Condo Bank Financing in the Philippines

by Steve Van Derodar

New condo units in Toronto | Photo via New Construction in Toronto

Now and then, we receive updates about housing developments taking place in Metro Manila and even in the provinces. The once empty sections have been turned into fine housing complexes, and before you knew it, there were only a few available units left in the inventory. Not only tempting, but these developments are also within proximity to everything you need in an interconnected pathway. With the lure of these conveniences and with the current residential lifestyle trends in the Philippines, I am almost certain that you are one of those thinking of owning either an additional condo investment property or finally giving in an appetite for your “very first” investment property ownership.

You might not be surprised that in fact, a home loan or borrowing money from banks with interest for a specific period is a wise option as this becomes possible with extraordinarily little down payment which means minimal outright cash exposure,

“With the lure of these conveniences and with the current residential lifestyle trends in the Philippines, I am almost certain that you are one of those thinking of owning either an additional condo investment property or finally giving in an appetite for your “very first” investment property ownership.”

It could be years now since you have been pondering if a bank loan for property ownership is a better option for you now that interest rates are extremely inviting at 6.75 percent with a 5-year fixing period, banks vary. Today, the standard equity to the home loan can range from 10 to 30 percent to the total property cost. Literally, any down payment of more than 10 percent of the total purchase price can be your loan equity. Some buyers do put up more than fifty percent so that the loan amount would be much lesser than usual.

For Filipinos and Filipino-Americans living in the U.S., Philippine banks offer them access to property financing. However, this is not available with foreigners without established income, residency, or ties in the Philippines.

For Filipinos in the US, this can be relatively easy as you have to find a Special Power of Attorney (SPA) or an attorney, in fact, or sometimes a co-borrower. General eligibility and requirements for housing loans include 1. Duly filled housing loan application form, 2. Photocopy of ID, 3. Copy of latest Income Tax Return, 4. Copy of Building plan, 5. Documentation for salaried applicants: Original copy of Certificate of Employment, Photocopy of last full month payslip, 6. Documentation for self Employed applicants as usual.

“Home loans are a great way to buy a property rather than paying outright cash, not to expose your cash to pure real estate investment. There are plenty of opportunities for home loans provided the said investments are sound and are within affordability.”

I have been fortunate that for more than 10 years, I have assisted clients in referring them to banks for their loans, regardless of unit size, and for always, the process can be relatively fast. I remember assisting clients whose SPA are mothers-in-law, brothers, sisters, friends, etc. It is just as important to have somebody representing you being an overseas buyer. As soon as income documents have been verified and a consularized SPA at the Consulate has been received, the line of undertaking (LOU) and, eventually, bank proceeds are then forwarded to the property seller.

Several factors play a part in determining the loan amount applicable to a borrower: age, monthly gross income, allowable down payment, the location of the said property, and current market value/price of that property. You should be less than 65-70 years old by the full term of the loan. Most banks for condo properties offer 10-15 years, and rarely, other banks offer up to do have 20-25 years. Obviously, longer payment terms will affect interest rates and monthly amortization.

Home loans are either fixed rates or floating rates. With fixed interest rates, your monthly housing loan payments remain fixed regardless of dropping or skyrocketing interest rates in the market. Usually, in the fifth year, the loan will be reviewed and repriced. Either your monthly payments will increase or decrease, depending on the market conditions. Floating rates, on the other hand, can go higher or lower every month. Please discuss with your loan officer your preference as this can impact your monthly budget,

As to documents, they must be consularized for non-Philippine-based purchasers. Consularization is the process by which the consular agent or officer in the Philippines’ foreign service stationed in the country where the record is kept authenticates a document by the seal of its office. A document is deemed consularized when executed before and notarized by a foreign notary. The Philippine consular agent or officer authenticates such notarization, or when directly authenticated by such Philippine consular agent or officer, in either case, sealed by the seal of the office of the Philippine consul.

The most important step you can take in the mortgage process is to find the right lender and loan officer. Home loans are a great way to buy a property rather than paying outright cash, not to expose your cash to pure real estate investment. There are plenty of opportunities for home loans provided the said investments are sound and are within affordability. Owning a home lets you build substantial equity over many years as the value of your property increases.

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(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation, and commercial properties. He has worked as an International Property Specialist to markets in Asia, Europe, and North America with Ayala Land, Federal Land, and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a key focus on Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at derodarsales@gmail.com.).

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