To further assist home buyers in their investment planning, real estate portal MyProperty.ph created a list of prevailing interest rates for housing loans this 2017 of various commercial banks in the country.
As investing in a home is one of the biggest purchase decisions one can make in a lifetime, it is imperative to study first and foremost the ins and outs of your current financial standing. Once you know the budget that you can allot for your future property, you can then choose from the wide array of properties available in the market and distinguish the right financing scheme that suits you best.
The key to planning ahead is to be armed with the right information. Apart from finding out the lowest interest rates, it is also essential to dissect and differentiate the components of the home loan program offered. For instance, HSBC offers a very low interest rate compared to other commercial banks in the Philippines.
Unfortunately, the minimum loan amount to be able to avail the program must be P2 million. Therefore, if you are eyeing a property that costs less than this, HSBC’s offering will not be applicable to you.
In addition to interest rates, it is equally important to note the loan tenor of the fixed rate that you are agreeing to. All interest rates given in the table provided below falls under the one-year re-pricing period, this means that interest rates are subject to change per year. Although price change does not necessarily mean that rates will go up, it is still crucial to know and expect that your amortization fees will vary each year depending on the current interest rates.
Banks also offer a fixed interest rate for a longer span, the longer the tenor, the higher the interest. For example, BDO offers a fixed 6.5-percent interest rate for a length of 2-3 years and 6.88-percent fixed interest rate for 4-5 year duration.
Margin of finance
Most banks can lend up to 80 percent of the property’s selling price, while the remaining 20 percent will then be paid as equity or down payment directly to the developer or the seller. Among all banks listed in MyProperty’s comparison, only Union Bank can lend up to a maximum of 90 percent of the property’s selling price. This is good news to some home buyers who do not have enough cash to cover a 20-percent down payment.
Unlike the government shelter agency Pag-IBIG Fund (Home Development Mutual Fund) that offers loan tenors of up to 30 years, banks’ normal maximum loan tenor is only 20 years. Some extended their offering up to 25 years, while only EastWest Bank follows the model of the government bureau for offering 30-year tenure. Although paying in longer duration means your total payment will be higher, this helps lower monthly mortgage payments, which might be more manageable to some borrowers.
Fees and charges
Miscellaneous charges vary from the requirements of each bank, but home buyers must expect and be ready to spare some cash to cover these fees. Some of the common additional expenses included when applying for a housing loan are appraisal fee, registration, documentary stamp (P1 for every P200 of the loan amount), and notarial fee.
Mortgage redemption insurance
When applying for a housing loan, the bank or lender will normally ask the borrower to get a mortgage redemption insurance (MRI), which is a form of life insurance that pays off a part or the whole of the insured’s outstanding mortgage balance in case of his or her death or total disability. MRI guarantees the bank that it will be paid back the amount it has lent, and also protects the borrower’s surviving family, as it will help settle the outstanding housing loan amounts. In the absence of an MRI, the bank or lender may sequester the house from the surviving family. The MRI is usually incorporated to the housing loan in lump-sum payment (one-time premium paid annually).