Walter Scott’s novel “Ivanhoe” contains the earliest written roots of the word “freelance.” It was used to describe lance-wielding mercenaries who would fight for sum of pay. As of today, the term “freelance” retains its original meaning. Today’s freelancers are paid for doing specific types of work rather than slaying their employer’s enemies. Freelancing is the act of doing paid work without necessarily being committed to a specific employer. It is a contract-based arrangement in which you provide your skills and expertise as a service to several clients. Depending on your load management, you can take on as much work as you want until such a time you afford buying a house in the Philippines.
Filipinos are wary, and are constantly looking for new ways to earn money through hardwork and dedication. With technological advancements, an increasing number of people are looking for ways to make money. With the passage of time, an increasing number of Filipinos have dabbled in digital freelancing. As of 2015, Upwork had approximately 1.4 million Filipino users enrolled. Furthermore, as of 2016, there were over 800,000 Filipino freelancers registered on Freelancer’s platform. When you consider the hundreds of Filipinos who work for other freelancing sites, it is clear that freelancing is a thriving industry in the Philippines.
The Philippines is brimming with world-class talent, but there are not enough outstanding opportunities in the country to fully employ or compensate them. While most of the workforce is overworked and underpaid, job seekers must be aggressive to secure decent jobs. While this is true it cannot be denied that there are ample of opportunities to earn extra income presented in freelancing. According to research, Filipino freelancers earn an average of Php39,000 ($780) per month, which is a significant sum for most. Sixty-six percent of freelancers earn less than Php30,000 ($600) per month, while twenty-four percent earn between Php50,000 ($1000) and Php100,000 ($2000+). When the average monthly income is multiplied by 32 hours per week, the average Filipino freelancer earns $6.10 per hour.
It is recommended that while freelancing, one is available for a regular income job where an employer is present. With a traditional employee setup, you can anticipate receiving your paycheck on specific dates throughout the month. Freelancers do not have that kind of guarantee because they are only paid if they have clients. There may be times when finding clients is difficult, which can be especially difficult if you have a family that relies on your income. Also, it is challenging to buy a house in the Philippines, as freelancers are demanded the usual proof of income that employees have, which is why many banks and developers are still wary of approving home loan applications from them. These organizations want assurances that freelancers can meet their financial obligations regardless of their employment status.
Now, in this article, we will show you how to buy a house as a freelancer.
- Pay your Taxes
Buying a house in the Philippines, requires the individual to provide legal documents that a person doing freelance is actually making money. One way of proving you have a consistent inflow of money is by paying your taxes regularly. Individuals who receive personal income from their profession with or without a license from a ruling board are classified as freelancers by the Bureau of Internal Revenue (BIR). While there is no established category for freelance work, individuals who earn a living from their business or profession are:
- Those who practice a profession and are registered with the Professional Regulation Commission (PRC), for example, doctors, lawyers, dentists, public accountants, and so on.
- Those who pursue art for a living (including freelance and home-based work), such as writers, athletes, and so on.
In addition, you will also need to obtain annual community tax certificates and business permits from the municipality or city of location. Please keep in mind that, in most cases, a business permit is required for legality, and your business or undertaking will be illegal if you do not have one regarded as illegal which may cost you money and an ounce of effort to obtain one. You can either do it yourself or hire someone to do it for you. Some service providers are actively seeking one because they are more familiar with the process and requirements.
- Pay Government Contributions
The amount of tax and government contributions you must pay is determined by your earnings or the type of membership you hold. Freelancers are classified as self-employed members by:
- SSS- The smallest monthly contribution is Php 240, while the largest is Php 2,400. The greater your monthly contribution, the greater your MSC or monthly salary credit.
- PhilHealth- As of 2020, the PhilHealth rate is 3% of the basic monthly salary, and it will increase by 0.5% each year until the 5% limit is reached.
- Pag-IBIG- Is calculated based on your monthly income. If you only earn Php 1,000 to Php 1,500 per month, your contribution will be 1% of your monthly earnings. If it is more than Php 1,500, it will be 2%. Please keep in mind that the maximum income limit for self-employed Pag-IBIG members is Php 5,000. This means that even if you earn more, you will still contribute only Php 100.
Also, The Pag-IBIG Fund is one of the most popular options for housing loans in buying a house the Philippines. If you want to buy a home using this method, you must first become a member and contribute at least two years’ worth of contributions to qualify for the loans.
- Have an employed Co-Maker
A co-maker is defined as someone who, by contract, promises to repay another person’s loan in the event of default. He or she is frequently used when applying for a collateral loan and when the borrower does not meet certain credit criteria, such as age or insufficient proof of income. With a co-maker, you can increase the loan amount and increase your chances of approval for buying a house in the Philippines, especially if the co-maker has good credit and a sufficient income. Assume you missed a payment and your co-maker was forced to pay the loan. Furthermore, the co-maker may seek reimbursement from the principal borrower for all loan payments made.
The key is to select a co-maker with a steady source of income and a good credit history. Unfortunately, not everyone is willing to collaborate. In most cases, a spouse is considered the loan’s co-creator. Unmarried applicants may be able to qualify with the help of a parent or sibling, depending on their living circumstances and the lender’s approval. Even if someone can help you pay for your loan, make sure you do everything you can to meet your obligations and do not shift the burden to someone else.
- Increase Credit Score
Banks and other financial institutions consider a number of factors when deciding whether or not to lend money to someone. Banks use a borrower’s credit report and credit score, in addition to the financial information submitted via a loan or credit card application (proof of income), to assess his or her ability to repay a debt. Banks lend borrowers other people’s money. As a result, they’re responsible. People should understand that banks cannot simply lend to anyone.
As a freelancer in the Philippines, keeping track of your credit score is critical to managing your personal finances and financing your dream home. Having an excellent credit score will benefit you as a freelancer. Pay your insurance and credit card bills on time and in full. If you don’t already have a credit card, you can easily qualify for one and use it responsibly to build a good credit history. It’s critical to understand what it is, how it works, and why you should test yours.
- Apply for a Pre-approval
You will know how much money you can borrow if you have your home loan pre-approved. Because you are a freelancer with no guaranteed steady inflow of cash. As a result, you can concentrate on looking at properties within your price range. You might have to say goodbye to that penthouse unit you have had your eye on, but it also means that your home-buying process will be much easier now that your options have been narrowed down. You can plan your finances accordingly if you have a pre-approved home loan. Because you know how much loan you will be eligible for, you can predict whether the amount will be sufficient or if you will need to contribute more from your savings to get the property you want.
- Prepare Documents
Banks and other financial institutions require several income documents to ensure that their borrowers will repay what they owe. Even if you are not employed by a company and do not have payslips as proof of income, you can submit other documents to demonstrate your ability to pay when buying a house in the Philippines.
It is important to examine all of your sources of income and see if you can obtain documentation as proof. Some lenders consider the following documents for application of a housing loan in the Philippines:
- Copy of government-issued photo ID or driver’s license
- Bank statements from the previous six months
- Latest Income Tax Return
- Proof of asset ownership in your name – If you own a car, a piece of real estate, or any other valuable asset, You should show the lender documents proving you own certain assets.
- Client employment certificate – You can ask your clients to provide you with a certification that states your employment, gross income, and the length of time you’ve been providing services to them.
- Upwork Certificate of Earnings – If you get your freelance projects from Upwork, you can request a Certificate of Earnings report  from the online job search platform. This document details a freelancer’s earnings over the previous one to twelve months. Under certain conditions, lenders such as the Pag-IBIG Fund accept the Certificate of Earnings for applications for freelancer loans.
Moreover, other documents that may be used to confirm your income include tax preparer verification of employment, a business license, or letters from clients confirming past work. Specific requirements will vary, so do not be afraid to contact your bank before beginning the application process to determine what else you may require.
That is all of the basic information you should know on how to buy a house as a freelancer. With the world becoming more networked by the day, the country’s freelancing business will continue to grow and provide a plethora of options for the country’s freelancers. Filipino freelancers will undoubtedly remain in this profession for a long time, owing to increased opportunities, more platforms available, a hardworking culture, and a positive attitude toward work. While obtaining a loan for freelancers in the Philippines is difficult, it is possible. If you are just starting out as a freelancer, you should wait a few years before applying for a housing loan.
Unpredictable income does not have to preclude you from obtaining financing. You will be holding new house keys in no time if you plan of time, work to improve your creditworthiness, and work with a freelancer-friendly bank. Purchasing a home is a weighty decision in our lives, and it is one of the most exciting things to plan for. You will want to have all the necessary information and plenty of time to complete your homework and prep work. Bria Homes is more than willing to assist you as a freelancer in achieving your dream house, whether you are a freelancer or an employed individual.