(1) What Is A Housing Loan?

A housing loan is an agreement between a creditor and a borrower where a sum of money is lent for the acquisition of real estate property and related assets.

In this financial relationship, the borrower is able to acquire the asset immediately while paying for it on an installment basis over an extended time frame. Meanwhile, the creditor profits from the transaction by charging interest on the amount borrowed.

As the name suggests, a housing loan can be used to build a house. However, it can also be used to purchase vacant lots, house and lot packages, townhouses, condominiums and more. In the Philippines, this form of loan is most often used to purchase residential properties for families.

(2) The Value Proposition Of Housing Loans

Housing loans have become more popular in the Philippines than ever before thanks to nearly a decade of sustained economic growth in the country.

As Filipinos gain greater purchasing power, many find themselves seriously considering the idea of owning their own homes. For those who don’t prefer to pay for real estate assets in cash, housing loans are attractive due to the following reasons:

• Better Than Renting. Housing is a basic need for most people. Given the relatively high real estate prices in the country with respect to current wages, it’s easy to see why many Filipinos rent their living spaces instead of purchasing them. The cost of living especially in urban areas makes owning property seem like a distant prospect, leaving the common man to resign to the idea of paying rent for the foreseeable future.Many Filipinos may not realize it, but the cost of rent these days isn’t too far off from what you would be paying for property acquired via housing loan. For a little extra each month, you could call the property your own after just several years. With rent, you can only use the place for as long as you can afford the monthly payments.

• Maintaining Financial Flexibility. Even when you’ve saved up enough cash to buy a house and lot package, splurging all your savings on it still may not be a good idea. Depleting your savings just to purchase a house can leave you strapped for cash in the coming years. If you find yourself in a situation where you urgently need cash, you can’t go back to the property seller and demand your money back.
  Investment opportunities and medical emergencies can create situations where you’ll need substantial cash in hand. Unless you’ll have plenty of funds left in your account after a purchase, deferred payments via housing loan may still be the better option to preserve your financial flexibility.

• It’s Good for Your Credit History. Maintaining a good credit standing with financial institutions such as banks can open up many doors for you in the future. New loans can be approved with ease and your credit limits on credit cards can be increased dramatically over time. This helps you access funds for future needs and opportunities – all thanks to the fact that financial institutions view you as a trustworthy borrower.One of the best ways to build your credit standing in the Philippines is by successfully completing a housing loan. Making payments on time and seeing the loan through to the end will speak volumes about your credibility as a borrower.

• It Gets You an Appreciating Asset. The beauty of real estate is the fact that it almost never depreciates. It’s one of the very few assets that only increase in price as time goes by. This is particularly true for emerging economies such as the Philippines where there’s still a lot of room for economic growth and the demand for real estate is expected to keep increasing for the foreseeable future.This means that if you ever want to sell your home, you can do so at a much higher price than what you acquired it for today. This also means that even if you’re paying a bank interest for granting your housing loan, the appreciation of your property’s value nullifies the extra money that you’re spending on the house or condominium.Land is also an asset that can be passed on to your children or other loved ones in your advanced age. The real estate will be just as useful to them as it was to you on the day you acquired it. The structure built on it may need to be updated, but the land will only become more valuable over time.

More than any other form of loan, housing loans deliver the best returns on your investment. Whether your intentions are for personal use or business, it’s hard to go wrong with this form of loan.

(3) Housing Loan Types

As the name implies, housing loans can be used to purchase or build houses.

However, there are several other things that you can use this loan for. Here are the most common types allowed by banks and other creditors:

• Purchase. This is the act of acquiring the property by buying it outright using a down payment and the lump sum from the housing loan.

• Construction. If the borrower already has land and wishes to have a structure constructed on it, a home loan may be used to fund the project. In cases like these, the lot is sometimes made the collateral for the loan.

• Renovation. If the borrower already owns a lot with a structure on it, but wishes to make repairs and improvements, a housing loan can also be used to finance the project.

• Refinancing. Refinancing is an agreement between a creditor and a borrower where the borrower is already engaged in a housing loan but wishes to receive lower interest rates. The creditor may opt to pay off the existing loan and take over it with a new set of terms. The original creditor is then taken out of the equation as the original loan has been satisfied, while the refinancing creditor assumes the right to collect monthly amortization payments from the borrower.

• Home Equity Loan. A home equity loan is a type of secure loan where the creditor lends a borrower substantial amounts of money which will be paid over a period that both parties mutually agree to. In this agreement, the borrower uses property such as a house and lot for collateral in the transaction.

The value of the collateral is determined by an appraiser from the financial institution, which also determines the amount of money that can be borrowed. In the Philippines, this type of loan is often used to pay for medical bills, to finance business ventures, for renovations, etc.

(4) Properties You Can Purchase With A Home Loan

While housing loans were first offered by banks as a means to pay for real estate on a deferred basis by borrowers, this type of loan isn’t limited to just that.

The following are the types of properties that can be acquired in the Philippines through financing:

• Vacant Lot. This is real estate that doesn’t have any structure built on it.

• House and Lot. This is a property type that has both land and a structure built on it.

• Condominium. This is a type of single-unit living space that’s found in a building where other units are also located. Legally, the individual owns the unit but only jointly owns common property and the land where the building stands jointly with other owners.

• Townhouse. Townhouses are multi-floor housing structures that share walls with other townhouses. Each one is sold separately by a developer to an individual owner.

(5) How Do I Know A Housing Loan Is Right For Me?

While housing loans can be very helpful in the acquisition of your desired property, there are several factors to consider if it’s the right path toward your goals.

Here are some areas that you have to give careful thought to before deciding to take on the responsibilities that come with a housing loan:

• You’ve Saved Enough for a Down Payment. If you’ve saved enough to pay 20% of the property’s price up front while still retaining substantial funds in your bank account, this might be the best time to commit to a housing loan. Some property developers and sellers even allow you to pay for the down payment on an installment basis with no interest to help make the purchase easier for you.

• You Can Afford the Monthly Amortization. Aside from the down payment, you’ll also have to account for the monthly amortization fees that you’ll have to pay once the loan term begins. If you calculate that you can comfortably pay your monthly dues while leaving enough for your living expenses each month, you may be ready to take on a housing loan.

• You Need a Permanent Living Space. If you’re tired of having to move from one rented space to another and you desire to have a living space that’s all yours, a housing loan may be right for you. This is increasingly true for people living in urban areas who wish to move to nearby suburbs where there’s less traffic, congestion and pollution.

• You Want an Ideal Place to Raise Kids. Some parents who are raising very young children prefer to bring up their kids in environments which have more space to move around than the average condominium or apartment. If you wish to have a place where children can enjoy some yard space and walk around safely in a neighborhood, a loan may be the best means to acquire a house and lot.

• You Want a Surefire Investment. Even if you’re not planning to live in the property yourself or even build a structure on it, purchasing real estate can still be a great idea. For one, you don’t have to do anything for the asset to be profitable: It grows in value over time by itself. If you want greater returns on your investment, you can lease the property to another party to generate passive income This means that the investor only needs to pay for the down payment, then lets the lessor’s monthly payments take care of the property’s amortization.

  TO KNOW MORE ABOUT THIS KINDLY CONTACT

  Maica Castillo

  EMAIL : iamdrivenmaica@gmail.com

  VIBER : 09760077327

  SOURCE: https://www.robinsonsbank.com.ph/loans/consumer-loans/housing-loan/