Tuesday, February 11, 2014
Debt and financial difficulty can be emotionally crippling. With the many attractive property buying options on the market, a number of home buyers have been lured into buying property they can ill afford.
It’s important to assess your financial situation well and ensure you have enough stable income before you commit to a property investment.
Paying by installment and acquiring financing through a home loan are common avenues for home buyers. However, the struggle to keep up with these monthly expenses can be tough. Many end up with late loan payments, which inevitably incur penalties and ultimately, the home buyer only ends up paying more for the property overall.
Some also end up defaulting since they can’t continue to pay the monthly fees anymore. These can lead to financial trouble and foreclosure.
Republic Act No. 6552, also known as the Maceda Law or the Realty Installment Buyer Protection Act, recognizes these difficulties and provides protection for defaulting property buyers. This applies to any kind of property purchase, be it a condominium unit or a house and lot.
According to Section 3 of the Maceda Law, a defaulting buyer has the following rights concerning succeeding installments:
1. To pay, without additional interest, the unpaid installments due within the total grace period for every one year of installment payments made; provided, that this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.
2. If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to 50 percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed 90 percent of the total payments made; provided, that the actual cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
The computation of the total number of installment payments also includes down payments, deposits and options.
Section 4 discusses the right of the buyer, if less than two years of installments have been paid, to a two-month grace period from the installment’s due date. After the grace period expires and the buyer still has not paid the due installment, the seller may send a notice of cancellation and proceed to cancel the contract thirty days after the buyer receives the notice.
Knowing your rights as a property buyer can help you with debt and defaulting.