The impact of the pandemic did not spare the real estate industry. The Philippines declared a lockdown in most cities in the metro by the end of the first quarter in 2020 which has resulted in the economy taking turn for the worse. Many Filipinos became unemployed while those who were able to keep their job felt unsure of their future. Purchases that require shelling out a large amount of money are put on hold. One year after lockdown, business have slowly return to normal operation. Employees who were working from home are already back in the office. But is it already safe to invest in real estate or should you delay?
Invest or delay?
Amid the pandemic, the Manila City government has bought a property for a housing project intended to provide shelter to over 600 families as mentioned in an article by Manila Bulletin. It only shows that having a home you can call your own is important and should not fall at the bottom of your priority list.
It is every Filipino's dream to own real estate property. If you are still undecided, here are some important factors to consider when buying real estate in the Philippines.
1. Margin on loan
When applying for a housing loan, the bank determines the amount and number of years to pay the loan based on the client's age and income bracket. The property type and location are also taken into consideration. In the Philippines, the typical margin on loan is 80%. It means the bank will only loan you an equivalent to 80% of the value of the property. You are expected to provide for the 20% as a downpayment.
2. Early termination charge
My husband and I applied for a 25-year bank loan. After 5 years, we were able to save enough money to pay the remaining loan in full. We had to pay an early termination charge. Compared to the interest we are paying every month, it was still better for us to pay the early termination fee considering the number of years still remaining for the loan. It is very important to ask your bank about this charge because after a few years you might want to pay in full.
3. Capacity to pay
Real estate developers are selling properties at a more affordable price compared to previous years. The banks are also offering low-interest housing loan rate to encourage borrowers. But knowing your capacity to pay is essential. A bank loan means you have to make sure your monthly income is more than enough to provide money to pay for amortization.
4. Other costs
There are other costs to consider when buying a real estate property. Transaction fees include title registration fee, capital gains tax, appraisal fee, transfer tax, and documentary stamp tax. Clarify from the seller who will shoulder these fees. If you have a real estate agent, he usually takes charge of processing the documents but sometimes will require additional payment.
Buying real estate is a big decision to make. Understanding all the costs involve will help you avoid financial difficulties later on.