OFFICE OF THE PRESIDENT • REPUBLIC OF THE PHILIPPINES
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8 Things to Consider When Buying a House

 

Home Guaranty Corporation

  1. How much you can afford

    One of the most important things to consider when buying a house is determining how much you can afford. Most of us consider owning a house the fulfillment of a dream. We all have a picture of our dream house in mind. And sometimes, we buy houses based on our picture of the dream house without really considering what we can afford. Sometimes, we end up scrimping on other essentials just to pay for our “dream house”.

    A good advice to follow is to make sure that the monthly amortization for the house you are going to buy will not exceed 36% of your monthly take-home pay. Supposing that your monthly net take home pay is PhP 50,000.00, the monthly amortization should not be more than PhP 18,000.00. This leaves you with enough money for your other needs.

  2. Down payment

    A portion of the selling price (or contract prices for Contracts-to-Sell) is usually required as a down payment. This is to assure developers/banks/sellers of the buyer’s willingness or ability to pay. The down payment, which is sometimes referred to as equity, may be as low as 5% to as high as 50% of the selling price. Some real estate developers allow that the equity be paid on an installment basis. However, only after the required equity has been paid can the buyer occupy and make use of the housing unit.

  3. Finding the right mortgage

    The right mortgage is basically a combination of the interest rate you can live with and the term of the loan. A longer loan term usually means lower monthly amortization, and a shorter term loan means higher monthly amortization. In simple terms, the monthly amortization for a 10-year loan is generally more compared for a 20-year loan of the same amount.

    You may consider a long term loan, if you can only allot a little portion of your monthly pay for amortization payment. It is good to remember however, that the longer the term of the loan, the bigger the portion of your payment goes to interest. You will end up paying more but you are given a longer time to complete your payment.

    You may consider a shorter-term loan if you can afford it at your present financial situation. For example, you may want to pay more now and complete your payment in five years time. Such that, by the time your children go to school, you no longer need to worry about your monthly amortization.

  4. Vicinity

    After carefully taking into account how much you can afford, the amount required for the down payment, and how long you want to keep your mortgage, the next question would be where to buy.

    Different locations have their advantages and disadvantages. For example, buying a house near the workplace will cut transportation costs and time allotted for commuting. In Metro Manila where traffic during peak hours could crawl at just 10kph in chokepoints, a 25- km distance from the house to the workplace could mean 4 hours of commuting in a day or 20 hours in a week. That much time could be better spent somewhere else or for doing something else. Real estate prices, however, are generally higher in areas near work places.

    Aside from your own personal convenience, there are the needs of your family to consider. Questions that should be considered include: how far is the nearest good school? Are there good hospitals, malls, playgrounds, etc. in the area? Is the neighborhood safe for the children? Is the area prone to flooding? The more you are in the family, the more the needs to be considered. Be ready to make compromises. At any rate, it is always best to have all factors considered.

  5. Detailed records of previous ownership

    For properties that are FSBO (For Sale By Owner), it is recommended that you look at the previous ownership and the status of the Transfer Certificate Title (TCT) to make sure that there are no other claimants to what you are buying. Cases involving land ownership usually take time to resolve and you would not want to end up being evicted.

  6. Architectural and engineering plans

    The architectural and engineering plans will provide a detailed summary of what your walls, floors, ceiling, etc., are made of. These will also tell you how the electrical wiring of the house is set up in case you will have a need to refer to it in the future.
    Deciding on which appliances to buy may depend on the sizes of the electrical wires used in your house and the power capacity of the circuit breakers. Knowing where the flow of the drainage is, may be a valuable information when planning to do some renovation or home improvement.

  7. Parking space

    One of the advantages of having an assured parking space is the certainty that you will be able to park your car at any given time. In places where parking spaces cost as much as the car that you will park in it, locating a parking space may take some time. This will prove to be problematic every time you will be coming home with a bag-full of groceries, or if it is raining, or simply when you just want to be in the comfort of your home the soonest. The size of the parking space should also be considered, especially if you are planning to buy another car or upgrade to a bigger car in the future.

  8. Taxes

    If you own real property, you will have to pay real property taxes on a quarterly or a yearly basis. It is therefore important that one knows how real property taxes are computed. The fair market value (FMV) of the property you wish to buy will be used in determining the assessed value and hence, the tax. Taxation laws state that 20% of the FMV be used as tax base. Assuming that the FMV of the property you wish to buy is PhP 5,000,000.00, multiplying this amount by 20% will yield a product of Php 1,000,000.00 which is now the tax base. This tax base will then be multiplied by a tax rate of usually 1% in the provinces and not exceeding 2% in highly urbanized cities. If the property is in Metro Manila, the real property tax that has to be paid annually for a PhP5 million property at 1.5% tax rates is PhP 15,000.00.

    Real property taxes are due on or before March 30 of every year for annual payments or at the end of each quarter for quarterly payments.

These are just some of the basic things that have to be included when buying a house. Some factors that may also be considered include pet ordinances, the neighborhood, wind direction, sunrise and sunset, and many others. If you need information regarding any of these things, do not hesitate to ask your broker.

 
 

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