Saturday, September 3, 2011

Can I Afford a House? Considerations When Buying a House

House for sale. Image by Chris Holder from stock.xchng
We still don't have a house in the Philippines. Actually, we do but my husband bought it second hand and it's quite old and there are many repairs needed. He said that instead of repairs, it would be better to just rebuild the house. I don't know about that. We haven't thought and planned about it since we are living abroad. But with the recent news that prompted us to prepare to go home, suddenly we are contemplating about it.

We could buy a house. We could ask friends about good buys especially houses facing foreclosures or look online at Sulit Real Esate. Sulit Real Estate is an online marketplace for buying and selling real estate properties in the Philippines, much like Zillow in the US.

But there are many things to consider. Can I/we afford a house? Here are some of my thoughts concerning buying and owning a house.
  • It would be better to pay cash, if one can afford it. You save money because you don't have to pay interests. Also, having to pay borrowed money can be very stressful. 
  • Rent to own properties or properties for sale that is provided in-house financing by the real estate developer may also be a good option. Payments are staggered unlike the cash option, but interest is computed into the scheduled payments. 
  • Many people do not have cash and may take a very long time to save the amount of money needed, so they borrow. 
  • It is better to borrow from people like relatives and friends who are generous enough to lend you the money at zero or very low interest. Of course, there may be a catch. So beware. 
  • One can also opt to get a mortgage or a loan from the bank, insurance company or other lending institution. Beware of loan sharks. In this agreement, the property will be used as security for the loan and when you fail to repay the mortgage on time, the lender may take possession of the mortgage. 
  • Before you get into any mortgage loan, you have to check out the different types of mortgage and rates of interest offered by different providers of mortgages or loans. Some good features in Zillow are the available tools like mortgage calculators and mortgage quotes house buyers can get quickly without having to give any personal information. 
  • Most mortgages pay interest at a fixed rate throughout their term. But when the prevailing mortgage rates become lower than what you are paying for, you may opt to refinance your mortgage in order to get lower rates. In the US, websites like MortgageRefinanceRates.org can provide the needed information for refinancing mortgages. American Veterans can check out VA refinancing to save even more dollars on their VA loan payments. In the Philippines, I'm not sure if there is a similar website offering such information. It may be more legwork for those who want to check this option. 

The bottom line is if you don't have cash right away, there are financial resources from which you can get some. But eventually, you still have to come up with the needed cash, so careful planning is also needed. Otherwise, you may end up losing the property to foreclosure.



6 comments:

Rovie said...

very accurate and informative post chin... i'm praying that eventually your family will have a new home here in the Philippines.

Thank you for your visits!

teecup said...

Based on experience, it is indeed very stressful to even consider purchasing real estate property if you're not financially prepared or committed to the idea of paying for something over the long term.

Bank loan requirements are absurd. The last time I checked, you need to earn at least P50,000 a month (net) in order to qualify for a housing loan. If I had that much money, then I'd rather pay for the property in a staggered basis or apply for a PAG-IBIG housing loan.

The interest rates are not rosy either... Imagine padding the cost by 11 to 15 percent annually (excluding mandatory insurance calculations).

krizza said...

Hi Chin! I have a post regarding investing on real estates on my home blog http://krizza-homes.com. This answers some of the questions.

BTW, I am passing an award to u. Pls. claim it from my blog site "Lifes Tips And Tricks".

Have a nice Day!

Simply Pochi said...

very informative :) nice!
http://simplypochi.blogspot.com/

Chin chin said...

Thanks Rovie for the visit.

Hi Teecup, thanks for the additional info on housing loan requirements in the Philippines. If that is the case, it's really so much better to pay for a house on a cash basis. Sigh. I think we'll be stuck for a while with our old house.

Chin chin said...

Hi Krizza. I read your post. It was really helpful too.

Thanks Simply Pochi for the visit.

Have a blessed day.