Own a Home Through a Loan

A house could be the biggest investment middle class families will make. It is thrilling to live in your dream home, but the cost of owning one could be so high that you will just opt for a decent home that fits your budget. Buying a home is a major decision because it could mean applying for a home loan to afford it. Most Filipinos are able to own a house through housing loans offered by banks and other financial institutions.

Two Types of Home Loans

There are mainly two types of home loans in the Philippines. These are the conventional loan and the flexible loan, commonly known as flexi-loan.

Conventional loans require borrowers to pay fixed monthly payments for a specific period. Loan period can be up to 20 years, with almost 80% of the home amount loanable. This scheme allows borrowers to easily manage finances because payments are predictable.

Flexi-loans on the other hand are linked to a bank account. Borrowers can choose to reduce their loan’s interest rate each time they deposit cash. Excess payments can be withdrawn without the need to notify the bank. Borrowers can also choose to start repaying principal anytime they want.

Interest Rates

Interest rates for home loans in the Philippines are influenced by the Central Bank’s (Bangko Sentral ng Pilipinas) rates. Currently, base lending rate is at 6%, meaning, your interest will be at 3.5% on a BLR-2.5percentage loan.

It is important to note, however, that interest rates for home loans vary, and they are subject to taxes and other charges. If you are thinking of applying for a home loan, expect annual re-pricing to adjust increase in interest, unless it is locked. Banks also differ in the interest rates they offer.

A 2-percent penalty is charged on the home loan by some banks if you repay your debt before maturity. This still varies since most Philippine banks have yearly repricing schemes. Borrowers are given the option to lock interest rates for up to ten years. Monthly amortization can thus be easily predicted in this case.

Am I Capable of a Home Loan?

Basically, to know if you can qualify for a home loan, you have to prove your financial capability to pay for it. Banks and other institutions will require you to submit documents that determine your eligibility to loan. The first thing they will look into is your income or salary bracket to know how much you earn on a regular basis. Apparently, the higher you earn, the higher your chances of being granted a home loan.

Lenders will also check your credit history. In other countries, borrowers are given a credit score. Records will show how you keep up with your debts. Even if you have several loans from other institutions but you never miss payments, and you have a steady income flow, you still have a good chance to qualify for housing loan, or in foreign countries, get a passing credit score.

In the Philippines you can use the DSR (Debt Service Ratio) formula, which is equal to your monthly debt obligations divided by your monthly take home pay. BSP accepts DSR of 50%. Additionally, your bank savings can be linked to your home loan and give you a greater chance to get a loan you desire.

Now that you have an idea on how it’s like to get a home loan in the Philippines and you think you are ready to apply for it, the next challenge would be where to get the best one? Let Loansolutions.ph help you. They will match you with a lender that best fits your needs and preferences.

Disclaimer: This is a sponsored post.

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