Are you ready to buy your dream home but unsure how much you can afford? Understanding your budget, downpayment requirements, and loan limits is crucial to avoid surprises. Here’s an easy guide to help you calculate what you need to prepare.

How Much Should You Save for the Downpayment?

For Ready-for-Occupancy (RFO) Properties

If you’re eyeing a move-in-ready property, be prepared to pay the downpayment 30 days after reservation. The typical downpayment is 20% of the total property price. In some cases, developers allow this to be paid in tranches, but it depends on their policies.

Example Calculation:

If the property costs ₱10,000,000:

• 20% downpayment = ₱2,000,000
• Payable after 30 days or as per developer’s discretion.

For Preselling Properties

Preselling properties offer more flexibility. The downpayment is usually spread out over the construction period until the project is turned over, making it easier on your wallet.

Example Calculation:

For a property priced at ₱10,000,000 with 3 years until completion:

• 20% downpayment = ₱2,000,000
• Monthly payment for 36 months = ₱55,556

Preselling options are great if you’re still saving up, as payments are spread over time. Some developers offer low downpayment for pre-selling projects like 5% spread in how many months before turnover.

How Much Loan Can You Afford Based on Income?

Banks generally follow the 30% rule: Your total monthly debt payments (including home loans) should not exceed 30% of your monthly income.

Example Calculation:

If your monthly income is ₱200,000:

• 30% of ₱200,000 = ₱60,000
• Your loan repayment should not exceed ₱60,000 per month.

Before banks approve a loan, they check all your existing debts, including car loans, credit card payments, and other obligations. The 30% limit applies to your total debt payments, not just the home loan you’re applying for.

Loan Term and Age Matters

Banks consider your age when approving loans. Typically, the loan must be fully paid before you turn 65. This affects the loan term you qualify for.

Example:

• If you’re 40 years old, you have 25 years to repay the loan (65 – 40 = 25 years).
• If you’re 55 years old, the maximum loan term is 10 years.

Shorter loan terms mean higher monthly payments, so plan accordingly.

Check Your Loan Eligibility with the Bank

Before committing to a property, check with your bank to know how much you’re eligible to borrow. Banks will evaluate your income, existing debts, age, and financial stability. Knowing your loan approval amount ahead of time can help you set realistic expectations and avoid unnecessary stress.

What About Having a Co-Borrower?

If your income isn’t enough to qualify for a loan, you can apply with a co-borrower. A co-borrower helps strengthen your loan application but comes with responsibilities.

Key Considerations:

• A co-borrower’s income can be combined with yours to increase loan eligibility.
• The co-borrower is equally responsible for the loan repayment.
• Both your names will appear in the loan documents.

However, a co-borrower’s financial commitments and credit standing will also be reviewed, which could affect loan approval.

Other Costs to Prepare For

Beyond the downpayment and loan, consider these additional expenses:

• Closing Fees: Around 3% to 10% of the property price for legal and processing costs.
• Move-In Fees: Includes utility setup and miscellaneous expenses and government taxes.

How Ohmyhome Can Help

Figuring out your budget doesn’t have to be stressful. Ohmyhome provides expert assistance in finding properties within your means, offering insights on financing options, and connecting you to trusted banks. Whether you’re buying an RFO or preselling property, we’re here to make the process simple and hassle-free.