The Pag-IBIG Fund stands for Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya at Gobyerno. It is a government agency that seeks to provide affordable home financing for Filipinos.
For most Filipinos, this PAG-IBIG Housing Program is the most affordable option. It has 5, 10, 15, 20, 25 and up to 30 years of financing terms. Last July 2009, Pag- IBIG has become mandatory to all employees covered under SSS, GSIS and even Overseas Filipino Workers (OFW). To avail of Pag-IBIG housing program, you have to be a member with at least 24 months of contribution, not more than 65 years old at the time of application provided you are no more than 70 years old at the time of loan maturity and is qualified with income requirements based on the loanable amount. The housing developer makes the background and credit check to ensure their clients are qualified. For more information please check the Pag-IBIG website.
It’s amazing this developer required 10% Down Payment (DP), usually some developers require 20% DP before you can apply the financing through PAG-IBIG. Now, it’s confirmed that housing loan with this developer at 90% to 95% of the total price, can be approved by Pag-IBIG, and even banks actually, cool, right? So in this case, we only needed to pay a DP of 5% to 10%, that is around Php. 45,000 to Php. 90,000, so that the developer will start to construct the house.
What’s the big deal with 95% approvable loanable amount? You only need to cash out a lower amount to avail of the program. More important is, the 90% to 95% loanable amount means the Developer’s Housing package has a high appraisal value. For a client to be allowed such high loanable percentage through a developer, it can mean the developer is credible and that the Banks and Pag-IBIG have confidence on the developer.
Yes, it’s a good deal, but, what did we do to save around Php. 448,200 on the loan? Check it out and compare.
Table 1 shows a Php. 124,560 savings if I was going to avail of the 10% DP and a 90% loanable amount.
Okay, I can save Php. 124,560 within 30 years if could pay the 10% DP of Php. 90,000. Actually that saving for 30 years of payment is very small amount, considering I could use the Php. 45,000 to other priority expenses.
Using Table 2, the 90% Loanable Amount that is Php. 810,000 has 8.5% interest rate. Since, nothing is ever stable nowadays, especially on income and expenses, I want to make the monthly amortization as low as possible and at the same time, save on this housing loan.
For me, the 8.5% interest rate is very high for a 30-year loan. Can’t do much with the number of years(30 years term) because that’s what I’m capable of. But I realized I can do a way with the 8.5% interest rate. How? I opted for the 7% interest rate. Instead of paying the standard 10% DP (90,000), I need to pay more for the DP in order that the loanable amount will become Php. 749,000. This would then be below 750,000 loanable and would qualify me for a 7% interest.
The developer will be more than happy if the clients could make more down payment as possible, also it will make your housing loan more eligible for approval. However, In Pag-IBIG Financing we need to comply with their Net Disposable Income requirement, how to compute? See table 4.
In my preferred loanable amount of Php. 749,000 I can save as much as Php. 448,200 on a 30-year loan. I am also Real Estate Practitioner, I know what’s best for my investment. I also recommend this strategy to my clients, usually to those who have a lower monthly income. Though you need to cash out a bigger Down Payment, consider how much you can save in the long run.
At least, I can sleep well with a Php. 4,983 monthly amortization. Clients could also make advance or balloon payment during the loan though I need to research more on that.
Maybe, after 5 years, that Php 4,983 per month will become more affordable as salary increases and considering that the value of land appreciates. For me, it’s a good buy and the best option.
Hope I was able to help by sharing what I know. Veteran practitioners know this and I’m open for their clarification, comments and feedback. Anyway, it’s based on my personal knowledge and experiences as a Real Estate Practitioner; I do not represent Pag-IBIG Fund or developers for this blog, for your concerns please check their website.
Note: The Interest Rates or Factor Rates and Format of Computation above may no longer applicable, but the essence of paying more than the required Down Payment is always a right strategy to lessen Monthly Amortization and makes loan approval faster.
Click here for new update: How to compute Pag-IBIG Housing at Circular No. 310
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