Things You Should Know About Home Loans In The Philippines – Part 2
In the previous article we discussed the basics of acquiring home loans in the Philippines. So let us now proceed to how much you should borrow or can borrow to finance that dream home.
Am I Financially Capable? Can I Afford Home Loans?
Banks in the Philippines are more than willing to lend you money to help you buy your dream home but first you need to prove your financial capability and submit the required documents. If you qualify for home loans you can borrow up to 80% of the property’s value. So to give you an idea here are the things that determine your eligibility for a housing loan in the Philippines.
Income Bracket/Salary – Banks base your financial capability on how much you are earning. Banks basically take on fewer risks by lending to high earning clients. The higher your annual pay is the higher are the chances of getting a home loan.
Amounts of Debt Owed – Banks will check your credit history, if you can keep up with your payments then you are more likely to get approved. If you have tons of debt like personal loans, credit cards and car loans and you are having a hard time paying for all of them banks will reject your application.
Your Savings – Having a savings account or a current account you can link to your home loan can be advantageous to your situation. If you have a savings account this proves that you have a good credit standing. The rule of thumb is that your monthly amortization should not exceed 30% of your gross income. There is another way to determine if you can afford a housing loan and this is by getting your DSR or your Debt Service Ratio. The formula to get your DSR is DSR = monthly debt repayment obligations/your take home pay per month. In the Philippines the acceptable DSR is 50%, as set by the BSP (Bangko Sentral ng Pilipinas).
Okay, now that you have an idea if you can afford a home loan or not the next thing you should do is to decide the amount you should borrow. Well, this depends on your needs but the most important thing that you should always remember is to only borrow an amount you can actually pay for. If you borrow more than you can afford you might end up being knee-deep in debt. And if you plan to take up short-term loans you should be aware that you will be paying higher installments each month. You need to know how much interest rates you can afford. Refer to the previous articles to determine the factors that determine your home loan interest rates.
You think you are capable of applying for home loans? Now it’s time to find the right one. You can use our comparison table to find the best one.