It is important to have some basic understanding of real estate concepts before investing in condominiums and house & lots in the Philippines. This way, you’ll have some peace of mind that you’re making the right decision before investing your hard earned money.
So we’ve prepared for you a list of terms to guide you in your search for your next home.
Bank Financing vs. In-house Financing
After paying your down payment, you will now have to choose a financing option for the remaining balance of the property.
Bank financing offers lower interest rates which are currently at 5% to 7% per annum. Some banks offer fixed interests up to five years which will be reassessed after the payment period. However, interest rates are subject to economic conditions and may increase after the term.
Securing a bank loan also demands a lot of requirements and documents that may include any of the following: employment records, bank statement, income tax return, financial statements, permits, Special Power of Attorney, birth and marriage certificate. Banks also have basic qualifications at the onset. Eastwest Bank, for example, requires the following:
|Minimum Income||40K monthly salary|
|Age||21 up to 65 years old (upon the maturity of the loan)|
|Employed or Self-employed or OCW/OFW||If employed, must be 1 year with the company and with permanent status (note: contractual status is allowed for seafarers/ OFWs.
If self-employed, business must be operating for at least 3 years.
|Citizenship||Filipino and residents of the Philippines|
On the other hand, in-house financing does not require much paper work compared to bank financing. Rates are fixed and are not subject to the fluctuating economy. But the rates are higher compared to a bank loan, usually at 14% to 18%.
Bare, Unfurnished and Fully-Furnished
A bare unit refers to a unit with only concrete finishing and the main door. There will be no tiles, no paint on the walls and ceiling, no internal doors, no electrical wirings. Kitchen and bathroom are also at the concrete stage.
The unfurnished unit is the most common way a developer will turn over the unit. Usually, this includes floorings, painted walls and ceiling, kitchen cabinets and sink, bathroom fixtures, internal doors and electrical wirings and outlets.
The term semi-furnished may vary depending on the developer. Furnishings may include any of the following: TV, bed, sofa air-con, washing machine and bed. Buyers may be able to avail of this semi-furnished package depending on requirements dictated by the developer.
The most convenient of it all is the fully-furnished unit like what is offered by HBI. In this type of delivery, unit owners can expect to have a sofa with throw pillows, wall clock, and aircon for the living room. Kitchen and dining includes tables and chairs, refrigerator, plate set, cookware, flatware, utensils, range hood and induction cooker. And for the bedroom, mattress, beddings and pillows are also included.
Some people usually hesitate investing in a condominium because of the misconception that it will be obsolete after 50 years.
The confusion might have arisen because of Republic Act No. 4726 or the Condominium Act of the Philippines which states that a, “project has been in existence in excess of 50 years; that is obsolete and uneconomical, and that condominium owners holding in aggregate more than 50 percent interest in the common areas are opposed to repair or restoration or re-modeling or modernizing of the project.”
Meaning, the lifespan of a condominium is not limited to 50 years only. Instead it will depend on the decision of the majority of unit owners.
But before buying or signing an agreement, make sure that you ask your agent or broker if the condominium for sale is under perpetual ownership and is covered by a Condominium Certificate Title (CCT). This will entitle you to full ownership rights, and should it be decided that the property is going to be sold or demolished, you will get your appropriate share of the proceeds of the sale.
Rent-to-own (RTO) vs. Traditional Financing
The rent-to-own (RTO) scheme is an agreement wherein an individual is allowed to rent a property with an option to acquire it within a specified period of time. In case the individual decides not to continue with the purchase, all payments made to the owner will be treated as rental fees.
Buyers with an immediate housing requirement are easily attracted to these RTO offers. If you’re one of them, make sure that you clarify the terms with your agent. Because there are promos made to appear as RTO, but are just traditional financing schemes with low downpayment requirements. Though home ownership is made easier, the buyer will still need qualify for a housing loan before being allowed to move-in.
Traditional financing generally means a loan or line of credit secured through a financial institution under conventional terms, usually based on the “four Cs”: character, collateral, capital, and capacity. The process for securing such financing is fairly standardized, with lenders looking at your credit history and your assets when assessing your qualifications.
Pre-selling vs. Ready for Occupancy
Pre-selling refers to properties that are currently under construction or still in its planning stages while Ready For Occupancy (RFO) are units in existing structures that may only require minimal rectification prior to move-in.
Properties that are pre-selling usually have more flexible payment schemes compared to RFO’s. RFOs usually require higher cash-out and tend to be more expensive because it has already appreciated since the time it was built.