Written by: Rita Magallona
So you’ve decided to take the leap and purchase your first home. Your first foray into real estate is going to cost a lot of money – think millions of pesos, especially for a home in the city.
Have you considered the other expenses involved in purchasing a home? As any professional architect or developer would tell you, it pays to plan things out in detail before you spend a single centavo.
7 Financial Factors to Plan for When Buying a Home
Time to take out your calculator!
1. Monthly Income
Paying for a bank loan means forking out monthly payments over a period of about 20 to 30 years. Do you make enough to make five-figure payments and still meet your daily needs?
The rule of thumb is the amortization for the house should only be around 28% of your monthly income. So if you make ‚Ç±75,000 a month, you should only be paying ‚Ç±21,000 in monthly amortizations.
Can you comfortably afford the property that you’re looking at? Check out various online amortization calculators like Pag-IBIG Fund’s Housing Loan Affordability Calculator to find out. see if you can afford that home you want. These calculators also let you see which homes are within your budget.
3. Documentary Stamps Tax
In the Philippines, the Documentary Stamps Tax is imposed on loan agreements, instruments, and other legal documents.
For deeds of sale of properties, expect to pay ‚Ç±15 for every ‚Ç±1,000 of the fair market value of the property. So, if you’re buying a ‚Ç±1 million condo unit, the tax would be ‚Ç±15,000.
But what if you’re buying from the developer as a mortgaged property? Expect to pay:
- ‚Ç±40 for the first ‚Ç±5,000 of the price
- ‚Ç±20 for every additional ‚Ç±5,000 more than the first
If you are buying a ‚Ç±1 million condo unit through a mortgage, the tax would be ‚Ç±8,020.
4. Local Transfer Tax
This is the tax imposed on the transfer of ownership of a property. This could be 0.5% to 0.75% of the selling price, depending on the city or municipality of your property. Inquire at your city or municipal hall to be sure.
5. Notarial Fee
All legal documents have to be notarized to be considered legal, including the Deed of Absolute Sale of the property. The notarial fee ranges from 0.1% to 0.15% of the selling price. You can usually find a notary public at your municipal or city hall.
6. Bank Loan Fees
Banks usually offer the fastest loan transactions, but this convenience means additional fees. They charge for attached services like appraisal fees and handling fees. For security, banks also include mortgage redemption insurance (MRI) and fire insurance in their loan packages.
If you wish to avoid paying bank loan fees, consider government home financing through the Pag-IBIG Fund or the National Housing Authority.
7. Real Property Tax
When the Local Government Code was passed in 1991, the local government units were authorized to generate their own income to fund their public services. One of these sources of income is the Real Property Tax (RPT) levied on properties to be paid by the property owners. The RPT covers not only land, but also the building on the land, improvements on the land and the building, and machinery.
In Metro Manila, the RPT rate is 2% of the assessed value of the property. In the provinces, it is 1%. But local governments also charge an additional 1% for the Special Education Fund that is added to the budgets of local schools.
If you buy a freestanding house, you will be charged for both the house and the lot that it stands on, assuming that you own both. However, if you buy a unit in other developments like condominium complexes, you will pay for both the RPT of your unit, and your share in the RPT of the common areas of the condominium complex.
Your condominium’s Property Management Office computes this by dividing the RPT due by the total number of square meters there are in the residential areas, and then multiplying the quotient by the size of each individual unit to determine how much the owners of those units owe. This is often charged with the monthly association dues in January, when you can pay for the RPT in whole.
Now that you’ve crunched the numbers, we hope this helps you become even more ready to buy your first home.
Ohmyhome was launched in the Philippines in September 2020, following the company’s establishment of a tech team in the country in 2017. Ohmyhome was originally founded in 2016, and subsequently rose in Singapore as a leading PropTech solution and licensed real estate agency.
Ohmyhome expanded into the Philippines so that Filipino home seekers can have a real estate partner that they can trust to have their best interests at heart and can be relied upon to provide exceptional services throughout the entire property journey.
Featuring thousands of properties across many of the Philippines’ major real estate brands, Ohmyhome differs from other local platforms by going the extra mile and extensively helping buyers narrow down the choices and find the property that best suits their budgets, home needs, and lifestyle preferences.
The company’s Real Estate Agents help in shortlisting options and providing professional services through the entire purchasing process. These include assistance in property inspections, negotiations, the finalization of the Conditions of Sale, deposit collection, the submission of property documents, as well as providing buyers regular updates.
Ohmyhome helps Filipinos find their dream homes, all while making sure each real estate transaction is complete and is an efficient and enjoyable experience.