A banker’s useful insights on home loans
Loans, when put to good use, can provide the common Filipino the leverage to a wide range of investments, from small purchases to the big-ticket items like cars or houses.
When invested recklessly and irresponsibly however, loans are often reduced to mere horror stories that talk of ballooning interests, absurd service fees and other hidden charges that can readily put an individual deep into debt.
It is thus critical for an individual to first have a clear grasp of what a loan is, the different types that will suit varying needs and concerns, and how you can make the most out of these facilities, especially if you are planning to go for bigger purchases like a house and lot.
Housing loans, in particular, will require knowing and understanding the risks and huge responsibilities that come with availing these facilities, since the amounts involved are usually huge.
To prepare you for any potential loan uptake, either soon or in the future, Dang Manulat, senior vice president and head for the consumer lending group-home loan business of BDO Unibank, has provided Inquirer readers useful insights on some of the frequently asked questions concerning housing loans. These insights can serve as a guide in helping you decide which loan best suits your need.
1 What is a home loan? Home loan is a financing facility secured by a real estate where funds can be used for the following loan purposes: purchase of vacant lot; purchase of house and lot; purchase of townhouse unit; purchase of condominium unit; house construction; refinancing/take out; house renovation/home improvement; and reimbursement of acquisition cost.
BDO Home Loan, according to Manulat, offers an all-in financing option, a separate financing arrangement, which you can avail to finance everything that you need at all stages of owning a home. The all-in financing option covers incidental expenses such as transfer cost, title registration fee and insurance premium.
2 Who are eligible to apply? BDO considers as eligible to apply for a home loan employed individuals with regular status and have stayed with current company for at least two years; self-employed individuals whose businesses have been operating for the last two years; Filipinos or Filipinos with dual citizenship; individuals who are 21 years old, but not exceeding 65 years old upon loan maturity; individuals who have a minimum gross family income of P50,000 per month; and those with no adverse finding based on bank’s guidelines.
3 How is this eligibility determined? At BDO, eligibility is usually determined or measured mainly in three areas.
One, BDO looks into the individual’s capacity to repay the loan. Aside from requiring a minimum family income, banking institutions usually ensure that the total amortization of an individual must not exceed 40 percent of the gross monthly income.
Also being looked at is the character of the borrower, which usually centers on his or her willingness to pay the loan. To assess this, BDO checks on the client’s payment history or handling of past and existing loans. If all loans have been satisfactorily handled, it creates a positive impression that the client is a responsible borrower and has thus less risk for default.
Any bad loan record will meanwhile serve as a red flag for the bank.
Another consideration is that the property for mortgage must be residential and within the serviceable area of BDO. It must carry a clean title or not currently mortgaged with other bank or financial institution upon loan application.
4 How does one apply for it? Luckily, the healthy competition among different financial institutions has eased the process of applying for a home loan.
In BDO’s case, depositors and walk-in clients may apply and submit their loan application in the banks more than 730 branches nationwide; or upon completion of downpayment requirements, buyers of accredited real estate developers can apply for BDO Home Loan through their developers.
“Clients may buy from inventory of properties sold by accredited brokers or sales agents. The accredited broker or sales agent will assist them in filing the loan with BDO through their designated Home Loan account officer,” Manulat explained.
Other applicants may also send online application via www.bdo.com.ph and an account officer will respond within three banking days.
5 What are the requirements? When applying for a BDO Home Loan, make sure you already have these basic requirements: completely filled-out and signed home loan application form; photocopy of one valid government-issued ID with photo and signature; and marriage contract if applicable.
Additional requirements, however, may be requested depending on source of income and loan purpose.
6 How long does it take to process a loan? For BDO, it takes five banking days to process the loan upon receipt of complete application documents. Once approved, the client will be requested to sign the loan documents and submit a copy of original collateral documents such as Transfer Certificate of Title (TCT), Real Estate Tax Receipt (RETR), Tax Declaration of Land and Improvement (if any).
Borrowers will have to wait for another 10 banking days after these additional documents are submitted for the release of loan.
7 Is there a maximum or minimum amount one can borrow? Who or what determines the amount of loan that can be granted? The loanable amount is determined through the value of the property to be mortgaged and the borrower’s capacity to pay.
Currently, BDO offers a minimum loan amount of P500,000 while the maximum amount can go as high as 70 percent of the appraised value of the property to be mortgaged, provided that the total monthly amortization will not exceed 40 percent of the gross family monthly income.
8 What is the range of interest rates offered by BDO? According to Manulat, interest rates range from 7.75 percent to 11.50 percent annually that can be fixed from one year to up to 20 years, respectively. BDO gives the borrower the option to choose for the fixing period, after which, yearly repricing will be applied based on prevailing market rate.
9 How does one pay for the acquired loan? A client starts paying his or her loan after 30 days from date of the loan release. Amortization is usually paid monthly via automatic debit arrangement (ADA) against borrower’s BDO current or savings account.
10 What are the benefits of acquiring loans from reputable institutions like BDO? At the moment, BDO provides clients competitive interest with fixed-rate options and flexible payment terms plus a guarantee of fast loan processing. And as an added perk, clients with approved home loans can avail of a free home insurance.
“This automatically entitles you to insurance coverage from fire and lightning, typhoon, flood, earthquake and robbery and burglary,” Manulat concluded