PAGIBIG Housing Loan and Net Income

Among the four factors used by the Pag-ibig Fund to compute the amount of housing loan that its members may avail of is their monthly net disposable income.

Net disposable income is what’s left of your salary after deducting taxes, mandatory contributions to Pag-ibig and Social Security System (SSS) for the private sector or Government Service Insurance System (GSIS) for the public sector, and loan or other payments (if applicable).

Since Pag-ibig decides on the lowest amount of loan that a member may take out based on either contribution, actual need, loan-to-collateral ratio, or capacity to pay (based on the net disposable income), it is the latter factor that is usually used as basis for most housing loan computations.

The table below is a listing of net incomes and their equivalent housing loan amounts pegged on the loan terms or the number of repayment years.

If, for example, you want to take out a housing loan of 500,000 pesos, you must have a net monthly income of about 25,000 pesos if your loan term or number of repayment years is five years. You may still avail of the same loan if your net monthly income is 10,000 pesos if you choose a 20-year loan term.

Now that you know the amount of housing loan you can take out, the next step is to determine your monthly amortization. How much do you need to pay Pag-ibig Fund on a monthly basis if you take out a 500,000-peso housing loan for 5, 10, 15, or 2o years.

The table below lists loan amounts and corresponding monthly payments based on loan terms (5, 10, 15, 20, 25, 30 years).

PAGIBIG Housing Loan Guidelines

If you’ve made that big decision to buy a house, chances are you’re also already choosing from the many possible financing options available to you because, let’s face it, only a few people can afford to pay cash for big purchases like property acquisitions.

One alternative that private sector employees should consider when acquiring a house and lot is to take out a housing loan from the Home Development Mutual Fund (HDMF), more popularly known as Pag-ibig Fund.

Republic Act 7742 has made membership in the fund mandatory for private sector employees earning 4,000 pesos and above. If you’ve been contributing religiously to the fund for at least two years, you probably quality for that loan.

Pag-ibig Fund allows borrowing of up to 2 million pesos to fund any of the following:

* purchase of a fully developed lot in a residential area

* purchase of a lot and construction of a house on it

* purchase of a house and lot, townhouse, or condo unit

* construction of a house on a lot owned by the member

Pag-ibig Central Visayas senior mortgage account specialist Senen D. Catingub Jr. says that in determining the maximum amount that a member may take out as a loan, the fund decides based on the “lowest” from among four factors:

1. Contribution. The table below shows the schedule of contributions and the corresponding loanable amounts. POP in the first column means Pag-ibig Overseas Program and the amounts in column 2 under the heading Pag-ibig I and II as well as in the third column under loan amount are in Philippine peso.

Hence, if your monthly contribution is 500 pesos, your loanable amount is over 1 million to 1.1 million pesos.

2. Loan-to-collateral ratio. Some subdivision or property developers offer a buy-back provision for housing units sold through various financing schemes.

The provision serves as a guarantee that the property developer will reacquire housing units foreclosed by financing institutions due to non-payment of borrowers.

Pag-ibig fully covers housing units costing up to 300,000 pesos even without a buy-back guarantee and over 300,000 up to 750,000 pesos with buy-back guarantee. The fund will cover 90 percent of the cost of housing units worth over 300,000 up to 750,000 pesos without a buy-back guarantee.

Housing units that cost over 750,000 up to 1 million pesos are only 95 percent covered if with a buy-back guarantee and 85 percent covered if without.

Pag-ibig covers 90 percent of the cost of housing units worth over 1 million to 2 million pesos if with a buy-back guarantee and 75 percent of the cost if without.

3. Actual need. This represents the amount of the housing unit as stipulated in the contract to sell, license to sell, amount of loan applied for, or cost estimates.

4. Capacity to pay. Pag-ibig Fund takes into consideration the member’s capability to pay the monthly amortization of his or her housing loan. It requires that the monthly amortization of the member on his or her loan must not be more than 40 percent of his or her net disposable income. Hence, if a member’s take home pay is 20,000 monthly, his or her monthly amortization must not exceed 8,000 pesos.

Other uses of a Pag-ibig housing loan, aside from the four mentioned above, are: home improvement and refinancing of an existing loan in an institution acceptable to the fund.

Aside from meeting the contribution requirement, Pag-ibig also requires that borrowers must not be more than 65 at the time of the loan application and not more than 70 at the date of loan maturity, they must not have any outstanding housing loan either as borrower or co-borrower, and must not be in arrears in their multi-purpose loan repayment.

Pag-ibig charges 3,000 for housing loan processing fee. The 1,000 pesos is paid at the time of the processing while the remaining 2,000 pesos is taken from the loan proceeds upon its release.

The monthly amortization of the housing loan may be paid in two ways: through salary deduction or by issuing 12 post-dated checks to cover one year of payment.

Payment of the monthly amortization starts a month after the full or final release of the loan.

By fully developed lot, Pag-ibig means land that is free from squatters, with access to electricity and water, with provision for drainage and road right-of-way, and with existing land monuments.

Also, the lots to be acquired using the loan must be free from any encumbrances.

The maximum term of a Pag-ibig housing loan is 30 years.

Last Update:August 8th, 2007

Easy steps to a Pag-Ibig housing loan

You’ve seen the property that you want to acquire, checked it out repeatedly, in fact, and you’re convinced that it’s the right one for you.

You’re a Pag-Ibig fund member and want to acquire the house and lot or the lot where you want to build your home through a Pag-Ibig housing loan but don’t know how to go about it.

Let these easy steps published in the Pag-Ibig publication “Pabahay ni GMA” and posted in the agency’s website guide you.

1. Attend a housing loan counseling session at the Pag-Ibig Fund office nearest you.

Applicants are asked to accomplish a preliminary loan counseling questionnaire, housing loan application form, and membership status verification slip (MSVS).
Based on these documents, Pag-Ibig officers will determine if the applicant is eligible for a housing loan. Eligible applicants are then given a checklist of requirements that they must comply with before they move on to step 2 in the list.

The requirements include: certificate of employment with salary breakdown (notarized), latest 1 month payslip, Income Tax Returns (ITRs) and W2 for the last two years, photocopy of a company ID or any valid ID with signature, proof of billing, birth certificate, marriage certificate, community tax certificate, and 1×1 picture (4 pieces).

For overseas workers, the requirements are: a special power of attorney (SPA), ID with signature of person designated in the SPA, photocopy of passport (pages 1 and 2), latest job contract, and POP contribution with record book.

To know some eligibility requirements of the agency, check out Pag-Ibig’s housing loan guidelines.

2. Submit to Pag-Ibig your loan application form together with all the requirements in the checklist and pay the processing fee of 1,000 pesos. The amount is non-refundable, even in the case that your loan gets disapproved.

3. Wait for notice of approval or letter of guaranty from Pag-Ibig on your housing loan. After your loan is approved, you will need to sign loan documents at the Pag-Ibig office.

4. Proceed to the Bureau of Internal Revenue (BIR) and present the deed of absolute sale between you and the owner of the property. You will also need to submit other necessary documents like tax declaration and tax receipt or clearance for the payment of capital gains tax and documentary stamps tax and secure Certificate Authorizing Registration (CAR).

If you want to know beforehand how capital gains tax and documentary stamps tax (DST) are computed, check out this post on taxes in real estate transactions.

5. After getting CAR from BIR, proceed to the notary public and have your Loan Mortgage Agreement (LMA) notarized.

6. The next agency to visit is the Registry of Deeds where applicants will need to pay transfer tax and registration fees for the transfer of title and annotation of mortgage.

7. If you’ve taken out a loan to purchase a new residential unit or a lot where you’ve had a house constructed, you need to secure an occupancy permit from the engineering office in the city or town where the property is situated.

8. Next stop is the Assessors Office where you will need to secure a tax declaration for your property, which may be a house and lot or lot only. This is to be used as basis for your real property taxes.

9. After visiting other government agencies, you need to go back to the Pag-ibig Fund Office, armed this time with the following documents:

* Original Transfer Certificate of Title in your name which has the mortgage annotated on it
* DOAS with original RD stamp
* New tax declaration
* Updated real estate tax receipt
* Occupancy permit
* Assignment of loan proceeds

10. The second to the last step is to receive the loan proceeds that you will use to pay the seller of the property.

11. The last step is to start paying the monthly amortization base on the scheduled date.

Interest rates are at six percent for loans up to 300,000 pesos, 7 percent for loans above 300,000 to 750,000 pesos, and 10.5 percent above 750,000 and up to 2 million pesos.

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