Debtor, creditor, lender: when you’re buying property, these terms pertain to a financial institution or company that provides the homebuyer with a mortgage. There are four common channels from which one can apply for a mortgage in the Philippines, namely:
The most ubiquitous lending institution, banks are often the first stop for a loan, as many homebuyers are often already existing clients of a bank. Banks provide a selection of mortgages, often with an interest rate of 5 to 20%, on average. Homebuyers may approach commercial and universal banks alike for a loan.
2. In-house financing
In-house financing refers to a loan provided by the seller to the buyer, thereby helping him purchase its own goods and services. In real estate, in-house financing may be availed from the private company or developer of the property. But banks also provide in-house financing for its foreclosures and property assets. Interest rates are typically steeper, at 10 to 15%, on average.
3. Social Security System (SSS)
The Social Security System (SSS) provides housing loans to: (1) members who have made monthly contributions for at least two years or 24 months; and (2) Overseas Filipino Workers (OFWs) no older than 60 years old. SSS has interest rates of 9 to 14%, and terms of 5 to 30 years.
The Home Development Mutual Fund (HDMF), known as Pag-IBIG, is a government program from which a homebuyer can avail of a loan provided that he or she is an existing member, with at least 24 monthly contributions in the past, and with no other existing loan or any foreclosures to his or her name. Pag-IBIG provides for up to P6 million in total loanable funds, and their interest rate is at 5 to 11.5%, with terms of up to 30 years.