What is Down Payment in Buying Properties?

Payment of Down Payment or DP is another stage in buying properties. This is paid right after the reservation fee. It is an important stage for property buyers because it's the hardest to pay (except for extended down payment promo). As in terms of monthly payments, its almost twice the monthly amortization. This, then, becomes a test stage for client's financial capability before paying the monthly amortization.

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On the other hand, in bank financing, the bigger the down payment means a lesser appraisal value over the price of the property compared with the lower down payment.

What is Down payment?
Down Payment is the payment required by developers before applying a housing loan to financing companies such as bank or Pag-IBIG financing.

What are the Options or Set-up on Down Payment?
In buying properties in developer, the most common setup of Down Payment are:

* 10% Down payment and 90% Loanable Amount
* 20% Down Payment and 80% Loanable Amount
* 30% Down payment and 70% Loanable Amount 

Each setup has its own advantages and disadvantage for buyers, let say the setup is 30% DP and 70% LA, this will give you a bigger monthly DP on the other hand will give you a lower monthly amortization and better chance of approval at banks.

An Option? Let say, the developer's down payment set-up is 20% DP and 80% LA, the buyers still may add an additional down payment like: additional 10% or more to make clients' loanable amount lesser as possible. The developer will be happier of the additional because it would result to faster approval by banks and a lower monthly amortization for clients. But, this is only allowed to be paid within the standard down payment terms like 12 months or 24 months or if it is spot cash DP, depending on the developer.

How Down Payment can be paid?
Down Payment can be paid in cash, deposits, checks or wire transfers depending on how many months are to be paid and depending on the developers requirement.

Payment in post dated checks is required for more than 6 months of Down Payment as it is more convenient for clients and for faster processing of all documents.

Is Down Payment refundable?
Down payment may or may not be allowed for refund depending on the developer, number of payments made, financing scheme and of course in accordance with the Realty Buyers Installment Act.

Can I cancel Down Payment?
Like in reservation fee, clients could cancel their down payment, but formal cancellation is recommended to pull out confidential documents.

Can the Down Payment paid be transferred with other projects?
Down payment may or may not be allowed for transfer to other projects, depending on the developers' policy. Transfers and downgrade of property may have an additional charged depending on the developer.

What are the Documents need to submit during Down Payment?
From Reservation Fee, it's recommended to submit all the Required Documents on the first payment of down payment along with the post dated checks. In a big projects, developers are processing all the necessary documents by batch, so buyers are required to complete the documents before/ during the very first payment is scheduled.

During the down payment is the signing of Contract to Sell and pre-application of loans to bank financing for stretched down payment.

What's next after Down Payment?
After the down payment, housing loan approval in banks is next or should be approved as soon as possible. Clients may refer to the official computation for the submission date of bank guaranty to developer - a proof of loan approval by banks.


Now, you are done paying the down payment and approved by bank on your housing loan, the next is the construction of house and then turnover.

Good luck.



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About the Author

Jerome Morada

Realtor & Webmaster

Good day! I'm Jerome, your friendly Real Estate Broker with PRC License 0012399 and HLURB registration. Just sharing simple tips, please share if you find it useful! Thanks!

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