"I am grateful for the lawn that needs mowing, windows that need cleaning, and floors that need waxing because it means I have a home."
- Author Unknown -
Knowing how to best finance your real estate purchase is a matter of knowing which payment options are available and being honest with your capacity to pay. This article discusses five ways of financing a real estate property purchased from a developer.
The nature of this payment scheme varies from one developer to another. In general, it means you have to pay the Total Purchase Price of the property in a given period of time (usually 30 days from the date of reservation). The good thing about spot cash purchase from a real estate developer is you enjoy a large amount of discount. Some companies offer up to 20% discount on Spot Cash Purchase. But only a few buyers will choose this payment scheme. Those who do are usually the ones who are disciplined in handling their money and will not go broke after spending as a big amount.
This is another term for Good-As-Cash Payment where the total contract price of the real estate property is spread equally each month for a certain period, say 2 years. If you see something like "No Down payment, No Interest, Payable in xxx Months", that is a Deferred Cash Payment. This payment scheme is attractive to those who are allergic to Interest rates and are scared of paying the burden of a long-term debt. And they have good reasons for thinking that way.
This means you pay directly to the company (usually the developer) where you purchased the real estate. In Davao, the usual practice is to divide the total contract price into two: a) 20% Down payment; and, b) 80% Loanable Amount. You can either pay the 20% down payment in monthly installments or in spot cash (also called spot down payment) where you get a certain discount. The balance of 80% is amortized and can be paid monthly for a given period of time. Your monthly amortization covers the payment for the principal amount and the interest incurred. The going interest rate in Davao for In-House Financing is in the range of 17% to 22% per annum.
Note: Payment for your monthly amortization always follows the full payment of your down payment. If, for example, you are to pay the 20% Down Payment in 12 months, your monthly amortization for the 80% balance will start on the thirteenth (13th) month
This is similar in concept to In-House Financing, but here third party: A Bank.
In simple terms, it means that after paying the required downpayment, you are going to secure a loan from the bank to pay for the remaining balance. The bank pays the developer, and you pay to the bank. In practise, you agree to give the title of the property to the bank as collateral to the loan so that in case of default payment, the bank can go after your property and take possession over it. All of this is put into a Mortgage Agreement binding you and the bank that financed your property.
Members who have made at least 24 monthly contributions to the Home Development Mutual Fund (or Pag-IBIG) can enjoy lower interest rates and longer payment terms (up to 25 years!) by availing of a Housing Loan from this government institution. The idea of Pag-IBIG Financing works similar to that of Bank Financing or In-House Financing. The main difference is that you have to be an active Pag-IBIG Fund member to avail of this Financing Option.
For more information on how to avail of a Housing Loan, you may want to contact the following banks and financial institutions in the Philippines:
Bank of the Philippine Islands
Main Office : (02) 754-6468, 754-6341
In Davao: (082) 235-3558 to 59, 235-3560 to 66
Banco de Oro
BDO Home Loan Hotline : (02) 688-1220, 688-1221, 688-1240