Pag-IBIG Financing vs. Bank Financing25 September 2021
Everyone's ultimate dream is to have their own house and lot property for their family. But despite this great dream, not all Filipinos have the budget to buy their dream home. That's why it is excellent that real estate businesses like Lumina Homes partnered with financing institutions to help our kababayans achieve their hashtag #BAHAYGoals.
One of the secrets in achieving your #BahayGoals is by considering and choosing the best financing options where you can avail your housing loans—two of which are the pag ibig financing and bank financing. The government owns Pagibig Fund while private corporations own banks.
Incredibly, Lumina Homes partnered with various banks for the convenience of their homebuyers, such as:
- Banco de Oro (BDO)
- Cebuana Lhuillier Bank
- Security Bank
- China Bank Savings
- Robinsons Bank
But despite the diverseness and flexibility that bank financing offers, many people still have doubts about getting a loan from banks. Some of the reasons are high-interest rates, longer processes, more strict policies, and shorter payment terms.
But to understand more why a bank is one of the best financing options for you, let us compare pag ibig financing and bank financing.
Pag-IBIG Financing VS Bank Financing Comparison
1. Membership and Contributions
To apply for the different benefits that Pag-IBIG Fund has to offer, including their pag ibig financing, you must be an active member first with 24 monthly contributions to qualify. Your monthly contributions may vary depending on the loan you would like to avail of.
- For 200 monthly contributions, you can borrow as much as 500k loanable amount
- For 250 monthly contributions, you can borrow as much as 500k to 600k loanable amount
- For 2,950 monthly contributions, you can borrow over 5.9M to 6M loanable amount
There is no required membership or contributions. You don't also need to have a savings account to apply for a bank loan.
2. Housing Loan Interest Rate for Economic Packages
The Pag ibig financing housing loan interest rate for economic packages is at 6.5 % interest rate per annum.
The bank financing housing loan interest rate for economic packages is at 5.25 % interest rate per year.
Lumina Homes use the standard interim rate of 8% for back just for qualification, but after down payment and once your loan is released, some banks offer as low as 5%, so you don't already have to pay their interim financing.
3. Payment terms
They have a 5 to 30 years payment term based on the borrower's age and capacity to pay. They also have 35% required net disposable income for Overseas Filipino Workers, self-employed, and locally employed. The only downside of it is the longer the term or the years to pay, the higher the interest rate you will have.
You will have a maximum of 20 years payment term if you are locally employed while 15 years to pay for OFWs. Meanwhile, a 30% net disposable income is required for both OFW and locally employed loan applicants. But, if you are self-employed, you will just be required to have 25% net disposal.
This means that since bank financing caters shorter payment terms, you can pay your debts faster and save more money than those paying for a more extended period. Bank financing is also the only one that offers very flexible terms to their clients. You can quickly contact them through a phone call, email, or by visiting the nearest branch in your place. This is great since most towns, cities, and municipalities have various bank establishments compared to other financing institutions. You don't also have to wait upon a long queue and lengthy processing transactions.
4. Loanable Amount
You can borrow up to 6M loanable amount that will be subject to qualification depending on the lowest of the actual need, loan appraised value, and your capacity to pay.
You can borrow from Php 450,000 to Php 50 million loanable amount, which is also subject to qualification. Also, borrowers can loan up to 90% of the total contract price.
The loanable amount for the bank is higher than pag ibig. This means you can pay a lower down payment if you choose bank financing, while in pag ibig financing, your down payment is based on the approved loan, which in return is based on the appraisal value.
For example, if the property is on 60% appraisal only of the total price, you need to pay 40% of the remaining amount. This means that if you can't get a longer down payment term, then you should pay more.
5. Loan Process
The loan process for a pag ibig housing loan is around 3 to 4 months with the following criteria:
- The house must be fully completed.
- The subdivision must be ready.
- All developers' and buyers' requirements must be complete.
The loan process is around 2 to 3 weeks. Your loan can be released even your house is not fully completed.
At this rate, if you will choose bank financing for your housing loans, you can move earlier to your dream home!
6. Sample Computation
Here's a sample computation for you to have a more precise comparison between a pag ibig housing loan and bank financing options:
Let's say you purchase a Townhouse Inner Unit with Lumina Homes. The estimated contract price for the units is Php 1 million. You need to make a down payment of Php 125,000 payable in 14 months and a loanable amount of Php 875,000.
Your minimum loan will be 30 years. But for example, I would opt for 20 years payment terms, and then you will need to pay Php 6,524 for your monthly amortization with a 6.5% interest annual rate.
Applying for a bank loan with the same payment terms of 20 years will only require you to pay Php 5,896 monthly amortization with only a 5.25% interest rate per annum.
Now that you have a clearer understanding of the pros and cons of this housing loan institution, it is time for you to decide whether to choose bank financing or pag ibig financing.
Buying a property might not be as simple as buying your personal needs; that is why it's good that there is Lumina Homes that can help you to reach your dreams and to achieve that rewarding feeling for your hashtag #BahayGoals.
For more information about the affordable house and lot for sale of Lumina Homes, please contact (0917) 629 6523.
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