Buying a house
is one of the hardest milestones to achieve in the Philippines, yet it’s still a common goal among millennials before they reach 30 years old. While some are lucky to attain it – and even get married and have kids by that age – many remain to struggle, especially the minimum-wage earners.
About 60% of the projected current demand in housing is in the socialized and economic housing category. So if a minimum-wage earner is a member of the Home Development Mutual Fund (HDMF a.k.a Pag-IBIG), how much do they need at least to buy a home near Metro Manila? Let’s refer to this guide.
Housing Loans
To qualify for Pag-IBIG’s Affordable Housing Loan programs, one must fit the following criteria:
For minimum-wage earners, the most suitable housing loan type offered by Pag-IBIG is the Subsidized Program. They can borrow up to P450,000 for an interest rate of 4.5% per annum for the first 10 years, with the term lasting up to 30 years. But what makes the Subsidized Program more favorable is that the principal amount they can borrow can go up to P750,000.
As with any loan, applicants will also go through an approval process. Their gross monthly income will be assessed, as well as their capacity to repay and their loan-to-appraisal value ratio. Up to three qualified applicants can be approved for a single loan, as long as they’re blood-related up to the second degree.
After 10 years, the 4.5% interest rate will change depending on the current rate of the same principal amount or will be increased by 2%, whichever is lower. Interest rates will be subject to change again depending on the lender’s chosen repricing period.
Other Fees Involved
As you look for affordable houses for sale in suburban areas such as Tanza, and Cavite, you may be subject to pay other fees, such as notary fees, local transfer taxes, documentary stamp tax, capital gains taxes, and agent’s fee. As for the value-added tax, you are exempted if the house you bought costs only P450,000, if you bought a lot not exceeding P1,919,500 in value, or a house and lot valued at P3,199,200 and below.
Notary fees typically cost around 1% – 2% of the property value but are negotiable. Local transfer tax costs 0.75% of the property value if it’s in NCR, and only 0.50% if it’s in provinces. Documentary stamp tax is either imposed on the selling price or fair market value of the house, or around 1.5% of its value, whichever is higher.
Capital gains tax only applies if the property is classified as a capital asset. It’s 6% of the gross selling price or fair market value, whichever is higher. As for the agent fee, it typically costs approximately 3% – 5% of the property value. They’re not really a necessity, but their assistance will take a burden off your shoulders because they do all the legwork.
From this simple guide, you can get a rough estimate of the minimum amount you need to buy your first home in the Philippines. But aside from those costs, there’s the furnishing, additional repairs, and maintenance to work on, so don’t rush to buy a house if your circumstances aren’t that much favorable yet.
