Unlocking the door to your dream home
You’re sitting on your couch, scrolling through social media, and there it is—your online algorithm just led you to iterations of the dream home you’ve always wanted, with the perfect spot where your future selfies will look fabulous, a garden worth sharing on Home Buddies, and a kitchen where your Chicken and Pork Adobo will look (and taste) even better.
But there’s a catch. This dream home of yours comes with a steep price tag that makes your savings account look lean, and makes you even think about downgrading your dream just because of your financial situation.
But for every problem, there is always a solution. You have to understand that there is a facility called a ‘home loan’ and it is something that not all Filipinos tend to completely understand.
In order for us to better understand the utang universe, I think it’s best if we get a good grasp of the plight of Filipinos as far as money matters are concerned.
Financial literacy
According to Standard & Poors, three out of four Filipinos are financially illiterate. We know how to add, subtract, divide, and multiply numbers. But in the real world, we don’t know how to multiply money. Most of us think it’s enough that we have a stable, competitive-paying job. What we don’t understand is, that’s just one side of the story.
This brings me to the fact that according to the Asian Development Bank, eight out of 10 Filipinos don’t have financial plans—a plain and simple plan as to what we’re going to do with our money. And let’s admit it—if you don’t know what to do with money, what do we normally end up doing? We end up spending most, if not all of it.
That’s why, according to the Bangko Sentral ng Pilipinas, nine out of 10 Filipinos don’t have savings.
And if we’re looking at that many people having a difficult time saving, they also tell us that almost 98 percent of Filipinos are not even investing—which leads to the Social Security System telling us that 97 percent of Filipinos still end up retiring poor.
Saving, investing, and borrowing
It may be quite discouraging to save because our money’s only growing by so much. But Filipinos also need to understand that borrowing money also has a cost. You save money, you get, best case 0.5 percent gross. You borrow money, you repay with an extra 6 to 9 percent per annum. That’s why it’s not enough to save. We also need to make sure we also invest.
Which brings me to my point: There’s not much money in the pockets of Filipinos. And a lot of times, when we are in financial trouble, we resort to borrowing.
And whether we admit it or not, having to loan if you have debt, liability, whatever you prefer to call ‘utang’ is often frowned upon. For some reason, it carries with it a negative connotation—that when you borrow money, it is automatically assumed that you are poor, you are struggling financially or you are irresponsible with money.
It’s unfortunate, too, that many don’t take advantage of the fact that it’s easier for us to make money while we are young. Save and invest while you are still making money. We don’t make it a habit to think about the future. A lot of Filipinos are too comfortable relying on utang that it’s already embedded in their lifestyle.
The good utang
If you ask me, money, whether earned or borrowed, can be a useful weapon. It’s thus important to understand what makes a good utang—the kind that helps you and your money grow, that helps you progress personally and professionally, and that puts into consideration your future.
A good utang can be a multipurpose loan to fund paper investments to create a new source of income; a personal loan to buy a laptop to start a small online business; or a home loan so you end up paying mortgage instead of rental payment so you can own your unit or house, which then offers an opportunity for you to grow your money through real estate, whether through lease or land value appreciation.
Not all utangs are created equal
Among the loan products in the market, a home loan tends to be the crowd favorite because it not only provides Filipinos with shelter, but also allows them to convert their money into an asset which appreciates over time. It’s a wise investment for you and your family today, and for your future.
Let’s be honest: if we had it our way, we’d love to buy our dream home in cold cash. But acquiring a property through a home loan will allow you to spread the cost over many years, making it practical and affordable. It may end up being more expensive because of the cost of borrowing money, but a lot of times, it’s much better this way than sacrificing liquidity.
Interest rates
In the Philippines, banks and financial institutions offer competitive interest rates for home loans.
While inflation is seen to decrease in the near term, we also need to realize that the Philippine economy, despite political, economic and health crises, has always been stable. There are options for borrowers to renew home loan rates annually if the outlook is for rates to decrease, or lock in good rates if the general outlook is for rates to increase.
There’s also Pag-IBIG Fund (Home Development Mutual Fund), which offers affordable home financing options with lower interest rates compared to private banks. If you’re a member, you’re eligible to borrow money to buy a house, construct a new one, or even improve your current home.
Tax hacks
Here’s a little-known secret: Home loans can actually help you save on taxes. The interest you pay on your mortgage can be deducted from your taxable income, which means you could end up paying less in taxes each year. It’s like getting a little bonus from the government for being a responsible homeowner.
Home loan process
Before you dive into the home loan pool, make sure you meet the eligibility criteria. Generally, you need to be at least 21 years old, have a stable income, and a good credit history. You’ll also need to prepare documents like proof of income, tax returns, and valid IDs.
In choosing your bank, compare interest rates, loan terms, and any additional fees. Look for promotions and discounts. It’s like shopping for the best deal on Lazada or Shopee, but with higher stakes, minus the vouchers!
Once you’ve chosen your lender, it’s time to apply. Submit your documents, fill out the forms, and wait for approval. This might take a few weeks, so use the time to plan your housewarming party.
Happy Holideals promo
As we move closer and closer to the Yuletide-slash-Jose Mari Chan season, let’s celebrate Christmas by moving closer to opening the door of your dream home with Metrobank’s Happy Holideals promo!
Forget playing Santa Claus for once and be on the receiving end of gift-giving by enjoying competitive rates as low as 6.75 percent, waived fees of up to P100,000, and more until October 31, 2024.
Known as a bank that educates, this is also Metrobank’s early holiday treat in line with its goal to help Filipinos realize their dreams and what better way to accomplish dreams by not just living in, but also acquiring a real estate asset that just keeps on appreciating over time. Just visit the nearest Metrobank branch or go to https://metrobank.com.ph/articles/happy-holideals-promo-2024.
Owning a home indeed stands as a monumental milestone—a testament to hard work, perseverance, and the occasional Tiktok dance. Home loans make this dream achievable by offering financial flexibility, investment opportunities, and a sense of security. So, if you’re ready to stop renting and start owning, continue saving and investing for your dream house, but also consider a home loan to catapult your way to home ownership.
It’s a smart move for your future and a great story to tell over a hearty meal at your housewarming party!
The author (CIS, CSR, CTP, CUSP and CFMP) has 19 years of experience as an entrepreneur, real estate investor, stock broker, financial literacy advocate, educator and public speaker. He is the vice president and head of Business Development and Market Education Departments together with the OFW Desk of First Metro Securities Brokerage Corp. and is a member of Metrobank’s Financial Education Editorial Advisory Board. Email the author at andoybeltran@gmail.com
