and foreman and I worked together to get things finished to match up to those checkpoints and then we called the bank at each milestone and they sent an inspector to verify, take pictures of the progress and determine if we had met the goals.
Money was released (direct to my bank account) upon each satisfactory inspection report. In turn, I transferred money (free using my online banking) to the contractor’s bank account for each monthly bill she sent me. At the end of the project I withheld 10% of the total bill for several months until all last-minute “punch list” completion items had been accomplished and the house had been though a couple of rain storms to make sure the rood was sound.
I then made the final payment and we’ve been pretty happy ever since.
Sounds complicated (and in a way I suppose it was) but it’s all written out and documented, and my builder was experienced in working with the bank, so in reality it all went very smoothly.
Last But Hardly Least — The Payments.
This is where the Internet and online banking really make life easier here. Our monthly mortgage payment is due the 27th of every month. I just need to make sure there is enough money in that account, and the monthly payment gets automatically withdrawn like clockwork. Easy-peasey, no standing in line, carrying large sums of cash around or any of the other hassles of manual, stand in line bill paying.
Would I Do It Again?
You bet, interest rates and all. We love our new/old house. So what else can I tell you about the In’s and Out’s of Home Loans in the Philippines?