Ways to Afford a Home in the Philippines

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Real estate prices in the Philippines are soaring. The latest CEIC data revealed that the costs increased by 10.4% year-over-year in September 2019. It’s one of the highest quarterly growth rates since January 2017. How can Filipinos afford a home in the country then? It turns out, there are still many ways:

1. Step Out of the Metro

One of the options for the future home buyer in Philippines is to get out of the densely populated communities and move to emerging cities and provinces. For example, they can look for a house and lot in Cavite for sale.

Over the last few years, the province saw the construction of new townships and business districts led by big corporations, such as Ayala and Megaworld. The Cavite-Laguna Expressway connects two of the fast-growing Luzon areas. As to home prices, many Cavite homes can still cost less than 2 million pesos. It’s about 11,000 to 25,000 pesos in monthly amortization.

Compare that to Makati, where the cost of a three-bedroom condominium already rose by 10.6%, according to Global Property Guide. It’s equivalent to an increase of over 230,000 pesos. Overall, in the last eight years ending in 2018, property prices in Makati CBD already went up by 132%.

2. Buy the Property at Pre-selling Price

There are pros and cons to buying a property at a pre-selling price. Usually, though, the benefits outweigh the risks, especially if the developer is trustworthy. A property is pre-selling when the building doesn’t exist yet. It might still be under construction, or the developer is still in the planning stages. Many real estate companies offer it to help augment their working capital.

A pre-selling house can cost at least 30% less than its supposed actual or final price. It can also exempt the buyer from paying value-added tax (VAT). According to TRAIN Law, the buyer might not pay this tax if the residential dwelling is 2.5 million pesos and below. The same rule applies if the lot costs no more than 1.5 million pesos.

3. Compare PAGIBIG and Bank Loans Carefully

Many Filipinos take out a mortgage to buy a home. They can go to the bank, take advantage of in-house financing, or apply for a PAGIBIG loan. The most popular options are the first and the last. From the get-go, PAGIBIG seems to offer lower interest rates and longer payment terms.

Homeowners can repay their loans for as long as 30 years. In most banks, it is only between 20 and 25 years. In the long-term, though, the total loan value can be lower when the buyer gets a bank mortgage than a PAGIBIG loan. It’s best to compare PAGIBIG and bank loans, as well as the different mortgage packages offered by commercial lenders.

4. Watch Out for Transfer Fees in Philippines

In some cases, the listed price of the property doesn’t include the transfer fees yet. These refer to charges associated with transferring the title to the buyer’s name. The documentary stamp tax and transfer tax cost 1.5% and 0.5%, respectively, of the selling, zonal, and fair market value price, whichever is the highest. If a residential property costs millions, then the buyer ends up spending thousands more on other charges alone.

To avoid paying a hefty fee later, buyers can choose to buy properties with prices that already include these charges. This way, they can spread the repayment. As they say in real estate, there’s no better time to invest in property than now. It might not take a long time before prices surge again and become less affordable.

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