Owning a House & Lot in the Philippines through Home Mutual Development Fund

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Owning a house and lot is not as easy as I think in the Philippines. Or even in many progressive countries, like USA, Canada, UK, Japan, Australia and other members of G20. Living in a third-world country complicates the idea of having a comfortable shelter, even it's one of the basic needs of man; aside from food and clothing.

Enter the Home Mutual Development Fund (HDMF), better known as PAG-IBIG Fund, meaning love, that I can't even memorize its acronym. It caters to Overseas Filipino Workers(OFW), like me, as the government encourage us to have savings for house loans.

HMDF started during the Marcos regime, the best option of the Filipino citizens way back when political turmoil clouded the disposition of the country. It was created by virtue of Presidential Decree No. 1530 on June 11, 1978.

It harnesses four sectors of the Philippine society: financial institutions, industrial sector, government and people. The Fund was created to address the two basic concerns of the nation: 1) to generate savings, and 2) provide shelter to Filipino workers.

The process of acquiring your house and lot can be tedious at times. You have to consider the long paper trail, the intervention of private land developers that enter the government's project such as housing and the length of mortgage you'll be paying, say for 10 to 25 years.

Travel Man, this author, applied for HMDF under the home improvement scheme, since I was halfway constructing my house. Unfortunately, the complication is that the lot is still under the ownerhsip of my parents. The re-processing of land title takes time and I was denied of the loan because of that factor. The insider's advise was that I should avail of housing loan program they're promoting for instant ownership. I sensed they're just marketing the ready-made houses built out of third class contruction materials that will never last for long. The anomalies on a government/private-funded housing projects are endless. Kickbacks and the like are often the news headlines in the country.

An OFW grabs the opportunity to own a house and lot while working and the cash flow or allotment is still active.

To qualify for the housing loan, an OFW must be active and has an initlal HDMF savings for at least two years.

Even if this is a government program, housing project is often bidded to private companies. Clients are given choices for row houses, single-detached or duplex. Mortage amortization for row houses is cheaper than the last two options. You can own a row house (two storey) for only Php 500,000.00 (Five Hundred Thousand Pesos only) while single detach or duplex are priced like, Php 1,000,000.00 (One Million pesos and above).

Housing loan finances are shouldered by the Social Security Services (SSS) for private workers, mostly OFWs; while the Government Services Insurance System (GSIS) for government employees.

Mutual Funds 101

For the last 20 years, the often ignored or obscure financial instrument on Mutual Funds in the USA is now dominating American households. Almost 50 per cent or more of American people trust their money to mutual fund companies

The mutual fund system in the Philippines is largely derived from its American counterpart, empowering four sectors of the society.

Mutual fund is basically a collection of stocks or bonds. A company brings together a group of people (rich or poor) to invest in stocks, bonds and other securities.Its investor owns his shares, representing a portion of the holdings of the fund.

How Mutual Fund works

Part of the orientation, before investing in the mutual fund is to know the basics of it. As explained:

1) Income is earned from dividends on stocks and interest on bonds.

2) If the fund sells securities that have increased in price, the fund has a capital gain.

3) If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. (For more information...).

Aside from housing loans, multi-purpose loans are most popular scheme of withdrawing your money in mutual funds (only 60 per cent of the capital). You can reinvest the money to continue the program. Once you reaches the retirement age, you can collect what you earned in your investment.

Mutual fund has its own advantages and disadvantages. Private developers often borrow these mutual funds for housing development.

Failure to pay home mortgages will result to forclosure or forfeiture of contract. Re-possessed housing units will undergo bidding to interested clients under the supervision of SSS or GSIS.

Philippines: The Unpolished Diamond of Asia c/o moneyandmarkets

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Comments 16 comments

Simone Smith profile image

Simone Smith 6 years ago from San Francisco

Wow... I had never even heard of home mutual development funds... fascinating! Thanks so much for discussing the whole process here! Great Hub!

travel_man1971 profile image

travel_man1971 6 years ago from Bicol, Philippines Author

Thanks, Simone! Misleading interpretations are common among OFWs about this mutual fund thing. I'm dedicating this hub to all Filipinos who are working overseas in order to help stabilize the nation's economy. I compared it to the US version because they can learn a lot about it.

thesailor profile image

thesailor 6 years ago from Seven Seas

I'm aiming to have my own house and lot someday. I didn't know that my mutual fund can increase its interest if I'm going to invest it as bonds. Thanks for sharing!

soni2006 profile image

soni2006 6 years ago from New Delhi, India

This concept is just a bit different here in India. I need to check out with my bank what they call it. By the way, this is something unique and different. Best of luck travel_man1971

akirchner profile image

akirchner 6 years ago from Central Oregon

That's truly fascinating - here in the US, I've never heard of such a thing! Really neat subject to introduce us all to and well written.

travel_man1971 profile image

travel_man1971 6 years ago from Bicol, Philippines Author

@Soni: Better check it with your bank. The Asian version on mutual funds have much similarities with the US or even Europe counterparts. Thank you so much. Best of luck to you, too!

travel_man1971 profile image

travel_man1971 6 years ago from Bicol, Philippines Author

@sailor: Yes, it is better to invest your savings on mutual fund wisely and see if it can lay golden eggs for the next five years on bonds. Good luck!

travel_man1971 profile image

travel_man1971 6 years ago from Bicol, Philippines Author

Thanks, Ms. A! HDMF really helps OFWs especially on housing projects. My plan is to own a house and lot of my own; not that house I've built for my parents. It may take five years or so, depending in the inflation rate + or - of the Philippine peso.

Seth 5 years ago

hdmf indeed is the best option in owning a house this time, the rate in stabilized unlike other financial institutions

travel_man1971 profile image

travel_man1971 5 years ago from Bicol, Philippines Author

Thanks for the neat explanation, Seth. My former classmate who's based in UK contacted me to help her find an affordable house-and-lot in Naga City. She already read this hub and I told her to apply for HDMF-funded housing loan.

Mrs. J. B. profile image

Mrs. J. B. 5 years ago from Southern California

Travel: You taught me something new tonight I knew nothing about. I am blown away at all the hard core facts you presented. I loved this hub.

travel_man1971 profile image

travel_man1971 5 years ago from Bicol, Philippines Author

@Mrs. J.B. : Thanks for the trust on this hub. I already received inquiry from my former high school classmate from UK that she'll avail of HMDF once she go back here in the Philippines for a vacation.

carol 5 years ago

hello,i just wanna ask what are the requirements needed to get a loan with pag-ibig and how long was the processing to approve my housing loan?

travel_man1971 profile image

travel_man1971 5 years ago from Bicol, Philippines Author

@carol: Sorry for this late answer. Multi-purpose loan requires you to have at least two-year contribution.

I applied at the HMDF office in Makati City. You will be given an application form. You must present your HMDF booklet and your HDMF ID, too.

I am an OFW, so, I was required to xerox copy my passport, seaman's book, etc.

I don't know for land-base jobs. I think, there's no big difference about the requirements.

You can also visit the HDMF site for further reference. Just follow this link.


William Beceos 4 years ago

Hi! I would like to ask what will happen to my house after it is being foreclosed? will it be transferred to acquired asset department of HDMF? Thank you for giving time.

travel_man1971 profile image

travel_man1971 4 years ago from Bicol, Philippines Author

@WIlliam Beceos: I hope you're reading this , Sir William. Yes it will be under the supervision of HDMF once you house is foreclosed. But the bidding part will be assisted by SSS or GSIS (depending on how you work, whether in private or government agencies).

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