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Your Questions About Home Loans, Answered

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After you've paid your reservation and downpayment for your dream property, getting a bank loan is one of the next steps. Atty. Tricia Villar answers some questions that may be bugging you. 

What kind of collateral is acceptable to the bank? Will the amount of my loan be based on the value of my collateral? 

"Real estate properties without any liens or encumbrances attached to it are acceptable. Usually, the property being purchased by the loan is the one offered as collateral. The bank won't give you the equivalent of the full value of the property."

  • For condo units, the loanable value is equal to 70 percent of the appraised value per bank assessment.
  • For lots, the loanable value is equal to 60 percent of the appraised value per bank assessment. 

What are the advantages and disadvantages of loaning from a bank? 

"Getting a bank loan will allow you to have a property in your name without having to fully pay for it at once. You just have to make sure you can sustain the monthly payments. Save or invest whatever money you have left from your amortization. Also, you'll be glad to know that home loan rates are currently lower compared to previous years. [But the disadvantage is that] you end up paying more of the interest rather than the principal in the first few years. Since the principal amount of the loan is quite substantial, the interest amount is also quite heavy. Also, if you invest in an empty lot, the bank may require you to start building after a certain number of years." 

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I'm currently unemployed but I have assets under my name. Will this affect my chance of being approved for the loan?

"Yes. Since assets are not liquid, they won't be able to pay for the monthly amortizations for the loan. You'll still have to prove that you have enough source of income or cash in the bank to cover your monthly payments."

I'd like to remodel my townhouse. Can I loan from the bank for this purpose?

"Yes, you can avail of a loan for home improvement or renovation. You'll have to submit your building plans and bill of materials—the amount of the loan will be based on these. The loan proceeds will be released on a staggered basis depending on how long construction or renovation will be completed."

Read the original article ("Getting A Bank Loan") in the October 2004 issue of Real Living magazine. Download your digital copy on the Real Living App. Log on to more for details.

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* Minor edits have been made by the editors.