A Guide on Using Pag-IBIG Housing to Purchase your Condo

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Filipinos with low or intermediate income can now afford to purchase their dream home. The government-mandated Home Development Fund, also known as the Pag-IBIG Fund, allows its contributing members to finance their home purchases.

This type of loan is an ideal financing option for those who wish to purchase their own condominium as Pag-IBIG housing loan offers low-interest rates as well as a long repayment period. If you are on a budget but want to own a condo such as those offered by DMCI Homes, then you might want to consider obtaining a loan from Pag-IBIG.

What is a Pag-IBIG housing loan?

The Pag-IBIG Fund Housing Loan allows you to borrow up to P6 million under very low rates and at the friendliest terms, to help you fulfill your dream of owning a home! The rates offered by the Pag-IBIG are lower and more affordable compared to those offered by banks or in-house financing of real estate developers.

Thus, you won’t have to worry about that hefty monthly amortization and excessive interest rates. That being said, let us discuss the features and benefits, requirements, and intricacies of the Pag-IBIG housing loan.

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Who is eligible for a house loan?

Now that we have discussed what a Pag-IBIG housing loan is, let us now delve into who are the persons eligible for a housing loan. Members who meet the following criteria, according to Pag-IBIG, are eligible for the home loan program:

• You must be an active member under the Pag-IBIG membership program. Active membership may be evidenced by the remittance of at least 24 monthly savings at the time of application.

  If you are not a member but wish to apply for a Pag-IBIG housing loan, you may remit the required 24-monthly savings based on the mandatory rate in a lump sum. (This lump sum shall be considered as a single remittance for the applicable month as of the payment date)

• You must not be more than 65 years old at the time of the loan application, nor more than 70 at the time of the maturity of the loan.

• You must have the legal capacity to acquire or the capacity to make an encumbrance on real property.

• You have passed the satisfactory background checks of the Pag-IBIG Funds. Background checks may be either in the form of credit, employment, or business checks.

• You must not have any outstanding Pag-IBIG Short-Term Loan (STL) in arrears at the time of the application. A member whose STL is still in arrears shall be required to update his account.

• You must have no Pag-IBIG housing account that was foreclosed, canceled, bought back due to default, or subjected to dacion en pago, which shall include cases where the borrower is no longer interested in the loan and surrenders the property.

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How much can I loan in Pag-IBIG based on my income?

Members of the Pag-IBIG Fund are permitted to borrow up to P6 million at interest rates ranging from 5.5% to 10%. The member’s ability to pay will determine the loanable amount. A qualified Pag-IBIG member may apply for a housing loan of up to Six Million Pesos (P6,000,000.00), which shall be based on the lowest of the following:

• The member’s actual need

• The desired loan amount

• The loanable amount based on capacity to pay and loan-to-appraised value ratio

The benefit of the Pag-IBIG housing loan is that it can be utilized to finance not only the purchase and construction of your house and lot, townhouse, or condominium but also your home improvements.

Loanable amount based on the capacity to pay

For housing loans not exceeding P1,250,000, the loanable amount shall be limited to an amount where monthly repayment does not exceed 35% of the borrower’s gross monthly income.

For housing loans exceeding P1,250,000, the loanable amount shall be limited to an amount where the monthly repayment does not exceed 30% of the borrower’s gross monthly income.

Loanable amount based on Loan-to-Appraised Value ratio

PAG-IBIG also offers housing loans based on the Loan-to-Value Ratio of your collateral. The amount that you may borrow shall be based on the ratio of the loan amount to the appraised value of the collateral and shall not exceed the following:

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Features and benefits of Pag-IBIG housing loan

The housing loans offered by Pag-IBIG have certain features and benefits, such as the loan term, how the loan can be used, and more. Let us dive deeper into the benefits and features of the Pag-IBIG Housing Loan.

1. Purpose of the loan

The proceeds of the housing may be used to finance your townhouse, house, and lot, and even condominium purchases and construction. Pag-IBIG members who qualify for the loan may use the proceeds from the loan in any of the following ways:

• Purchase of fully developed residential lots or adjoining residential lots not exceeding one thousand square meters (1,000 sq. m.)
• Purchase of a residential house and lot, townhouse or condominium unit, inclusive of a parking slot, which may be:
  • Old or brand new
  • A property mortgaged with the fund or
  • Adjoining houses and lots/townhouses/row houses/condominium units.
• Construction or completion of a residential unit on a residential lot owned by the borrower or a relative of the borrower up to the 2nd civil degree of consanguinity or 1st degree of affinity.
• Home improvement on the house owned by the borrower or a relative of the borrower up to the 2nd degree of consanguinity or 1st degree of affinity or on a property currently secured under a Contract-to-Sell (CTS) or Deed of Conditional Sale (DCS) between ‘Pag-IBIG Fund and the buyer.
• Refinancing of an existing mortgage with an institution acceptable to the Pag-IBIG Fund.

2. Loan term

The housing loan shall be repaid at a maximum term of thirty (30) years and shall, in no case, exceed the difference between age seventy (70) and the present age of the principal borrower. The principal borrower shall be considered 70 years old at the time he has reached his 70th birthday.

3. Payment of amortization

A. Mode of payment

The payment of the loan shall be made in equal monthly amortizations that cover both the principal and interest. The payment shall be made, whenever feasible, through salary deduction. However, the borrower must give his/her written consent for the deduction of the amount due from his salary.

Payment may also be made through

• Post-dated checks
• Accredited collection partners
• Auto debit arrangements with banks
• Any other collection system which the fund may implement in the future.

B. Payment due dates

The payment of the monthly amortization commences on the month immediately following the date when the loan was taken out, and every month thereafter until the housing loan is fully settled. However, should the due date fall on a non-working day in the Pag-IBIG branch where the housing loan is maintained, the monthly amortization shall be paid until the next working day.

C. Partial payments

Partial payments shall be accepted but the unpaid portion of the amount due shall be charged with the applicable penalty. In case of late payment, any amount paid by the borrower shall be applied in the following order:

1. Penalties
2. Insurance Premiums
3. Interest
4. Principal

4. Collateral

The Pag-IBIG Housing loan shall be secured by collateral acceptable to the Fund, which may consist of the same residential properties to which the takeout proceeds are applied. Off-site collateral may also be allowed for meritorious reasons subject to the approval of the appropriate level of approving/signing authorities.

A. Collateral for Retail Housing Loans

For retail accounts, the security shall consist of a first real estate mortgage on the subject properties fully covering the payment of the obligation as stipulated in the corresponding loan agreement and a promissory note of the borrower.

B. Collateral for Developer-Assisted Housing Loans

For developer-assisted housing loans, the following may be provided as collateral:

• Contract-to-Sell (CTS) Documentation
• Deed of Conditional Sale (DCS) Documentation

5. Insurance

Borrowers of the Pag-IBIG Housing Loan shall be compulsorily covered by Mortgage Redemption Insurance (MRI) or Sales Redemption Insurance (SRI), whichever is applicable.

6. Prepayment

Borrowers of the Pag-IBIG Housing Loan shall be allowed to prepay their housing loan in full or in part without prepayment any penalty.

If any amount is paid in excess of the monthly amortization due, that excess shall be treated as an advance payment and shall be applied on the next amortization due date. However, you may also request that the excess amount shall be applied to the principal amount, provided that the amount be applied equals at least one monthly amortization.

7. Default

A. When are you in default?

A borrower under the Pag-IBIG Housing Loan shall be considered in default under the following instances:

• When there is failure to pay at least three (3) monthly amortizations
• When there is failure to submit proof of payment of the real estate taxes for the year
• When the borrower violates or fails to perform any of the obligations in the contracts entered into with Pag-IBIG

B. What is the effect of default?

When the borrower defaults, the outstanding obligation – which includes the principal, accrued interests, penalties, and other charges – shall become immediately due and demandable. The outstanding obligation shall also include:

• The unpaid amount shall continue to be charged with a penalty equivalent to .05% of the amount due for every day of delay.
• The outstanding obligation shall also continue to bear interest at the stipulated rate from the time the obligation becomes due and demandable.

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Step-by-step guide on how to apply for a Pag-IBIG housing loan

Now that we’ve already covered who is qualified for the loan and how you can use the proceeds of the loan, let us go into the steps on applying for a Pag-IBIG housing loan.

Here is a comprehensive step-by-step tutorial on how to apply for the Pag-IBIG Housing Loan so you can finally buy that dream home of yours.

STEP 1: Prepare a checklist of the requirements.

It is essential that you first arm yourself with a list of the requirements that you will need once you have made the decision to apply for a loan. Depending on the loan’s goal, the requirements list has a wide range, but the following are the basic requirements:

• Housing Loan Application (HLA) form, with recent ID photo of borrower and co-borrower (if any)
• Proof of income
• One (1) valid ID of principal borrower and spouse, co-borrower, and spouse
• A certified true copy of the Transfer Certificate Title
  • For condominium units, a Transfer Certificate Title of the land and Condominium Certificate of Title
• Contract-to-Sell or any similar agreement between the buyer and seller
• Updated tax declaration of the house and lot and updated real estate tax receipt.
• Vicinity map/sketch of the property

NOTE: Borrowers that are over 60 years old as well as members availing of amounts ranging from 2 Million – 6 Million pesos are required to submit a health statement form (medical questionnaire).

STEP 2: Submit your HLA and other forms

You can submit your HLA to the Pag-IBIG Fund’s main branch and regional offices with the necessary documentation. You can apply for a mortgage loan online as well. Additionally, you must pay a P1,000 non-refundable processing fee upon submission of all requirements.

STEP 3: Wait for your Notice of Approval (NOA) or Letters of Guaranty (LOG) and sign your loan documents

The NOA will only be released either to the borrower or, incase of OFWs, the attorney-in-fact. If your application is not approved, the borrower will receive a Notice of Disapproval. However, once you receive your NOA, you should sign your loan documents and submit them within 90 days.

STEP 4: Submit all of your NOA requirements to Pag-IBIG for the release of the check

You are given 90-days to accomplish all your NOA requirements, which include:

• Payment of Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) from the BIR.
• Transfer of title and annotation of the mortgage from the registry of deeds.
• Payment of transfer tax and transfer tax declaration from the local government.

STEP 5: Receive your loan proceeds

Once you have complied with and submitted all the requirements, you can now receive the proceeds of your Housing Loan. However, before you can actually receive it, you must have the following documents:

• Two (2) valid IDs
• Transfer Certificate of Title/Condominium Certificate of Title in the name of the borrower/co-borrowers (if applicable) with mortgage annotation
• Updated tax declaration (house and lot) and tax real estate tax receipt in the name of the borrower/co-borrowers (if any)
• Deed of Absolute Sale with the original stamp from the Registry of Deeds.
• Occupancy permit which is secured from the LGU Engineering Office (if applicable)
• Assignment of loan proceeds

STEP 6: Start paying your monthly amortization

Now that you have an idea of the steps and requirements necessary to apply for a Pag-IBIG Housing Loan. The last step is knowing how much your monthly amortization will be. By using the affordability calculator you should be able to accurately calculate your monthly payments.

It is important to note that if you default on your loan, there will be consequences such as having the whole obligation becoming due and demandable. Thus, if you wouldn’t want to risk having your house loan canceled or your home foreclosed, make sure that you always pay your dues on time.

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Which is better: Pag-IBIG or Bank Financing?

In the Philippines, there are a variety of ways within which you can apply for housing loans. However, the most popular ways are either through Pag-IBIG Housing Loans and banks. And while these two options have the same objective, i.e., to loan you money for the purchase or construction of your house, there are nonetheless fundamental differences between the two. Let us discuss these differences and ultimately choose which among these options is better.

Advantages of Pag-IBIG Housing Loan.

A. Lower and more predictable interest rates.

The primary goal of the Home Development Mutual Fund (Pag-IBIG Fund) is to assist Filipinos in saving money and obtaining housing. Therefore, in line with this objective, the interest rates are some of the lowest in the financing sector. And while there may be increases in the rates, such increases cannot exceed 2% per year.

B. Longer repayment period.

If you decide to borrow from the PAG-IBIG fund for the purchase or construction of your home, you will have a maximum of 30 years within which to pay it. This not only means that you will have more time to pay your loan but also the amount of your monthly payment will also be decreased as the principal is spread over a long period of time.

C. An option for low-income earners/minimum wage workers.

A program called Affordable Housing Loan for Minimum-Wage and Low-Income Earners is now offered by the Pag-IBIG Fund. This makes it possible for Filipinos with modest incomes to purchase affordable homes. One of the most important features of this program is that the interest rates are below average compared to the other loan programs. Thus, members who qualify for this kind of loan will have more leeway to manage their finances.

D. An Option for young and old applicants.

While Pag-IBIG does not specify the minimum age requirement for Pag-IBIG loan applicants, it is acknowledged that in order to apply as a member, you must be 18 years old. Before applying for a loan, you must first make a monthly contribution for two years in a row. Once you reach legal age and have made payments covering two years, you can be eligible for a loan if you started your business or job when you were young. -IBIG housing loans also remain available to the older generation. However, you must not be over 65 years old at the time of the application nor over 70 at the time of its maturity.

Advantages of a bank loan

A. Variety of loanable amounts.

If you decide to borrow from a bank, you have a large selection of loan products and loanable amounts to pick from. You can obtain a loan for a minimum of Php 500,000 from the majority of banks. You can

B. High appraisal value.

Before your housing loan is approved, your real estate must first be appraised. That said, banks typically assign higher appraisal values, thus allowing you to loan higher amounts.

And while bank financing is a good option if you want to have a higher loanable amount, still Pag-IBIG Housing loans are more beneficial to those who are on a budget. Pag-IBIG offers lower interest rates compared to those imposed by other financing industries. It also allows you a longer period within which to pay your loan. All of these factors, when combined, shows that indeed, Pag-IBIG is a great option.

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Tips to get your Pag-IBIG loan approved

Getting your loan approved is one of the most important steps if you want to purchase or construct your home. But how do you exactly get your Pag-IBIG loan approved? Don’t worry, here are the following factors that you might want to consider.

1. Settle any overdue Pag-IBIG Loan payments.

Your chances of being approved for a new loan can be ruined by any missed payments. Borrowers who have outstanding multi-purpose loans or housing loan accounts with the agency that have been foreclosed or canceled are specifically denied housing loan applications by Pag-IBIG. So, if you want your PAG-IBIG loans approved, check any outstanding balance.

2. Keep a stable source of income.

Having a stable income allows you to pay your outstanding monthly obligations as they fall due. So, if you want to apply for a housing loan in Pag-IBIG make sure that you have a stable income. In order to determine whether you are financially secure enough to pay all of your monthly mortgages, Pag-IBIG will review your employment history. Your length of employment is proof of your income stability.

3. Check your credit report and improve your credit score.

Having a good credit score means that you are paying your debts on time. In contrast, lenders are alerted by any late payments on credit cards and loans that appear on your credit report. Thus, you will have a lower chance of being approved for any loan if you have a poor history of repayment and a low credit score. Thus, if you want your PAG-IBIG loan to be easily approved, make sure that your credit score is high.

Key takeaways

Now that we have comprehensively discussed what Pag-IBIG loans are, who is eligible for them, its features and benefits, the steps for the loan application, and some tips on how to be easily approved, here are a few key takeaways that you carry with you.

1. Always prepare the required documents and requirements beforehand. Preparing the required documents and requirements before actually applying for a loan expedites the loan application process. Having the documents ready will allow you to have the loan as quickly as possible so that you can purchase or construct your condo or dream house.
2. Make sure to have a high credit score. Having a high credit score improves the possibility of your PAG-IBIG housing loan being approved. This is so because lenders typically do a background check on how and when you frequently pay your debts.
3. Always pay your monthly amortization due. Paying your monthly amortization as they fall due not only makes you a responsible debtor but also allows you to avoid any penalty that may be imposed for non-payment. These penalties can rack up, making the repayment of your Pag-IBIG housing loan a cumbersome task. So, endeavor to always pay the amount due on time.