Monday, March 16, 2020

Find the Right Financing Scheme For Your Real Estate Property

I have recently edited this post which I originally posted in May 2010. The advice still stood the test of time after a decade of publishing this from Pampanga Real Estate Trends and Guide (now defunct). 

After making a wise decision in finding the right home for you and your family takes worthwhile of amount of time and effort. It require careful research on the key elements mentioned previously in this blog. One is LOCATION, Second is SECURITY and the lastly NEIGHBORHOOD.

However, before taking the next step, you should fund the three key elements. Now, you need to plan your finance on buying that wonderful dream home you have in mind. Leveraging is accepted in buying a property. It requires a down payment or equity of at least 10 to 20% or 30% in some cases before the you can moved in for Ready for Occupancy homes or 30% down payment before the construction of the home if it is not yet available in which it takes about 5 to 6 months to build your new home. There are other schemes available like Rent to Own which is has become rampant on Class C to D segment market of property buyers.

These are five generally available financing schemes with most Philippine developers offer to end-buyers of properties:

1. CASH Payment - You buy a house outright with 0% interest. The good thing about this is that the developers can give you discounts and other promotions to satisfy you as a client. This one is recommended for buyers who have extra money to buy in order not to worry about monthly amortizations.

2. DEFERRED Payment - Same as Cash but with extended time frame of about 6 months, 12 months and sometimes up to 60 months depending on the developers promos. It is one of the best deals if you don't have enough cash to pay outright but on an extended payment at least with no interest to worry about. The downside is that sometimes builders or developers don't offer incentives or discounts on this scheme.

3. BANK FINANCING - Generally, the bank pays outright for the property to the developer and the buyer/lending party will be the paying the property through the lendee or banking institution where they loaned to. Philippine Banks can offer from 9% to 12% interest rate per annum. It can be a fixed rates from 5 to 25 years depending on the banks prevailing rates. The downside of lending through bank is that they will scrutinize your finances by their credit investigators if ever you are acquiring a loan from them. Just be ready with your needed official documents, documents of where your source income comes from and interviews wherein they will ask you alot on how you will finance your dream property other than the income from paycheck you received.

4. IN-HOUSE FINANCING - In this, the buyer will be lending and paying the monthly amortization directly through the developer or builder itself. The average prevailing rates maybe at 7% to 12% for about 5 to 10 years payments or more depending on the available financing scheme for buyers. This is advisable for people who don't want to scrutinized with credit investigation from banking institution. Less talk indeed. 

5. PAG-IBIG OR HOME MUTUAL FUND FINANCING - Lending some amount of money from this government agency in order to acquire their dream home. However the buyer member of PAG-IBIG should have made payments of at least 24 months to his account in building an equity for his/her dream home. It can be accelerated if ever the buyers intend to buy it no time as long as he/she is bona fide member of the PAG-IBIG Fund with no outstanding debts or balance with this agency. Current rates for HMDF Housing can be at 6.5% per annum for 1 year to 10% per annum in 30 years and may depend on the market value of the residential property.

So what's your next step now? Need help in finding the right financing scheme for you? Let us know by sending us a message now on our contact page here.

Photo Cover Courtesy of Nattanan23 / Pixabay

About the Writer

CRB Benedict Baluyut is a professional real estate broker, real estate appraiser and associate of C. F. Baluyut Realty. He is currently the Vice President for External Affairs, Real Estate Brokers Association of the Philippines, Inc. (REBAP) - Pampanga Chapter. You can get in touch with him at

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