How Buyers Can Avoid Losing Their Investment?
How Buyers Can Avoid Losing Their Investment?
In today's article, I will address a common issue faced by buyers who invest in pre-selling properties, such as pre-selling condos, houses and lots.
Purchasing pre-selling projects from developers can be a good investment, but it's crucial to assess your financial capacity, income bracket, and thoroughly review the computation sheets.
Most pre-selling properties require a downpayment or equity of 10% to 30%, payable over 2 to 5 years, with the remaining balance eligible for a bank or Pagibig housing loan.
Small Down Payment and Affordable Equity:
To entice buyers, some developers now offer easy payment terms with minimal equity and extended payment periods. Buyers are often tempted to reserve and issue checks. However, the real challenge arises when it's time to settle the remaining balance.
Bank Loan or Pagibig Housing Loan:
Buyers often apply for loans from banks, only to realize they don't qualify due to higher income requirements. Let me illustrate this with an example:
Suppose a buyer reserves a condominium project worth 4,000,000 PHP.
Reservation: 20,000 PHP
Equity: 10%, which is 400,000 PHP (minus the 20,000 PHP reservation fee), payable over 60 months at just 6,333 PHP per month, making it affordable for an average income-earning couple.
However, the challenge lies in the remaining 90%, which amounts to 3,600,000 PHP. If you opt for a housing loan:
A) Bank Loan with a 20-year tenure at 9% interest per annum would result in an estimated monthly amortization of 32,342 PHP, requiring a borrower with an income bracket of around 80k to 90k per month.
B) Pagibig Housing Loan with a 30-year tenure at 9% interest per annum would lead to an estimated monthly amortization of 28,950 PHP, necessitating a borrower with an income bracket of around 70k to 80k per month.
The point here is that buyers should resist the temptation to reserve immediately due to attractive reservation fees or low monthly equities. Always scrutinize the complete computation sheets and consult your licensed broker and salespersons for a detailed breakdown, including sample computations for housing loans. This way, you can honestly assess if you can afford the loan balance. Does your income bracket qualify for borrowing from banks or Pagibig based on the remaining balance?
Failure to secure a loan leaves you with limited options: a) Pay the balance in cash or b) avail in-house financing from the developer, although not all developers offer this option.
Risk of Losing Equity Due to Default:
If you fail to pay the balance due to a loan decline and cannot afford to pay in cash, the developer may forfeit your equity in their favor. However, there are some remedies for recovering a portion of your payments, which we'll discuss in another blog post.
Once again, as a buyer, be honest with yourself. Assess your capacity to pay and your income bracket. It's advisable to verify these with banks and Pagibig or consult with the developer in advance. Seek assistance from your licensed brokers or salespersons who handle your sales.
I hope this article helps buyers make informed decisions, avoid impulsive purchases, and protect their hard-earned money. For any questions or clarifications, please feel free to contact us at 09173236123, Samuel O. Lao, Real Estate Broker.
Tags: Real Estate Preselling House and lot Condominium Property
