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Owning a House & Lot in the Philippines through Home Mutual Development Fund
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.
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Home loans and mortgages may provide financing for buying a home, remodeling the home, refinancing a home or making necessary repair. Mortgages provide funds for initial purchase of the home and are considered secured loans with the property as colla