Pag-IBIG Financing Admin

Equity, Appraisal And Loan Amount – What You Should Know About These

Allow me to start off this article by quoting the question recently posted by a visitor of Pag-IBIG Financing Website:

“My husband and I are planning to buy a condo or a townhouse that’s worth P1.5M. We understand that the loanable amount is 3M. But the loan pag ibig can give is based on the monthly income of both husband and wife, is that right? The usual problem that we have is that how to pay for equity…. My question is, can we loan a full amount of 1.5M to Pag ibig so that we don’t have to pay for equity?”

That question is very important because it raises a lot of topics every Pag-IBIG Member should be aware of. Let’s tackle the following as it relates to the article:

Equity
Appraisal
Maximum Loan Amount

Your knowledge on these topics may save you from facing a possible foreclosure – something that you don’t want to happen with your property.

Now, before discussing the above terms, a general introduction on home loan is worth mentioning.

In general, when you apply for a real estate loan, you will be asked to pay for a down payment; say 20% of the appraised value of the property, that’s the standard down payment. The loan amount will actually be based on the appraised amount less the down payment.

To illustrate, assume for a moment that the appraised value is P 1,000,000 and you are asked for a 20% down payment. That means you are to personally raise P 200,000 before you are granted the P 800,000 loan. And if you are qualified for the P 800,000 loan, your monthly amortizations will be used to cover the interest and principal payment against the borrowed amount of P 800,000.

(See also: Mortgage Loan Fundamentals)

Now, back on track…

Equity

pag-ibig housing loan This is another word for Down Payment, a term mostly used by Banks; Pag-IBIG uses the term equity to mean the same thing.

The equity refers to your stake (or interest) on the property. This concept is very important because, in the eyes of the money lender (Bank or Pag-IBIG Fund), the more equity you have on the property, the more serious you are in paying the loan.

If you initially put down an equity of 20% of the appraised value the property, it means that you own 20% of the property; the other 80% is owned by the money lender. As you pay off your loan, your equity also grows over time.

Appraisal

Pag-IBIG Fund, or any lending institution for that matter, can’t just loan you any amount. They base it, first and foremost, on appraised value of the property and then on your capacity to pay.

Appraisal is simply the process if estimating the value of the property. Take note of the word “estimate,” … however advanced the tools being employed, appraisal is really just an estimate. That’s why it is not uncommon to see that the selling price of the property is very different from the appraised value of the property by a big factor. It would appear that the Seller has a different appraised value of the property he is selling compared to the Lender.

If you are getting a loan, its always the Lender’s Appraisal that determines the price and therefore your loan amount. After all, the flow of money is from them to you.

In the example above, just because the selling price of the condo unit is P 1.5M doesn’t mean that Pag-IBIG will also base it on the P 1.5M. This may be the case for Pag-IBIG accredited projects with their partner developers; otherwise, Pag-IBIG will conduct an appraisal on the property.

Maximum Loan Amount

Okay, you should know by now that Pag-IBIG Fund grants a maximum of P 3M only. That doesn’t mean you are also eligible for a 3-million loan. There are other factors that come into play.

Actually there are two maximum loan amounts that you must be aware of.

#1. Amount based on the appraised value minus your equity. If you are lucky, you will be granted with this amount.

#2 Amount based on your income, in other words, based on your capacity to pay. It goes to say that the bigger your income, the more advantageous on your part, because you are eligible to get a bigger loan amount also.

Don’t miss: Your Income, Contributions and Loan Entitlement.

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“Equity, Appraisal And Loan Amount – What You Should Know About These“ is written by Carlos Velasco.

More on Pag-IBIG Multi-Purpose Loan

by Pag-IBIG Financing Admin

This short article is intended to supplement the original article on Pag-IBIG Multi-Purpose Loan (MPL).

We will present the information in a Question-And-Answer Format so that it will be easier for you to find those topics that are relevant to your situation.

It is worth noting that a lot of the questions we received regarding the MPL Loan has already been addressed in the aforementioned article.

In many of our articles, there are instances when we don’t answer some questions. Our apologies. But that’s because the answer has already been very obvious in the article — if only the reader spent a few more minutes reading the entire article and understanding it thoroughly.

So maybe if you want to ask something that’s related to Pag-IBIG Multi-Purpose Loan, please consult that article first and make sure that you read it in its entirety.

(The New Philippine Peso Bills Design Series of 2010 is shown below. Source: The Bangko Sentral Ng Pilipinas.)

1. Who can avail of the Pag-IBIG Multi-Purpose Loan?

The Pag-IBIG Multi-Purpose Loan is open only to Pag-IBIG Fund Members who meet the following basic qualifications:

Active or currently contributing to the Fund at the time of loan application.
Has made at least of 24 months contributions.

2. What is the maximum loan amount I can get from MPL?

The maximum amount is 80% of the TAV.

Are you also interested in knowing the minimum amount?

That’s easy. The minimum is 60% of the TAV.

Note again that this is a recurring question which has been addressed in the previous article. In case you are wondering what on earth is TAV or you want to get a detailed answer to this question, please read the first article on Pag-IBIG Multi-Purpose Loan.

3. What is the interest rate and term of this loan type?

The MPL interest rate is only 10.75% per annum and the loan is payable in 24 months.

4. How do I get the loan proceeds?

Once the loan has been approved, you may get the loan proceeds from the office where you made the application or it will be mailed to you. The whole approved amount may be released through:

Check – Payable to the borrower’s name.
LandBank’s Payroll Credit System Validation
Philippine Domestic Dollar Transfer System

5. Can I avail of the MPL even if I still have an outstanding Housing Loan?

Considering that Pag-IBIG Housing loan is usually a long term one, that’s possible.

However, take note of the following:

The loan should not be more than 9 months in arrears.
The account is not yet cancelled.
The property is not yet foreclosed.

In case your housing loan is already over 9 months in arrears, you may still be allowed to avail of the Multi-Purpose Loan if the account has not yet been cancelled or foreclosed and the proceeds of the loan shall be used to cover the arrearages (missed payments).

6. Can I use the Multi-Purpose Loan for Home Improvement?

Yes. As a matter of fact, it is preferable to the usual Housing Loan for use in Home Improvement in the sense that there are less documents required from you. The regular Home Improvement Loan is quite complicated with lots of required technical documents like House Design, Floor Plan, Project Costing, etc.

The only other thing to consider when you want this option is that, you can’t expect to get a large amount for your loan. But for many Pag-IBIG members, that amount is already enough to cover the expenses on renovation and improvements of the house.

Actually, you can use the proceeds of the loan in various ways. It’s all up to you.

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More On Pag-IBIG Multi-Purpose Loan is written by Carlos Velasco.

Pag-IBIG Housing Loan Alternatives

by Pag-IBIG Financing Admin

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.

Citizenship, Land Ownership and Pag-IBIG Fund Membership

by Pag-IBIG Financing Admin

A good number of our website visitors came from Filipinos based overseas – both OFWs and immigrants. And occasionally, we also have dual-citizenship holders and former Filipinos who are certainly interested in the Pag-IBIG Fund Program. The messages and inquiries that we received from them are as varied as the different cultures they are currently in.

There is one particular question that struck our attention and we want to cover it hear simply because it many of our visitors can relate to this one and we want them to be informed about this once and for all.

The question came from R. Nunez and he said in part…

“I am a dual citizen but wish to retire early in the Philippines(Filipino/American passport holder).Can I be qualified to become a ‘Pagibig Fund’ member?”

And we replied with this:

“Please don’t make it complicated on your part. You can always use a Mortgage Loan from a Bank in your situation. That way, there is no more membership requirements and other complicated matters that go with it.”

“And yes, you are certainly allowed to own a piece of land under the Laws of the Philippines.”

(For the complete series of replies, refer to this link. )

Again, we are citing that particular inquiry because we want to elaborate further and add a few more important information for Dual Citizenship holders just like Mr Nunez and other former Filipinos as well.

Citizenship and Membership To The Pag-IBIG Fund

The right answer to Mr Nunez question is this: Yes, he is qualified to be a member of the Pag-IBIG Fund under the Pag-IBIG Overseas Program. As a matter of fact, The Pag-IBIG Fund stated that “Membership under the Pag-IBIG Overseas Program (POP) shall be open to all Overseas Filipino Workers (OFWs) with valid visas or employment contracts. Likewise, it shall be open to Filipino immigrants and to Filipinos naturalized in other countries.”

IMPORTANT UPDATE:
The Home Development Mutual Fund (or simply Pag-IBIG Fund) has changed the rule requiring OFW’s to become members of the Pag-IBIG Fund. In other words, the Pag-IBIG Overseas Program is only optional for the OFW’s, because they are now required to become regular members of the Pag-IBIG I.

For more information on the Pag-IBIG Overseas Program, please refer to the following links:

Citizenship and Land Ownership

dual passport -- Philippines and England It is a well known fact that land ownership in the Philippines is granted only to Filipino Citizens and Philippine Corporations with at least 60% interest by Filipinos.

Foreign Nationals are definitely not allowed to own. Most of them simply put the Land title in the name of a Filipino whom they can trust such as the spouse. Or it could be that they are on a long term lease-contract with the land owner.

As for the former Filipinos who are already naturalized in other countries, the Law of the Philippines still allows them to own a piece of land, but with a few limitations.

If this describes you, take note of the following restrictions.

Land must be used for residential or business purposes only.
Limitation on Residential land:
1. maximum of 1,000 sq meters of urban land
2. or one (1) hectare of rural land is allowed
Limitation of Land intended for business use:
1. maximum of 5,000 sq meters of urban land
2. or three (3) hectares of rural land
You can only get either urban land or rural land, but not both.
A maximum of two (2) lots not exceeding the maximum limit in total combined area is allowed. Lots must be located in different cities or municipalities.

As for the Dual Citizenship holders (one citizenship being a Filipino) the Law of the Philippines still allows you to own land in your name just like any Filipino National.

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Citizenship, Land Ownership and Pag-IBIG Fund Membership is written by Carlos Velasco.

How Your Income And Contributions Affect Your Housing Loan Entitlement

by Pag-IBIG Financing Admin

In case you are wondering how much loan amount you are entitled, this article intends to address that.

By now, you should already know that the maximum housing loan amount Pag-IBIG can possibly grant to a member is P 3,000,000 while the smallest amount is only P 100,000. And the corresponding interest rate is actually shown at the Right Panel of this website.

Basically, there are two very important factors that affect the loan amount you will be entitled to:

The amount of your contribution
Your Net Disposable Income

Naturally, if you want to avail of a bigger loan amount, you need to increase your contribution and demonstrate that your Net Income is also large enough to cover the monthly amortizations.

These things are easier to understand with the following Tables.

Loan Entitlement Based On Pag-IBIG Contribution

So looking at the table, if you need, for example, to get a loan amounting to P 2,000,000 your contribution should be P 950 / month. Now PhP 950 /month is easier for most Pag-IBIG Members. Quite frankly, there is no problem in that area.

Special Note to OFWs / POP Members: Since you are contributing in US Dollars, the table essentially means to need to contribute the US Dollar equivalent of that amount in Philippine Peso. As you know, there is a constant swinging of values between these two different currencies so there is also a corresponding adjustment.

Loan Entitlement Based On The Capacity To Pay

Take note of this part and this is very important.

According to the Pag-IBIG Fund Primer on Housing Loan, “A member’s loan entitlement shall be limited to an amount for which the monthly repayment on principal and interest shall not exceed 40% of the member’s net disposable income…”

In other words, the monthly amortization should be less than 40% of your net disposable income.

The following Table should guide you.

For example, if you are looking to get a PhP 1,000,000 loan and plan to pay it in 10 years (monthly amortization is P 12, 398.57 at 8.5% interest per annum), your net disposable income should be PhP 30,996.43 or higher (the higher the better).

So to avoid having problems paying for the property, that means you have to work backwards: Determine your net disposable income first, then buy a property based on the amount of loan that you can comfortably pay.

Let’s see if you really understand the Table shown above.

Question: You are planning to get a Pag-IBIG Housing Loan amounting to P 2,000,000 and pay it in 10 years. How much should your monthly income be?

Answer: Your monthly income should be P 67,467.50 or higher. And your monthly contribution should be P 950.

Additional Notes on Borrower’s Eligibility For Housing Loan

To be eligible for the housing loan, a member should:

Be a member for at least 24 months and has remitted at least 24 monthly contributions.
Be 65 years old or younger at the time of loan application.
Not be more than 70 years old at the maturity date of the loan.
Have no outstanding housing loan from Pag-IBIG.
Have no Multi-Purpose Loan in arrears at the time of housing loan application.
Have no Pag-IBIG Housing Loan that was foreclosed, cancelled, bough back or subjected to dacion en pago.

Related Articles To Check:

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This article on Income, Contributions and Loan Entitlement is written by Carlos Velasco.

5 Great Tips For The First Time Pag-IBIG Home Buyers

by Pag-IBIG Financing Admin

This article is intended for the first-time home buyer who wanted to buy a house using Pag-IBIG Financing.

Maybe you are still single and you already wanted to get a house before getting married. (Well, this was the route that I followed.) Or, maybe you are newly wed and you decided that you want to live separately from your parents. Believe me, there’s no substitute to the feeling that you are living on your own home.

A Pag-IBIG starter home — your first home — may not be the most impressive home in town. That’s okay. Forget about the Joneses. Like your puppy love, don’t ever think that it will become your dream home. Rather, treat it as a nest egg that allows you to slowly build your investment (hedge against inflation) while literally having a roof over your head.

Buying your first home through Pag-IBIG is so easy if you take note of the following tips offered here.

Tip #1: Work With Your Real Estate Professional
By real estate professional, in this context, I’m referring to the real estate broker or agent who is directly selling the house.

House From The Up Movie -- A Nice Starter Home You may think that getting the assistance of a real estate agent will make the property more expensive. Whoever told you that must be very ignorant of the whole process.

Here’s what you should know: The real estate professional can’t change the selling price of the property that is owned by the Developer. That is, they can’t markup the price nor can they offer a discount. The selling price and discounts are completely dictated by the Developer’s Marketing Team and the agent can never, ever change that price.

Using a real estate professional right from the start saves you from a lot of headaches associated with the home purchase. For one, the guy is a good source of information such as the following:

The project
The property
The financing schemes
Special promotions and discounts
The materials used,
The move-in process

And if you are using Pag-IBIG Financing, your real estate agent should be able to help you cut through the bureaucracy in the Office.

Tip #2 : Buy A New House

Avoid foreclosure properties or properties that are for assume. Most of these properties are inherently problematic. You don’t want to find yourself catching someone else’s problem, do you?

Many foreclosed properties are so cheap you are tempted to jump on the deal immediately. Not so fast. This may be one of those cases where cheap could actually turn out to be very expensive due to probable renovations. If renovations are needed, we can point you towards reputable contractors like Art Construction.

As much as possible, make sure you are the first owner. Of course, as time goes, newer homes will become harder to find. If that’s the case, make sure that the Land Title is clean.

Tip #3 : Buy From A Legitimate Real Estate Developer

Never, ever deal with a fly-by-night real estate developer. But the crooks have a way of putting on the mask in such a way that you can’t detect the devil’s intentions. Here’s where common sense becomes a useful tool at your disposal.

At the very least, a legitimate Real Estate Developer:

Has complete Business Permits and Licenses to operate in that line of business.
Issues an Official Receipt from the Bureau of Internal Revenue.

Some good points to keep in mind:

Check the track record of the Developer – especially its past projects.
Make sure they are accredited by the Pag-IBIG Fund. (only if you intend to use Pag-IBIG Loan)
Check the License To Sell and Development Permit – they should have both.

Tip #4 : Make Sure You Have Your Finances In Order

Here’s a handy checklist:

You are currently an active Pag-IBIG member with at least 24 months contributions
Your employment history is impressive
You have enough salary/income to cover the monthly amortization

Tip #5 : Save Enough For The Down Payment

The greatest hurdle most real estates buyer ever faced is coming up with the down payment. Many are surprised when they find they don’t have enough cash to cover the outright cash payment required of them.

The down payment, sometimes called equity, is usually 10% to 30% of the selling price. And almost always, it is to be paid one-time about one month after placing the Reservation Fee. So one of the first problems you should think about is the amount of cash you need to raise for the down payment.

Down Payment Tip: Ask your real estate agent if you can defer the payment of the down payment to, say, 12 months. This should be easier on your pocket.

“5 Great Tips For The First Time Pag-IBIG Home Buyers” is written by Carlos Velasco.