Saving for Your Future Home: Kaya pa ba? With the ongoing pandemic, saving money seems impossible – even making ends meet is difficult. However, unforgiving circumstances such as the current health scare should not prevent us from reaching our goals – even if that includes purchasing your future home.
In the Philippines, the National Wage and Productivity Commission, in a report in 2014, says that 626,631 families or 26.96% out of 2.46 million households intend to acquire a home – because who doesn’t? Sixty percent of the mentioned population are willing to pay Php 70,000 or less for a down payment. Moreover, most financing companies require a 20% down payment prior to moving in. Source: Own a Home in Five Years, an article by iMoney.
However, if your salary is within minimum wage, it seems far-fetched.
For the past four years, I have lived in several apartments – often transferring for comfort and/or work purposes. The first apartment I lived in was affordable: three rooms, a bathroom, and even a kitchen. Apparently, the location was not favorable. This means I could not stay out for long because of travel purposes. Ideally, your apartment should be proximal to your place of work, as well as (preferably) a convenience store, a pharmacy, and easy access to major roads.
My second apartment, location-wise, was close to perfect. It was a few minutes away from one of the city’s major malls; this includes easy access to a grocery, pharmacy, and even quality restaurants. Apparently, security was a major issue here thus I had to transfer immediately.
Another apartment I briefly lived in was, again, close to perfect. It was not quite close to the city’s center, but it was aesthetically appealing. Though small, but it was lovely. Apparently, cost was a major issue here. Ideally, rent should not cost more than 60% (my estimate) of your monthly income. You should also allot money for food, medicine, savings, transportation, etc.
Is it time to finally own a home? Here’s how to save money for a home.
Just Save Money
How to save money for a home? Just save it. The financial website advises the following: track your monthly expenses, discipline your ‘mouth’, be a practical ‘fashionista’, wake up early and PUV, and importantly, don’t buy things that you don’t really need. It is important to keep track of your expenses on a monthly basis – rent, electricity, water, food, transportation, medicine, etc. Then, identify which of these can be adjusted. You can opt to limit the use of air conditioning to save on your electricity bill. Or you can cross out trips to expensive restaurants or limit unnecessary shopping.
Another website, MoneyMax, also shared thoughts on how to save up for a home. The website listed factors to consider when buying a home. This includes the following: details of the home such as location, accessibility to public transport, etc; your real estate developer; amortization; possible challenges along the way; and the ability to adjust your lifestyle to be able to keep up with payments.
Dissecting the factors mentioned above, you have to take note of the following: your income should be higher than your monthly expenses, your budget should always include amortization, and use the incremental income to pay for loans. Amortization is just as important to consider as the down payment.
Down payment, according to Investopedia, is defined as a sum of money that a buyer pays in the early stages of purchasing an expensive good or service. The down payment represents a portion of the total purchase price, and the buyer will often take out a loan to finance the remainder.
Amortization, according to Investopedia, is an accounting technique used to periodically lower the book value of a loan or an intangible asset over a set period of time. In relation to loans, amortization focuses on spreading out loan payments over time.
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The Home Development Mutual Fund, commonly known as the Pag-Ibig Fund, is a government-owned and controlled corporation under the Department of Human Settlements and Urban Development of the Philippines responsible for the administration of the national savings program and affordable shelter financing for Filipinos. The corporation is best known for its provision of housing loans.
The Pag-Ibig Fund Housing Loan allows you to borrow up to Php 6 million to purchase a residential lot, a house, or a condominium unit. You may also secure a loan for house construction, home improvement or renovation, or even to refinance an existing housing loan. Those who qualify for the Pag-Ibig Fund Housing Loan Program include active Pag-Ibig Fund Members and those who have the following requirements: at least 24 monthly savings, passed the satisfactory background/credit and employment/business checks of Pag-Ibig Fund, to mention a few. You may access all information via the Pag-Ibig website, www.pagibigfund.gov.ph.
Did you know that Pag-Ibig offers affordable housing loans for minimum wage and low-income earners? The program allows minimum and low wage earners to acquire their own dream homes as it carries the lowest interest rate in the market today – 3% annual interest for the first five years of the loan term. With this program, minimum and low-wage earners need to pay a monthly amortization of as low as Php 2,445.30 for a Php 580,000 housing loan. Requirements are the same as those mentioned above. Again, to view full requirements and other relevant details, visit the Pag-Ibig website.
Is 2022 a good time to invest in a home? Surprisingly, according to Mr. Gino Olivares, President of the Organization of Socialized and Economic Housing Developers of the Philippines, today is a good time to plan, prepare, and get a house loan. Source: Is it a Good Time to Buy Your First House in the Philippines? You’d Be Surprised, an article by PhilStar.
In February 2021, the Bangko Sentral ng Pilipinas held its key overnight borrowing steady at a record low of 2%. The interest rates on overnight deposit and lending facilities are also unchanged at 1.5% and 2.5%, respectively. Olivares compared the total payments of someone who got a Pag-IBIG housing loan in 2009 and someone who would apply for a loan this year. The interest rate for a P2 million housing loan from Pag-IBIG in 2009 was 10.5%. Meanwhile, the interest rate for the same loan amount that would be taken this year is only 7.25%.