A lot of us dream about getting that quality and affordable house and lot that we’re all working so hard for. We work tirelessly and patiently wait for the opportunity to earn more, to have that badly needed salary increase or promotion just to have your dream house come to life. Fortunately, there are a number of ways to make the purchase of your new home more achievable and affordable – all thanks to housing loans. Here at Bria Homes, we’ve got you covered! Learn about your options by understanding bank financing vs Pag-IBIG housing loan and hopefully, we’ll give you the clarity you need for your dilemma in choosing what housing loan suits you best.
Bank financing vs Pag-IBIG – what’s the difference?
To give you a brief introduction to your housing loan options, let us first define and differentiate the two. First, getting a housing loan through bank financing would simply mean that you are looking at what commercial banks such as BDO, Maybank, UnionBank, Security Bank, RCBC, Metrobank, and other banks of your liking can offer. Meanwhile, Pag-IBIG is government-owned and is controlled by the Housing and Urban Development Coordinating Council (HUDCC). Just like commercial banks offering housing loans, the HUDCC also strives to do the same by providing families with affordable housing and financing, whether they are employed locally, self-employed, or working abroad.
Simply put, in your bank financing vs Pag-IBIG dilemma, the first one is offered by a private entity, and Pag-IBIG on the other hand is being offered by a public (government) entity. Nonetheless, both offer a compelling housing loan to help you fund your dream home. So, to give you a much clearer look at what sets the other apart from each other and weigh in what’s best for your current financial situation, let’s break down their differences.
Choosing the best option for you: Bank financing vs Pag-IBIG Comparison
1. Membership, contributions, and loan qualifications
The first step to identify the difference between your two options is to look at their differing requirements for membership, contributions, and loan qualifications. The purpose of you knowing this is that you would be able to assess your financial capability and see where your current situation best fits.
While there are no membership, contributions, or the need to have savings account for you to qualify for a loan, there is a stringent set of qualifications you have to meet first for you to successfully get that housing loan from the bank. It has been known to many that banks undertake thorough background investigations and will ask you to submit a variety of supporting papers. However, don’t let this scare you! Banks nowadays have competitive housing loan offers in which some bank housing loan borrowers get to enjoy lower interest rates – which we’ll get to discuss in a while.
To give you a glimpse of the things you need when applying for bank financing, the following are the general qualifications you need to keep in mind:
- The borrower must be 21 years old and no more than 70 years old at loan maturity;
- A Filipino citizen or a foreign national in possession of a valid international document;
- Must have a stable source of income – can be self-employed or salaried; and
- Meets the minimum gross household income required and other requirements needed in your private bank of choosing
You can also read a more detailed guide to bank financing here: Home Loan: A comprehensive guide to bank housing loans in the Philippines.
To be able to avail of a Pag-IBIG housing loan, the following qualifications must be met:
- The borrower must be a member;
- Must make 24 monthly contributions;
- Not more than 65 years old at the application date of your loan and no more than 70 at the end of the loan term;
- Has no outstanding multi-purpose loans;
- Has no other Pag-IBIG housing loans that were withdrawn, foreclosed, or brought back
Do note that to enjoy the benefits which the Pag-IBIG Fund has to offer, particularly their housing loan, becoming a member is as vital as your monthly contributions that vary depending on the type of loan you wish to avail of. Usually, employees here in the country have their monthly contributions automatically deducted from their monthly salaries by their employers.
Should you wish to have a walkthrough of the process of applying for a Pag-IBIG housing loan, read this article: Home Buying 101: A Step-by-Step Guide to Applying for A Pag Ibig Housing Loan.
2. Loan purposes
When it comes to your bank financing vs Pag-IBIG dilemma, always take into account and be ready to disclose the purpose of your home loan to your chosen housing loan option. There is a noticeable difference between the two and the following is a list that will give you an idea of what separates one from the other:
It is worth noting that banks honor a various home loan purposes. To give you an idea, usually the set of loan purposes in which private banks offer financing assistance to are the following:
- Purchase of house and lot, condominium unit;
- Construction of house;
- Home equity
- House renovation and the likes
If you wish to know more about the top banks that can help you finance your dream home and you are willing to learn about their requirements and home loan options, you can visit this article: Top Bank Housing Loan in the Philippines.
When it comes to Pag-IBIG, securing a housing loan underscores a slight difference to the loan purposes that private banks allow to. Nonetheless, as stated in Pag-IBIG Fund’s website, here are the loan purposes that they allow:
- Purchase of residential lot or adjoining residential lots (max 1,000 sq.m.)
- Purchase of residential house & lot, townhouse or condominium unit (old or brand new, property mortgaged w/ the Fund, adjoining houses/units) inclusive of a parking slot
- Construction of house
- Improvement of house
- Combined Loan Purposes
While you’re still deciding on what to choose or you’re still undecided what to declare on your loan purpose, make sure that whatever real estate property that you wish to purchase using these housing loan options are of quality and affordable. Paperworks that entail processes like these can already be an overwhelming feeling for everyone but looking and searching for that dream house should be hassle-free. At Bria Homes, all that you need in a home is here. Scan through our website to see affordable real estate property here.
3. Loan interest rates, loanable amount
Between bank financing and Pag-IBIG housing loan, their varying loan interest rates and borrowing limits are another factors to look at when comparing the two.
Loan interest rates in private banks vary from one another. Private banks nowadays offer a very competitive housing loan offers to cater to every possible need of their clients or borrowers. However, loan interest rate usually range from 5.25% – 9.75% per annum with a 1-5 years of fix pricing period. In terms of the minimum and maximum amount that you can borrow from the private bank of your choosing, it is worth considering that amounts are also dependent on the loan type or purpose. Nonetheless, the usual minimum loan amount ranges from P300,000 – 1 million. Maximum loan amount in private banks, on the other hand, can cover 80 – 90% of the appraised property value. You can read more about the list of banks with housing loans here.
Members of the Pag-IBIG Fund can loan as much as P6,000,000 but only if they do meet the Pag-IBIG housing loan qualifications. Additionally, Pag-IBIG emphasizes that the amount you can borrow will be determined by the lowest of your actual need, desired loan amount, capacity to pay, and loan-to-appraised value ratio. The following gives you a picture of the interest rates of the Pag-IBIG housing loan:
|Fixed pricing period
|Interest rate per annum
|1 Year Fixing 3 Year Fixing 5 Year Fixing 10 Year Fixing 15 Year Fixing 20 Year Fixing 25 Year Fixing 30 Year Fixing
|5.750% 6.250% 6.500% 7.250% 7.875% 8.500% 9.125% 9.875%
Since Pag-IBIG is a government entity and it aims to make its services within the reach of every Filipino family, it takes into consideration Filipinos who are earning minimum wage as they also provide the Affordable Housing Loan which offers socialized house loans up to P580,000 with a subsidized rate of 3% per year.
4. Processing time, repayment process
Finally, we are down to the last basic consideration when it comes to bank financing vs Pag-IBIG housing loan programs. I believe some of the questions that you have in mind while reading this are: how long do I have to wait for the bank or Pag-IBIG to process my housing loan? How long do I have to pay for such loans? Well, the answers you’re looking are all here.
Do note that the process of repaying the lender for the amount you borrowed, including the principal and interest rate specified in the contract, is known as repayment. When you opt for bank financing, private banks give loan lengths of up to 20 to 25 years but this some of the bank’s repayment process still depends on the loan’s purpose. Once you have weighed in the pros and cons of bank financing and you have complied with all the requirements for bank housing loan, the processing period for your housing loan ranges from 5 to 15 working days.
As explained in the Pag-IBIG’s website, the maximum repayment time for the loan is 30 years, but it should not surpass the difference between the principle borrower’s age at 70 and his or her current age. Talking about it processing period, after submitting all the requirements and having met all qualifications, within 17 days, your loan will be processed.
Bank financing vs Pag-IBIG: A quick wrap up
It is undeniable that both options are truly convincing but can be overwhelming especially for first-time borrowers. When it comes to building and owning your ultimate dream house, we know that you want it to be smooth-sailing and you have all of your housing needs covered. That is why it is important to remember and assess your financial capacities before venturing on these two housing options.
If you’re leaning towards borrowing from Pag-IBIG, put great attention to your monthly contributions and make sure that the purpose of your loan fits their qualifications for you to enjoy a predictable fixed pricing rate that goes up to 30 years. Not to mention that Pag-IBIG is more inclusive of the financial capacities of minimum wage earners as it takes into account their housing loan needs with its Affordable Housing Program.
On the other hand, if you wish to enjoy competitive interest rates as you might find a much lower rate than the one’s that Pag-IBIG can offer, you may opt for bank financing. However, you must first have a keen understanding of how the housing market works and be fully aware of all the terms and conditions that your bank of choice puts you in to avoid unwanted penalties.
All in all, whatever you choose, it is highly important to be knowledgeable about your financial priorities and capabilities. This is the most vital step in deciding what housing loan is best for you dream house. Often times, first-time borrowers struggle to keep up with the repayment requirements of their chosen housing loan and this is something you should be mindful of. Additionally, you should also be mindful about the quality of real estate you are investing to because you deserve to have that affordable, holistic, and pleasant home and Bria Homes gives its homeowners just that.
Don’t wait too long searching for houses or condominuims that only offer you less than you deserve. Today, more and more Filipinos, especially young ones, are starting to invest in a quality but affordable house and lot at Bria Homes as way of paying it forward for their future selves and their families. Luckily, Bria Homes allows both housing loan options to help its future homeowners fund their dream house. Get in touch with our team to look at what housing financing options is perfect for you and your future home.
Written by Jacqueline Buenaventura