Updated Pag-IBIG Housing Loan Guidelines for 2012 – Better or Worse?

A few months ago, I did a little research on home loans in the Philippines. I wanted to get a feel of how home loan rates offered by banks compare to the Pag-IBIG housing loan program.

I was then thinking about buying a house so I was also figuring out the best way to finance it. That gave me the idea to do some research which I then later used for my blog articles. I figured it could help other people as well who might be in the hunt for home loans that will cost them the least.

I did that by heading to the websites of popular big banks. I got their published home loan rates and tabulated the numbers for easy understanding. I then did the same thing for home loan rates offered by Pag-IBIG. When both have been tabulated, it’s easier to see how the two compared with each other.

Previous Comparison

It was basically a win for Pag-IBIG housing loan over those from the banks due to two things I pointed out:
  1. Lower interest rate overall for Pag-IBIG
  2. No re-pricing for Pag-IBIG
A month after I have published my articles, Pag-IBIG revised their housing loan guidelines. This made my comparison unusable for those who will avail of housing loans after July 2, 2012. I’m thankful for a reader who pointed out this fact to me so that I may update the blog post.

Before I go on to do a revised comparison, I’d like to list some (in the simplest way possible) of the changes that took effect for Pag-IBIG housing loans. With these changes in place, we’d be in a better position to do another assessment against home loans offered by banks.

We’d like to know if the impact of the changes is for the better or for the worse. If it’s for the worse, would it mean that bank home loans are now better than Pag-IBIG? If the answer to that question is not straight-forward, we’d like to see where and when Pag-IBIG is better than the banks and when the banks are better than Pag-IBIG.

Revised Pag-IBIG Guidelines

The important changes that I think we should all take note of with the new Pag-IBIG regular housing loan guidelines are the following:
  1. Loanable amount has increased from P 3 million to P 6 million pesos.
  2. Interest rates will also vary according to the new re-pricing scheme.
Take note that there are several changes in the guidelines that I will not discuss in this post. It will take too much space to discuss everything. I’ll focus on a few things which will aid in the comparison with bank housing loans.

Essential Changes

I thought the increase in maximum loanable amount from 3M to 6M pesos was a significant update. If the 3M pesos ceiling was the reason some people did not avail of a Pag-IBIG loan, the doubling of this ceiling should help them reconsider.

The other important update concerns the interest rates of the housing loans. The interest rates will now be re-priced similar to the banks instead of the previous constant interest rate for the duration of the loan. The table below summarizes the interest rates to be charged in line with the re-pricing period.
This re-pricing method brings to the Pag-IBIG home loan the risks that we can think of for the bank loans. That is, we can’t predict exactly how the interest rate will go after every re-pricing period. The best that can be said about this is that it still seems to be similar to what the banks have to offer.

Advantages Over Bank Housing Loans

Nevertheless, I think Pag-IBIG regular housing loans continue to have the following advantages over bank housing loans:
  • Significantly lower interest rates for loans lower than 750K pesos 
  • Wider loan term options of up to 30 years
  • Comparably lower interest rate for the same re-pricing period
Housing loans below 750K pesos are actually in a different category called the Affordable Housing Loan program. The interest rates applicable for these loans range from 4.5% to 6.5% for the first 10 years. They will then be subjected to re-pricing options similar to the regular housing loans above.

The maximum 30-year term for a Pag-IBIG loan is still unmatched by bank loans which usually extends to up to 20 years only. Longer loan terms mean lower monthly amortizations but effectively higher overall interest payments. For most people, lower monthly payment is the preferred option even if they would pay for a longer period.

Knowing the new interest rates for Pag-IBIG regular housing loans, our comparison with bank loans with comparable re-pricing period still show that Pag-IBIG rates are slightly lower. We cannot be certain how the rates will move over the succeeding re-pricing periods. But if the initial rates are indicative of what’s to come, Pag-IBIG home loans look more promising if you want to pay lower interests.

Photo Credit: nickname (Creative Commons)