According to the 2020 data from the Philippine Statistics Office, around 88.4% of Filipinos own homes.
Buying a house is one of the most significant financial decisions in a person’s life.
Even if it is the representation of a long-term investment and the fruition of one’s dream, the excitement of owning a house can turn into stress if you are not fully aware of the costs involved in the process.
When buying a house in the Philippines, many first-time homebuyers are surprised by the numerous expenses that come with the purchase.
These expenses go beyond the actual price of the property and can include taxes, fees, and maintenance costs.
Understanding these costs beforehand can help you plan better, avoid unexpected financial burdens, and ultimately ensure that buying your new home stays within your budget.
In this blog, we will break down the essential costs you need to know about when buying a house in the Philippines.
From the purchase price to hidden fees, we will guide you through every step of the financial process so you will be better equipped to make informed decisions and avoid breaking the bank during your home-buying journey.
1. Purchase Price of the Property
The first major cost when you learn how to buy a house in the Philippines is the purchase price itself.
Property prices vary greatly depending on the location, size, and type of property you are looking at.
For example, houses in Metro Manila and other highly urbanized areas tend to be more expensive compared to properties in rural areas.
It is important to assess your budget carefully before diving into property hunting. Consider:
- Location: Properties in prime locations such as Quezon City, Makati, or Cebu City will naturally cost more than those in provincial towns or smaller cities.
- Type of Property: A house and lot will be more expensive than a townhouse or condominium unit.
- Developer Reputation: Established developers may offer higher-quality constructions but may also have a higher price tag.
Before committing to any property, make sure you can comfortably afford the purchase price and factor in additional costs.
2. Down Payment
Once you decide on the property to purchase, you need to secure it by making a down payment. In the Philippines, the typical down payment for a home is between 10% and 20% of the total purchase price.
For example, if you are purchasing a house worth ₱3 million, you could expect to pay a down payment of at least ₱300,000 to ₱600,000.
To help ease the financial burden, here are a few tips:
- Save for the Down Payment Early: Start setting aside money as soon as you decide you want to buy a house. Opening a dedicated savings account for your home fund can help keep your goal on track.
- Pag-IBIG Housing Loan: The government’s Pag-IBIG housing program offers homebuyers the option to pay a lower down payment, often as low as 3% to 5%, depending on the property.
Having the down payment ready is a critical step when you learn how to buy a house in the Philippines, as it shows the seller and lender that you are financially committed.
3. Taxes and Government Fees
Pag-IBIG Fund is a government entity that can offer members a favorable housing loan term.
It is known to afford applicants of lower interest rates and reduced down payments. Eligible members can tap this office to finance their home purchase without burdening their finances.
Pag-IBIG loans offer terms that extend up to 30 years, allowing you to spread the cost over a longer period.
The down payment requirement for Pag-IBIG is also significantly lower than that of traditional banks, sometimes as low as 3% of the property’s purchase price.
By taking advantage of Pag-IBIG’s loan options, you can significantly reduce the upfront cost of buying a home and keep your monthly payments more manageable.
4. Miscellaneous Fees
Watch for several miscellaneous fees that can add to the total cost of buying a home. Here are a few you should be aware of:
- Homeowners Association Fees: Many subdivisions or gated communities charge monthly or annual fees for the maintenance and security of common areas. These fees vary depending on the development but can add a recurring cost to your budget.
- Title Transfer Fees: You will need to pay for the transfer of the property title, which involves costs for registering the new ownership at the Registry of Deeds.
- Inspection and Appraisal Fees: If you are taking out a loan to finance your home, the bank or lending institution may require an appraisal and inspection of the property. These services often come with fees that need to be paid upfront.
Understanding and planning for these additional costs ensures you will not be caught off guard when learning how to buy a house in the Philippines.
5. Financing Costs
Many homebuyers in the Philippines need a loan to finance their property purchase. Loans are offered by banks or government programs like Pag-IBIG.
There are still financing costs that should not be overlooked. Here are some key points:
- Bank Loan Fees: When applying for a housing loan, banks typically charge processing fees, appraisal fees, and legal fees. These costs can vary but expect to pay between ₱5,000 and ₱10,000 for bank loan processing and appraisal.
- Interest Rates: The interest rate will significantly affect the overall cost of your house. Bank loans generally have interest rates ranging from 6% to 8% per year, while Pag-IBIG loans may offer lower rates depending on the term and amount borrowed.
It is critical to shop around for financing options and understand the impact of loan terms when learning how to buy a house in the Philippines.
6. Maintenance and Utility Costs
Once you purchase your home, the next step is making the house livable. You will have to proceed with the application for and installation of utilities.
You also need to set money aside for repairs and renovations if needed.
- Repairs and Renovations: Newly bought homes often require minor repairs or renovations. It is advisable to allocate a portion of your budget for these unforeseen expenses.
- Utilities: Monthly utility bills such as water, electricity, and internet can add to your monthly budget. Be sure to consider these recurring costs when calculating how much you can afford.
7. Hidden Costs to Watch Out For
When you learn how to buy a house in the Philippines, some costs may not be immediately apparent. Your developer or agent may also charge some fees that include:
- Insurance: You may need additional insurance for flood, fire, or typhoon protection, especially if you live in a high-risk area.
- Broker or Legal Fees: If you decide to work with a real estate agent or lawyer, there may be additional fees for their services.
Make sure you account for these hidden costs when budgeting for your new home.
Tips to Save on Buying a House in the Philippines
Buying a home is a significant financial investment, but there are several strategies you can use to reduce costs and make the process more affordable.
From exploring different financing options to considering pre-owned properties, these tips will help you navigate the home-buying process with greater ease.
By taking the time to evaluate your options and plan, you can make the dream of owning a home more achievable without sacrificing your financial stability.
1. Shop Around for Financing
Before settling on a lender, make sure to compare mortgage rates and loan terms from different banks and financial institutions.
Each lender offers varying interest rates, loan terms, and processing fees, which can significantly affect the overall cost of your home.
For example, one bank may offer a lower interest rate but charge higher processing fees, while another bank may have a higher interest rate but lower upfront costs.
By shopping around and evaluating the total cost of each loan, you can secure the best possible deal and save money in the long run.
It is also wise to explore government-backed programs like Pag-IBIG, which may offer more favorable rates and terms compared to private lenders.
2. Consider Pre-owned Homes
While newly built homes may be appealing, they often come with a higher price tag due to construction costs, developer markups, and premium location fees.
Pre-owned homes, on the other hand, are often priced lower and can provide better value for money.
When considering a pre-owned property, look for homes in good condition that require minimal repairs.
You can also use the savings to invest in minor renovations to make the home your own.
Additionally, pre-owned homes in established neighborhoods often come with the advantage of developed community infrastructure, such as schools, hospitals, and commercial areas, which can save you time and money in the long term.
3. Maximize Pag-IBIG Housing Loans
Pag-IBIG Fund is a government entity that can offer members a favorable housing loan term.
It is known to afford applicants of lower interest rates and reduced down payments. Eligible members can tap this office to finance their home purchase without burdening their finances.
Pag-IBIG loans offer terms that extend up to 30 years, allowing you to spread the cost over a longer period.
The down payment requirement for Pag-IBIG is also significantly lower than that of traditional banks, sometimes as low as 3% of the property’s purchase price.
By taking advantage of Pag-IBIG’s loan options, you can significantly reduce the upfront cost of buying a home and keep your monthly payments more manageable.
4. Negotiate for a Lower Purchase Price
Do not be afraid to negotiate with the seller. In the competitive real estate market, there may be room for price flexibility, especially if the property has been on the market for a while.
By doing research and understanding the current market trends in the area you are interested in, you can have a stronger position when negotiating the price.
Sellers may be willing to lower the price or offer additional incentives, such as including appliances or covering certain fees, to close the deal.
Even a small reduction in the price can result in significant savings over the life of the loan.
5. Look for Government Incentives
The Philippine government offers various incentives to homebuyers, such as tax deductions and discounts for first-time buyers or low-income families.
The First-time Home Buyers Program under the Pag-IBIG Fund allows buyers to access lower interest rates and special loan packages.
Check if you qualify for any government programs or incentives that can reduce your overall cost.
These programs can help make homeownership more affordable, especially for first-time buyers or those with limited financial resources.
6. Plan for Long-Term Expenses
While the initial cost of purchasing a home is the most significant expense, it is important to plan for ongoing maintenance and operating costs.
Budgeting for utilities, property taxes, and homeowners association fees will help you avoid financial surprises after you move in.
Set aside a portion of your budget for regular maintenance, repairs, and upgrades to keep your property in good condition.
Being proactive about home maintenance will not only save you money but also help preserve the value of your property over time.
Conclusion
Buying a house in the Philippines is a significant financial commitment, but with proper planning, you can ensure it fits within your budget.
It is crucial to understand the full scope of costs involved, from the purchase price to taxes and maintenance fees.
By budgeting effectively and exploring financing options, you can make the dream of homeownership a reality without breaking the bank.
