Real estate financing.

Pag-IBIG Fund (HDMF) offers housing loans at significantly lower interest rates than commercial banks, making it the most affordable option for most Filipino buyers.

2026 key parameters:

• Maximum loanable amount: ₱6,000,000
• Minimum contributions required: 24 monthly Pag-IBIG contributions (need not be consecutive; lump-sum payment of back contributions is allowed)
• Loan-to-Value (LTV): Up to 95% for properties under ₱2.5M; up to 90% for properties ₱2.5M and above
• Maximum loan term: 30 years
• Age limit: Must not be over 65 at loan maturity (some sources cite 70)
• Affordability rule: Monthly amortization cannot exceed 35% of gross monthly income

2026 indicative interest rates (subject to repricing period chosen):

Subsidized rates (2026): Under the government's expanded 4PH housing program, qualifying socialized housing borrowers can access rates as low as 3% per annum fixed for 5 years. A separate 4.5% promotional rate fixed for 3 years was introduced for the first 10,000 locally employed and 1,000 OFW applicants for non-socialized housing loans up to ₱1.8M.

Application process:

1. Confirm 24+ contributions through Virtual Pag-IBIG (online.pagibigfund.gov.ph)
2. Submit a Housing Loan Application with required documents
3. Pag-IBIG appraises the property (loan is based on lower of selling price or appraisal)
4. Loan approval (typically 2–3 months total)
5. Loan release to the seller/developer; you start paying monthly amortizations

Each financing option has clear advantages depending on your loan size, processing speed needs, and credit profile.

Decision framework:

• Property under ₱6.67M and you have time: Pag-IBIG almost always wins on total cost.
• Property over ₱6.67M: You need a bank loan (or Pag-IBIG + bank combo: Pag-IBIG covers up to ₱6M, bank covers the rest).
• You need to close in days, not months: Bank loan.
• You can't qualify for Pag-IBIG or a bank: In-house, but treat it as bridge financing — refinance to a cheaper option as soon as you qualify.

Important: You cannot use both Pag-IBIG and a bank loan to finance the same property simultaneously. But many buyers use developer in-house financing as a bridge while their Pag-IBIG application processes (then pay off the in-house loan when Pag-IBIG releases).

Re-pricing means the interest rate on your loan resets to the bank's prevailing rate at the end of a fixed-rate period. This is how most Philippine bank housing loans work — you pick a fixed period, and after that, your rate (and monthly amortization) adjusts.

How it works in practice:

1. You sign a 20-year housing loan with a 5-year fixed rate at 7.25%.
2. For the first 5 years, your monthly amortization is locked.
3. At the end of year 5, the bank computes a new rate based on its current pricing (usually their published rate plus a margin tied to BSP benchmarks).
4. Your monthly amortization is recalculated based on the new rate and the remaining 15 years of principal.

Why this matters:

• If interest rates have risen, your monthly payment increases — sometimes significantly
• If rates have fallen, your payment decreases
• You typically have a small window (30–60 days before re-pricing) to refinance to another bank without prepayment penalties

Fixed-period choices and tradeoff:

Strategic note: If interest rates are at a cyclical high when you take out your loan, a shorter fixed period lets you benefit from declines later. If rates are low, a longer fixed period locks in the cheap rate.

DSCR (Debt Service Coverage Ratio) is a financial measure that compares the income a property generates to the debt payments required to finance it. Banks use it to evaluate whether an income-producing property can pay for itself.

The formula:

DSCR = Net Operating Income ÷ Annual Debt Service

Example: A condo unit rents for ₱30,000/month (₱360,000/year). After vacancy and operating costs, net operating income is ₱280,000/year. The annual loan amortization (principal + interest) is ₱240,000.

DSCR = 280,000 ÷ 240,000 = 1.17

How banks interpret DSCR:

• Below 1.0: Property doesn't earn enough to cover its loan. The owner has to subsidize from other income. Banks usually decline.
• 1.0–1.2: Tight but workable. Banks may approve if the borrower has strong supplemental income.
• 1.25 and above: Comfortable. Most banks consider 1.25 the minimum for investment property loans.
• 1.5+: Strong. Best terms typically available.

Why DSCR matters for residential investment buyers: If you're buying a rental property, the bank may want to see that the projected rent covers the loan. For owner-occupied properties, banks rely on the borrower's salary instead (the 35% gross income rule).

To run DSCR scenarios on a specific property with leverage, taxes, and rate re-pricing, see the free investment calculator.

Both Pag-IBIG and banks use a Debt-to-Income (DTI) ratio to determine your maximum loan amount. The standard Philippine rule:

Maximum monthly amortization = 35% of gross monthly income

Quick estimation:

What banks count as “gross income”:

• Base salary (always counted)
• 13th-month and bonuses (typically counted at 50–100% of average)
• Regular allowances (transportation, COLA)
• Documented commissions and overtime (averaged over 6–12 months)
• Spouse's income (if co-borrower)
• Rental income from existing properties (typically discounted by 30%)

What can lower your borrowing capacity:

• Existing credit card balances (banks count minimum payments against your DTI)
• Existing car loans, personal loans, or other housing loans
• Salary deductions (Pag-IBIG, SSS, PhilHealth, withholding tax)
• Recent late payments on any loan

Tip for OFWs: Banks will require remittance proof — typically 6–12 months of consistent inward remittances. The bank uses the average remittance amount, not the headline employment contract salary.

Amortization is the gradual repayment of a loan through scheduled payments that include both principal (the amount borrowed) and interest (the cost of borrowing).

How it works: Each monthly payment is the same amount, but the split between principal and interest shifts over time:

• Early years: Most of your payment goes to interest, very little to principal.
• Middle years: The split moves toward 50/50.
• Final years: Most of your payment goes to principal.

The standard amortization formula:

M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1]

Where: M = monthly payment, P = principal (loan amount), r = monthly interest rate (annual rate ÷ 12), n = total number of payments (years × 12)

Worked example: Loan of ₱3,000,000 at 7% per annum, 20-year term:

• P = 3,000,000
• r = 0.07 / 12 = 0.005833
• n = 20 × 12 = 240 payments
• M = ~₱23,259/month

Total cost over the full term: ₱23,259 × 240 = ~₱5,582,000. Of this, ₱3,000,000 is principal and ~₱2,582,000 is interest. You're paying nearly the same as the principal again, in interest, over the life of the loan.

Strategy: Even small extra principal payments early in the loan dramatically reduce total interest paid. Paying just one extra month per year on the example above can shave 3–4 years off the loan term.