Need to find an affordable loan for that dream home? Start with this handy guide.
While many people dream of owning their own home and while the improving Philippine economy is steadily putting that dream within reach for many families, paying for what is usually the biggest single purchase one will make in his or her life is still a challenge for all but a very few people.
Fortunately, Philippine banks have risen to the opportunities the growing residential property market represents and offer surprisingly easy and flexible terms for home loans. According to data from the Bangko Sentral ng Pilipinas (BSP), demand for real estate loans is growing at a rate of about 20 percent per year.
Competition among the banks and stable interest rates being maintained by the BSP are helping to keep interest rates on home loans relatively low, according to analysts, making now an attractive time to consider buying a new home or investing in improvements to existing property.
Sorting through competing offers can be confusing especially for first-time home buyers and even for homeowners who are experienced with what can be a time-consuming process. New offers to attract borrowers are constantly being developed.
To help the prospective home buyer or homeowner considering a loan for renovation, refinancing, or equity for other household expenses, we surveyed the basic lending requirements of eight out of the top 10 largest Philippine banks: Banco De Oro (BDO), Metrobank, Bank of the Philippine Islands (BPI), Philippine National Bank (PNB), Security Bank, Rizal Commercial Banking Corporation (RCBC), Chinabank, and Unionbank. Landbank and Development Bank of the Philippines (DBP) are also among the top 10, but these were omitted; Landbank does offer home loans, but under terms that differ somewhat from other commercial banks, and DBP does not offer home loans at all.
Because the banks reviewed offer a variety of lending packages, the requirements and terms described here are a sort of average, representing their basic and most popular loans. This should give a prospective borrower a helpful guide to what’s available and the documents and other requirements needed to take advantage of it, but a word of caution is in order: This is only intended as a basic guide to help the consumer get started; to fully understand the requirements and other details of the bank’s offers, contact the bank directly, ask questions, and get the details in writing.
Citizenship requirements vary among the banks. BDO, Metrobank, BPI, and RCBC will lend to Filipino citizens as well as foreign nationals; PNB specifies Filipino citizens or natural-born Filipinos, while Chinabank requires borrowers to be Filipino citizens. Security Bank and Unionbank do not list specific citizenship requirements.
In terms of age, the most common qualification is that the borrower must be at least 21 years old, but not more than 65 years old when the loan reaches maturity. Unionbank, however, is slightly more lenient in this regard, extending the maximum age to 70 in its requirements.
Not surprisingly, all the banks require verifiable income, whether the borrower is a salaried worker or self-employed. The minimum gross family income varies from P30,000 to P50,000 per month. Metrobank and PNB require a minimum income of P30,000 per month; BPI’s minimum requirement is P40,000 per month, while BDO, Security Bank, and Chinabank all require a minimum of P50,000 per month. RCBC and Unionbank do not specify general income requirements, but they do have them, depending on the type and amount of the loan, so it is best to check with the banks directly.
All the banks require an application form while BDO, PNB, BPI, Chinabank, and Unionbank also require that a copy of the borrower’s marriage contract, if applicable, be supplied along with the application form and two government-issued IDs. Only BPI, however, clearly states that the application must be signed by a married borrower’s spouse; this may or may not be required by the other banks, depending on the loan being sought.
In addition, BPI and PNB require a separate application for co-borrowers. PNB requires that a spouse also submit a certificate of employment and his or her income tax return. RCBC requires a community tax certificate or residence certificate from the borrower, as does Chinabank; in addition, Chinabank also requires that the borrower submit his or her resume or biodata as part of the application.
In general, the more information the borrower can provide the bank concerning his or her income and financial assets, the easier the loan process will be.
Beyond the minimum monthly income amounts, requirements for verifying income vary significantly from bank to bank, but at a minimum, the borrower should expect to present a certificate of employment, or if self-employed, a certified statement of account from his or her own bank (if not the same one where the loan application is being made) including a certification of “no overdraft charges”; the borrower’s most recent income tax returns; copies of payslips covering at least two years’ employment (in the absence of a certificate of employment); a copy of a mortgage redemption insurance form (this is required by Chinabank and Security Bank for most of their loans, and is for certain loans at other banks); and bank statements for any accounts the borrower owns.
In addition, the banks all require various documents pertaining to the property being purchased. At a minimum, a Transfer Certificate of Title or Condominium Certificate of Title and property tax declaration will be required; other documents may be requested as well.
Loan terms and interest rates
As with other requirements, loan terms vary from bank to bank, and depend on the location and nature of the property or home being purchased. For example, just one bank, PNB, sets a minimum loan amount of P750,000 for the purchase of a house and lot, townhouse, or condominium unit within Metro Manila, but only P500,000 for areas outside the metro area; for a lot only, the minimum loan amount is just P200,000 for areas outside Metro Manila, but increases to P500,000 for property within the NCR.
The terms and interest rates listed here are for customers buying homes in Metro Manila and applying for the banks’ most popular loans, who meet all the application, income, and property documentary requirements and have generally good credit standing:
Banco de Oro (BDO): P500,000 minimum loan, up to 20 years to repay, 5.50 percent interest rate.
Metrobank: P500,000 minimum loan, up to 25 years to repay, 6.0 percent interest rate.
Bank of the Philippine Islands (BPI): P400,000 minimum loan, up to 25 years to repay, 5.50 percent interest rate.
Philippine National Bank (PNB): P750,000 minimum loan, up to 20 years to repay, 5.50 percent interest rate.
Security Bank: P1 million minimum loan, up to 20 years to repay, 5.25 percent interest rate.
Rizal Commercial Banking Corp. (RCBC): P300,000 minimum loan, up to 20 years to repay, 8.80 percent interest rate.
Chinabank: P500,000 minimum loan, up to 25 years to repay, 6.50 percent interest rate.
Unionbank: P500,000 minimum loan, up to 20 years to repay, 6.50 percent interest rate.
The above figures were correct as of press time, but terms do change frequently, so check with the banks for the most current offerings.
How long does it take?
With banks constantly improving their services to attract more customers – including offering application, loan calculators, and other services online – in all likelihood the home buyer will spend far more time preparing the requirements and getting his or her other finances in order than waiting for a loan application to be processed. As of press time, the banks’ guidelines for loan processing times are pegged at five to 15 working days. BDO said its target is five working days for customers within Metro Manila and “as close to five days as we can make it” for provincial customers; BPI and Security Bank likewise gave a timeframe of five working days. Chinabank said its loans are processed in seven to 10 working days, again, depending on the customer’s location; PNB, RCBC, and Unionbank all gave a time of 10 working days. The longest processing time appears to be Metrobank, whose representative was hesitant to give a firm figure, saying only that it could take “up to 15 working days.”