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Help! I want to buy a house!

For the typical millennial, the idea of buying a property seems like next to never. Real estate nowadays often costs an arm and a leg, at least for someone just starting a career.

Yet for those willing to dream big, buying a property is actually feasible if you do your research. While having rich parents, lottery luck or ample savings help a lot, being well-informed is the best way to buy a house without going broke.

For those who wish to become property owners one day, it is never too early to start planning how you can make that dream a reality. Besides saving aggressively, it would also be wise to consider financial assistance to help you secure that coveted purchase.

Think about the pros and cons of the different institutions available to help you, and choose one that offers the most attainable conditions. Borrowing money is not a bad decision if you know how you can pay for it in the long run.

PAG-IBIG Fund

The Home Development Mutual Fund, or more popularly known as the PAG-IBIG fund, was set up during the '70s to help the ordinary worker secure a home. Nearing its 50th year of establishment, the government -led program remains a key player in shelter financing.

For many employees, this is the first go-to institution for asking help with house payments.

The best thing about this program is that it can also cater to the minimum wage workers. It can offer a maximum loan amount of P6 million, depending on the member's actual need, capacity to pay and loan-to-appraised value ratio.

The maximum repayment period is 30 years, subject to an age limit. The interest rate is about 6.375 percent initially but subject to a re-pricing period after three years.

The fund, however, remains exclusive to PAG-IBIG members. The interest rate may also be higher compared to private institutions such as banks.

Borrowing from the PAG-IBIG fund involves a long-term commitment. This financing scheme is best for those with modest salaries, stable employment and minimal loan needs.

Bank loans

Contrary to popular belief, borrowing from banks is not as burdensome as it may seem. The great thing about banks is that technically, anybody can apply for a loan, provided that they meet certain qualifications. Even foreigners can apply for a loan with these establishments.

More often than not, the interest rates are also lower than those offered by the government. During a promo period, a bank can offer as low as 5 percent interest rate for a housing loan.

Compared to the PAG-IBIG Fund however, banks require shorter repayment periods. While there are banks that can provide clients up to 25 years for repayment, the interest rates would be greater. These rates are also subject to re-pricing periods over time.

Banks also look at their potential clients' credit history, so your credit card payments would actually affect your application. The maximum and minimum loanable amounts vary among different banks, but compared to the PAG-IBIG fund, they are usually more generous.

Overall, banks are great options for those who are ineligible for government assistance, those who wish to loan big amounts, and those who have a proven track record of paying loans on time.

In-house financing

In-house financing is offered by subdivision and condominium developers. Compared to the first two financial schemes, this type of financing is more lenient when it comes to requirements.

Generally speaking, the applicant should not be more than 65 years old if locally employed or 60 years old if working abroad. The applicant can apply with a co-signer to meet the minimum gross income requirements.

The interest rates, however, are relatively the steepest when compared to PAG-IBIG funding and bank loans. The website bankbazaar.ph estimates that for a loan with a 10-year repayment period, the interest rate can reach up to 21 percent. The repayment period is also more limited, with companies offering only up to 15 years maximum.

Considering this, it would be wise to look towards this scheme as a last resort.

Things to remember

Buying a house through loans is a big commitment. Honestly speaking, it would actually be great if you could secure funds from rich relatives or many years' worth of savings.

The American certified financial planner Sophia Bera, however, asserts that you should not dip into your emergency fund or retirement savings just to buy a home. According to her, a purchase that is only two to three times as much as your annual income would already be a safe move. Do not buy something that you cannot afford, even in the long run.

Overall, despite the significant costs, being able to own your home is a priceless joy. Though it may seem overwhelming, real estate is an investment that has seen great returns in the past years.

Owning a property would definitely be a promising venture. Just remember to make informed and well-thought-out decisions, and you can be on the way to becoming a young homeowner.

(Sources: www.pagibigfund.gov.ph; www.forbes.com; www.inforgrab.com; www.bankbazaar.ph; www.dotproperty.com.ph)

The author is a licensed architect who studied abroad and currently works for DSFN Architects. Her family bought a condominium unit through a combined scheme of in-house financing, bank loan, and hard-earned savings.
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Publication:Philippines Daily Inquirer (Makati City, Philippines)
Date:May 26, 2018
Words:971
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