Looks enticing? House loans are meant to be so—the truth behind the housing loan is in the details.
At the most basic of it all, a housing loan is a sum of money given by a bank to an individual, and the individual must pay the bank back for a certain amount of time. Sounds simple? Yes, but there are a lot of details in between that we sometimes overlook. Other times, we find everything confusing so we become intimidated about housing loans in the Philippines. Be prepared. Here are the five truths about housing loans you should know:
- You can apply for a housing loan if you provide collateral.
Banks won’t simply give you a bank loan and you go out to shop for the home that fits the loan they gave you. The bank needs collateral, which would be the property you are buying. Most banks require that you already have your property’s Contract to Sell or at least a Reservation Agreement, along with the application form and supporting documents, when applying for bank financing.
- Be preapred with the necessary documents and requirements.
The amount that banks might shoulder for your housing loan may reach the millions, so it’s but natural that they require proof of income, as well as the necessary documents and paperwork to support your need for a loan, and the capacity to pay. From identification cards, proof of income, and of course, the application form itself, it pays to ask your chosen bank what documents you need to produce before going ahead with the process. And remember to take note which documents can be submitted as photocopies and which ones need to be the original copies.
- Developers have accredited banks for you to approach for bank financing.
While almost all banks offer housing loans nowadays, developers have preferred banks. While it’s okay for you to apply for a loan elsewhere, there might be a need for you to provide other documents, such as a copy of the collateral title of your property, which will be your Transfer Certificate Title (TCT) if you’re buying a house, or a Certificate Condominium Title (CCT) if you’re buying a condominium unit.
- Age and source of income matters.
Most banks will only receive housing loan applications from individuals around 21-65 years of age. This is naturally the age bracket to ensure that there’s a steady source of income to pay for the desired loan. They will also check your employment background, to make sure you have a steady source of income and the capacity to pay.
- Each bank has a minimum and the maximum amount they’ll be able to loan.
Depending on your documents, source of income, property type, and several other factors, the bank can choose to loan you only a certain percentage of the sum you need to purchase your home. If it does end up that they will cover only a minimal percentage of the entire selling price, time to crunch those numbers—or perhaps apply for another housing loan elsewhere?
- You’ll be paying for your housing loan for 10 to 30 years.
The terms of your housing loan depends on the bank’s policy, the type of home you’re buying (the timeframe to pay for a house and lot is different from purchasing a condominium unit), and sometimes your capacity to pay. Considering that you can pay off the loan for a maximum of 30 years, it will be a tremendous commitment on your part, so before scouting or applying for any house loan, you must be completely sure about your dream home—having it will be your lifetime commitment!