Housing Loans: 5 Biggest Differences Between Pag-IBIG and Banks

Loan application with pen and coinsPhilippine housing loans generally come from two sources: the Pag-IBIG Fund and banks. As lenders, the government and private financial institutions help different borrowers finance property purchases and home construction projects.

Outside these primary purposes, however, Pag-IBIG Fund and bank housing loans are dissimilar in almost every aspect.

In a nutshell, these are the five main differences between them.

Citizenship Eligibility

Any Lancaster review from websites such as Cavite Properties would affirm that Pag-IBIG housing loans are reserved exclusively to Filipino citizens. After all, one of the core mandates of the Pag-IBIG Fund is to provide affordable shelter financing for the Filipino worker.

On the contrary, some local banks, like the Philippine National Bank, extend credit to international clientele. If you’re a foreign national who wants to borrow money to buy a property in the country, you might find credit facilities available to cater to your unique needs.

Maximum Loan Amount

Certain borrowers can get multiple loans not exceeding P6,000,000. On the other hand, most private banks base their loanable amount maximum based on the borrower’s capacity to pay.

Margin of Finance (aka Loan-to-Value Ratio)

Generally, private banks are only willing to shoulder 80% of the property’s selling price; some financial institutions are only comfortable lending 70% of the cost. Based on its Loan Affordability Calculator, the Pag-IBIG Fund only requires 10% home equity on housing loans worth not more than Php1,888,000.

If you need to borrow more money than that, you would have to come with up a larger down payment.

Fixed Pricing Period

The interest of most housing loans in the Philippines are subject to re-pricing. By and large, private banks usually offer fixed interest rates for the first 12 months only, but you might find some willing to extend the period to five years.

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The Pag-IBIG Fund, however, allows borrowers to lock in a fixed interest rate for up to 30 years.

Processing Time

The Pag-IBIG Fund usually process housing loans in 15 business days, while private banks usually only need five to seven business days.

If the Pag-IBIG Fund and banks can’t meet your unique needs, you should consider obtaining a loan from the developer itself. In-housing financing is not without downsides, but it appeals to borrowers that don’t mind the slightly higher interest in exchange for a frictionless housing loan application process.

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