70% of Filipinos own their own homes. This is according to the Bangko Sentral ng Pilipinas 2012 Consumer Finance Survey. Filipinos dream of owning their own property, which is considered both an emotional and financial investment. It is an emotional investment because your home is where you will raise your family and retire. It is tangible proof that all your hard work has paid off. Of course, it is also a financial investment because real estate appreciates through the years. It is somewhat considered a forced savings account. Buy a home, live in it, and once you sell it decades down the road, you have a lump sum of money. A look at Manila Best Home’s listings, and you can see that homes cost upwards of a million pesos.
Owning a home is part of the Filipino dream, but for others, it may be a far-fetched or unrealistic one. Putting a downpayment requires hundreds and thousands of pesos and keeping up with the monthly amortization can prove to be challenging. However, through hard work, discipline, and determination, it is a realistic dream.
MoneyMax.ph interviewed 4 Filipinos who have bought a home before they turned 30 years old.
Roy* used to work as a plant operator for a petroleum company. The property he bought is located in Batangas, and he bought it to “provide a good shelter for my family since we have been financially struggling in the past. I used these experiences to fuel my drive to aim for a better living condition.”
Ben* is a sales executive in the FMCG (fast-moving consumer goods) industry. His house is located in Pasig City, and he bought his property to “make reality my mid-term goals of owning a house for myself that can also be a potential investment for me.”
As for Cathy*, she used to work as an overseas Filipino worker (OFW) in the airline industry. She bought two properties before turning 30 years old, one in Paranaque City and the other in Laguna. She bought the lot in Paranaque with intention of building a home for her growing family, and the lot in Laguna as an investment
Ronald* is an engineer for a telecom company, and he bought his property when he was twenty-eight years old. He bought it with the purpose of providing for his family – the same reason Roy and Cathy bought their homes.
Here are Roy, Ben, Cathy, and Ronald’s tips and advice for aspiring homeowners:
Factors to Consider When Buying a Home
All four of the interviewees put down location as one of the most important factors when buying a home.
“Accessibility to public transport, distance to the public highway, and house orientation,” are three sub-factors Roy focused on when he bought his property. As for Ben, Cathy, and Ronald, they considered the proximity of their properties to hospitals, schools, and commercial establishments.
The real estate developer is another factor to consider. What is the vision of the developer? Will the developer’s future plans increase the value of the property? are two questions to ask yourself before making a downpayment on a home. If you look at Cavite, Laguna, Pampanga, and Bulacan, property values are starting to increase as more developments happen. The prices of lots in some of these areas are almost close to property values in Metro Manila.
If a well-known developer has plans to advance a particular area, you can expect land value to rise. In addition, well-established developers will ensure that that the products and materials they use (e.g. roof and floor tiles, structural foundation, etc.) are of above-average quality.
Here in the Philippines, real estate developers tend to create self-sustaining communities. They do not only build residential communities but provide the whole package – with malls, parks, and even schools present in these communities.
Saving for a Downpayment
This is one of the main challenges of home buying. Making a downpayment will usually require you to come up with an amount equal to 20% of the property value. This is well about a hundred-thousand pesos, and for those in their twenties, this is too large an amount to pay.
For Roy, Ben, Cathy, and Ronald, this is how they were able to come up with a downpayment:
Roy says, “I allocated each portion of my salary for all necessary expenses as well as for savings while putting into account that I will be able to meet my goal of having a house. One way that I did was to do follow a savings chart I made for the downpayment needed for the house.”
As for Ben, “Working for two years, I saved up my bonuses and a part of my monthly salary to have enough money to buy my house.”
Cathy says, “I believe in the saying that when the opportunity presents itself, you have to take it. The first property was a resale and the conditions made it a good deal or bargain. The second was purely for investment. I didn’t use my savings and other investments to make a downpayment. Instead, I applied for a bank loan and got approved overnight. In Hong Kong, where I used to work, you can get approval after 24 hours. The loans are what I used to make the downpayment.”
As for Ronald, he says, “I have a permanent job while I do some consulting and liason work in my professional field during my rest days. Also, for the original 20% downpayment, we made a deal to make it just 10% while the remaining 10% for one-year installment while the house is being constructed. It’s a good deal for a tight budget.”
As you can see, it takes hard work, discipline, negotiating, and a little bit of risk. If you want to buy a home x years from now, then start saving up today. At the same time, don’t just buy a property for the sake of becoming a homeowner. Ensure than when you take the risk of buying real estate, there’s a potential for the property to increase in value.
Keeping up With the Amortization
The monthly payments on the loans can seem like a daunting task. A five-digit amortization can take a good chunk of your income every month, and having a five- or ten-year payment plan can feel like forever. When the interviewees were asked how they kept up with the monthly payments, they shared the same tips:
1. Your income should always be greater than your monthly expenses.
2. You should have a monthly budget with a specific category for your amortization.
3. Always put a percentage of your salary towards the amortization.
4. Use incremental income (e.g. bonuses, raises, etc.) to pay the loans faster.
Roy, Ben, Cathy, and Ronald show us that there’s no secret or magic recipe to affording a home. It takes planning and discipline. Roy allocated 25% of his monthly salary for his amortization, while Ronald took on freelance and consulting work to increase his monthly income. Track your expense, create a budget which includes a category for your amortization, and stick to said budget. Before you know it, your home is fully paid.
Challenges of Owning a Home
As mentioned above, owning a home is not only a financial investment, but an emotional one as well. It’s not like a stock certificate where you stash it in a drawer and leave it there until you sell. From decorating your home to maintaining it regularly, homeownership poses a number of challenges.
What are these challenges?
For Roy, the main challenge is experiencing lifestyle creep. He says, “Most new homeowners are attracted to what they see in other locations such as seeing upscale houses that will make one want to keep up with them. Try to avoid this until such time that you are financially stable for house improvements.”
Bottom line, you worked hard to own a home and you may want to make it the most beautiful home in the block; however, if your budget doesn’t have room for renovations and other enhancements, delay this for a few years until you can afford them.
For Ben, it’s keeping up with the monthly payments. “Be consistent with paying one’s monthly dues as it requires stability from the owner; ensuring that nothing drastic or unplanned events come along.” Just miss one monthly payment, and you’ll be paying more on interest. Stick to your monthly payments to avoid additional fees through interest.
As for Cathy, one of the main challenges of owning a home is keeping up maintenance and utility costs. “Replacing broken tiles, re-varnishing wooden floors, changing the blinds, and checking for water leaks and faulty wires all add up to maintenance costs. In addition, homeowners’ association fees and the water bills can become more expensive due to inflation. To ready myself for these, I always made it a point to set a portion of my salary towards savings.”
For Ronald, his main challenge “is losing a permanent job while paying for the monthly dues on the loans.” He then adds, “Losing a permanent job will surely tear you down. It’s a good thing I have a secondary job. I also always advise to have some money in savings, in the amount total to one year’s installment to survive a job loss crisis with loans to pay.”
A Realistic Goal
As you can see from Roy, Ben, Cathy, and Ronald’s experiences, homeownership is definitely possible. Even better, it can become a reality even before you reach 30. As long as you have:
· the willpower to create and stick to your budget,
· the foresight to see the upside potential of a property,
· the discipline to save for a downpayment, and
· the diligence to keep up with the monthly payments,
Homeownership is a realistic goal.
*This article is an updated version of a post at MoneyMax.ph, the Philippines’ leading comparison portal for financial products.
*Names have been changed to protect the privacy of the individuals.
Ysabella Bongat | Senior Writer