The Key Differences Between a Commercial Bank, SSS, and Pag-IBIG Housing Loans
For many of us, our ultimate dream is to stop renting and purchase our own home. Unfortunately, the majority of us do not have enough money to pay for our entire house in cash. That’s where a home loan comes in. Buying your first home is a major investment, and applying for a housing loan is something that you should approach with care and thought.
The first step in your home buying journey is to use a mortgage calculator. It’s usually a free, online tool that will help you determine how much financing you could qualify for. After you have an idea of how much financing you will need, it’s time to pick a lender.
When we think of a housing loan three products come to mind: a Pag-IBIG housing loan, a SSS housing loan, and a commercial bank housing loan. Since your home is one of the largest purchases you will make during your lifetime, it’s important to pick a financing option that best suits your current lifestyle. Deciding which financing option to choose from may seem like a daunting task, but we’re here to help. Below is an in-depth description of each housing loan option, as well as a comparison chart to help you pick the home loan option that is best for you.
Pag-IBIG Housing Loan
The Home Development Mutual Fund (HDMF), or the Pag-IBIG Fund is a national savings program that was created to provide affordable home loans for Filipinos. A Pag-IBIG house loan can be used to purchase a brand-new property, fully developed or adjoining lots that do not exceed 1,000 square meters, a residential house and lot, condominium, or townhouse. You can also use a Pag-IBIG house loan to complete construction, or refinance your current home.
With a Pag-IBIG housing loan you can obtain financing up to ₱6,000,000.00, and get a maximum repayment term of 30 years. The amount you are approved for will depend on your need, capacity to pay, and loan-to-appraisal value ratio.
The Pag-IBIG loan-to-appraisal value ratio is as follows:
|Loan Amount||Appraised Value|
|Up to ₱400,000.00||100% of the home amount can be financed through Pag-IBIG|
|From ₱400,000.00 – ₱1,250,000.00||90% of the home amount can be financed through Pag-IBIG|
|From ₱1,250,000.00 – ₱6,000,000.00||80% of the home amount can be financed through Pag-IBIG|
Perhaps one of the most attractive aspects of a Pag-IBIG loan is the affordability of the program when compared to other products on the market. You can use this Pag-IBIG Fund Housing Loan Affordability Calculator to get an idea of how much you will be able to borrow based on your income, repayment term, fixed pricing period, and the estimated value of the property you are interested in.
To qualify for a Pag-IBIG house loan you must be a Pag-IBIG member, and must have 24 monthly contributions under the “Pag-IBIG Membership Program.” If you have not made 24 contributions, you have an option to pay 24 months as a lump sum to qualify for the program. In addition, you must not be over the age of 65, cannot have any existing Pag-IBIG housing loan, and cannot have any outstanding multi-purpose loans. You also must not have any previous Pag-IBIG loans that were foreclosed on, cancelled, or bought back due to default. You can get approved for your Pag-IBIG housing loan in as little as 16 working days, if you submit all of the necessary paperwork.
SSS Housing Loan
The Social Security System (SSS) Housing Loan, was built to provide working Filipinos with low-cost housing, home loan assumption, and home improvements. An SSS Housing Loan is issued by the Social Security System, a state-run social insurance program. SSS Housing Loans are not as common as Pag-IBIG Housing loans, but still carry many benefits.
You can use a SSS Housing Loan to purchase a lot and construct a new house; purchase an existing residential unit such as a house and lot, condominium, or townhouse; or to construct a new house on a lot that you own which is free from encumbrances and liens.
With an SSS Housing Loan you can borrow up to ₱2,000,000.00, but the actual amount you are granted is based on the lowest of the following:
- Appraised value of collateral totaling at least 70% but not over 90%.
- Your capacity to pay.
- Your need based on the type of work you wish to complete and materials evaluated by the SSS.
Your loan repayment term can be repaid in multiples of five years, with a maximum repayment term of 30 years. Interest rates vary with an SSS Housing loan between 8.0% per annum and 11% per annum as outlined below.
|Loan Amount||Interest Rate|
|Up to ₱450,000.000||8.0% per annum|
|From ₱450,000.00 – ₱1,000,000.00||9.0% per annum|
|From ₱1,000,000.00 – ₱1,500,000.00||10.0% per annum|
|From ₱1,500,000.00 – ₱2,000,000.00||11.0% per annum|
To qualify for a SSS Housing Loan you must be a member of the SSS, be a member of a registered workers’ organization, have at least 36 months’ premium contribution and 24 continuous contributions before the time of your application, cannot be more than 60 years old at the time of your application, cannot have previously been granted an SSS housing loan, and cannot have previously been granted final SSS benefits.
Bank Housing Loans
There are many banks to choose from when it comes to home loan financing. One of the best ways to get started with deciding where to get a bank loan is to do research on various financial institutions that interest you or with the ones you’re currently using. Utilize a tool such as a home loan calculator to get an estimate of how much you could finance with a bank.
Banks differ in terms of rates of interest and loan terms. Overall, here is what you can expect from a bank. First, you can use a bank loan to: purchase a townhouse, condominium, vacant lot or house and lot. You can also use a bank home loan to complete construction and home renovations, or to refinance your current home loan. The amount of money you can borrow from a bank for your home loan will vary, and will be dependent upon your capacity to pay. Repayment terms are also variable depending on which bank you decide to get your home loan from. Since banks can provide you with so much flexibility in terms of financing options, doing thorough research before signing any loan document is of utmost importance. Like any loan amount, banks vary in the amount they are willing to finance. Some banks offer 80% to 90% financing, while some offer as low as 70% total financing. Interest rates also vary depending on the bank, the total loan amount, and the loan tenure you decide on.
The qualifications for a bank loan are a little less strict. In most instances, a bank membership is not needed, there are no contribution requirements, and you do not have to have a savings account. You must be a Filipino citizen, or have a Visa if you are a foreigner. Banks traditionally have quicker approval times than other home loan options. If you decide to go with a bank for your home loan financing needs, the best way to ensure fast approval is to fully complete your online home loan application.
In order to be approved for a home loan from a bank, you must have a steady monthly family income. The amount you qualify for, and the rate you receive will be largely dependent on your capacity to pay. Online tools such as a HSBC Housing Loan Calculator can provide you with an idea of the type of financing you could receive from a bank as compared to a Pag-IBIG Housing loan or SSS Housing Loan.
Which Home Loan Option Is Best For Me?
Buying a home is a major milestone, and you want this time to be memorable, not stressful. That’s why it’s important to pick a home loan that suits your individual needs.
- Pag-IBIG Housing Loan: If you are looking for a straight forward home loan with a low interest rate and flexible payment terms, a Pag-IBIG house loan would be a great financing option for you.
- SSS Housing Loan: If you are a Filipino worker who is part of a registered worker’s organization you could greatly benefit from the low-cost housing options offered by an SSS Housing Loan.
- Bank Loan: If you want a bit more flexibility with your home loan in regards to rate of interest, payment term, and financing amount, a bank home loan may be the way to go.
Above all, remember to utilize a mortgage calculator while doing your research to help you determine how much financing you could quality for, before you start looking for a house. Doing this will help set up expectations, and help you determine what type of financing would be best for you.