Home Buying Tips: Bank versus In-House Financing
There are definitely many things to consider when buying a house, but this does not stop anyone from dreaming of their very own home. One of the biggest challenges that people face when it comes to house ownership is actually having the cash to purchase one upfront. Applying for a housing loan provides a viable option, and these can be provided by the government’s Social Security System (SSS), the Pag-IBIG Fund, or commercial banks. In recent years, another option has surfaced wherein real estate developers have also begun to offer in-house financial services.
Property experts from Lamudi have created a comparative overview between bank loans and in-house financing to better help you weigh your options. Before you decide to make a financial commitment for your ideal house, you should carefully evaluate what your financial options are and how they compare to one another.
Pro: Lower Interest
Con: Stringent Financing
Image Source: Homes and Dreams/Flickr
There are two things to take note of before applying for a housing loan from a bank: You must pay a reservation fee and a down payment, which is usually around ten to thirty percent of the total property price. Don’t worry though. You can pay this on an installment basis if paying via a single transaction is too heavy on your pocket.
After both payments are made, you can now apply for a housing loan. The bank will be the one to pay the remaining balance on the property, but as a borrower, you are obliged to pay the bank monthly amortizations plus interest. The bank will also hold on to the property title for the duration of the loan, which serves as the collateral. This goes on for usually five to twenty years, depending on your terms and agreements with the bank.
Note: The Pag-IBIG Fund charges higher interest rates, but they offer mortgages for up to 30 years. This means that you have more time to repay your housing loan.
Example: BPI Housing Loan
Pro: Simpler Application
Con: Steeper Interest
Image Source: Homes and Dreams/Flickr
Real estate developers now offer in-house financing to those who do not want to resort to third-party institutions when it comes to paying for your property. These are technically not loans, but more like extended payment terms. You pay for your property on an installment basis, but with above interest rates, averaging around fourteen to eighteen percent per annum. Longer terms may even reach up to 22 percent, but they usually do not exceed five years. You would have to pay your balance—usually 80 percent of the total property value, plus interest—in a shorter period of time.
In-house financing however, have less rigid requirements and paperwork than banks. Most developers require nothing more than the down payment and a verifiable proof of income, as compared to financial institutions who require valid government IDs, marriage contract (if applicable), income tax return (ITR) for employees, certificate of employment, pay slips or proof of remittance for three months (for overseas Filipino workers), lot plan, and vicinity map.
Note: In-house financing may be available only for pre-selling projects. Many developers do not offer financing for properties that are ready-for-occupancy.
Example: Avida Land Home Financing
About the Author Agnes Embile Jimenez
Agnes often finds herself either lost inside her mind or lost in beautiful scenic places. She's currently doing the things she loves while maintaining a frugal lifestyle. This blog is all about her struggles to live a frugal life, her quest to see the world via budget traveling, and her love to share to people everything that she is passionate about.
Agnes does not absolutely conform to any beliefs or philosophies. Though she's writing about frugal living and is currently embracing the minimalist lifestyle, she doesn't want to define her existence based on these realities alone. For her, life is too diverse, too colorful, too mysterious, it would be a waste of experience (and time) to imprison herself to a few sets of ideas. Google+ | Twitter
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