House Insurance and Housing Loan in the Philippines Explained

Housing insurance is a type of financial investment you can get to protect your property assets against calamities, malicious damage, and loss. It’s an expenditure that you need to pay monthly, quarterly or yearly at a certain time duration so that once your property gets damaged, the insurance company will compensate you for whatever the impairment costs will be.

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Housing insurance falls under the property insurance. Depending on the premium you are paying, it may cover all or some the following:

·        Earthquake

·        Volcanic Eruptions

·        Fire and Lighting

·        Housebreaking and Burglary

·        Flood and Typhoon

·        Explosion

·        Vehicle Impact

·        Malicious Damage like Gang Wars and Riots

If you are a landlord, and your primary source of income is your rental property, you may want to prioritize getting a property insurance as this comes handy when the need arises.

Q: Is housing/property insurance important?

Yes. Things happen whether we like it or not. So, instead borrowing money because of unforeseen damages in your house, you may opt to get your property insured. All the more it is important if this property is income generating like rental houses and apartments.

Think of property insurance as the health insurance of your asset. If it gets sick, then you have readily available cash to make it well.

Q: How much is the average cost of property insurance?

Depending on the service provider and the coverage of the insurance, you may pay at around PhP 1,000 – 6,000 monthly on average.

Here are the institutions that offer property insurance in the Philippines.

AXA Philippines

Malayan Insurance

MAPFRE Insular

FPG Home Insurance

Prudential Life

Banco de Oro (BDO)

Bank of the Philippine Islands (BPI)

Housing / Home Loans

Housing loan is borrowing of money thru financing institution normally paid with interest at a certain number of months to be used for any dwelling related activities such as housing construction or renovation. There are three ways Filipinos can apply for a housing loan in the country: PAG-IBIG, direct to bank, or private company financing. Since it’s a housing loan and the lending institution need to earn a profit, it always come with interest (most of the time, hefty!).

The requirements and legibility may vary, but the most common factor the three lenders have in common is the documents that certify that you are capable of paying the loan amount that you want. Further, housing loan interest rates depend on the timeline of the mortgage. Normally, the longer the mortgage payment timeline is, the higher the interest rate is.

Examples of these documents are the following.

  1. Duly accomplished forms
  2. Valid IDs
  3. 1-3 months payment slips / Certificate of Employment / Job contract
  4. Photocopy of latest business permit / DTI Registration (if business owner)

Rates for the three institutions also varies so it’s good to check and shop around.

Q: Should I just save and pay the house in cash or just take a loan?

For those who are still undecided whether you should wait to have the bulk money to pay in cash or just take a loan, only you can answer it depending on your situation.

If you can really discipline yourself to save enough money; not looking into settling down yet; and couldn’t take the commitment of paying monthly for a mortgage, then, save enough and pay in cash.

If you can barely save enough money even for a down payment because you have dependents; would really like to have your own place as soon as possible; then, consider taking a housing loan.

Of course, paying in cash is always the better option if you have spare money to burn since you are not going to pay for any interest. But a typical Filipino don’t have enough finances for major purchase like a house. Study it, learn about the interest rates, ask a lot of questions on the lender so you’ll know what you’re entering into. Don’t blindly get into a housing loan just to get a house if you do not fully understand it.

Q: Is housing loan only applicable when buying developed real estates?

No. You can get a housing loan provided that it is for housing / residential construction or renovation. Not necessarily only for purchasing properties from developers. If you want your own house independently designed and constructed, you would need the documents mentioned above to prove that you are legible getting a loan. You also need to have duly signed and sealed house plans by the professional, bill of materials / quantity showing total contract price and other pertaining documents like the title of the lot or tax declaration.

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If you are into the “overpriced” houses constructed by the real estate developers, then invest in finding an experienced and legitimate contractor with proven track records to build your dream home.

Oftentimes, housing mortgage is the friend of a typical Filipino who wants to stop renting and just get a house under their name. Getting one prove to be beneficial in the long run, of course, depending on the reason why you took it. Others who made it out in life, also take housing loans as an investment. They get a house thru a loan and rent it out. That way, the tenant is the one who pays for the mortgage but you get the title of property. Smart move, isn’t it?

May we all win in life!

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