Home Loan Fees Explained
Purchasing your dream home or renovating your current one is one of the many goals that you may have. However, understanding the fees that come with it keeps you from committing to a loan amount that is beyond your targeted budget. To keep surprises at bay, here are the common home loan fees that you can expect:
Upon application, identifying the amount of loan that can be granted to you by the lender and the interest rate that will be applied to the loan is important. This requires the services of an appraising officer that will survey the neighborhood, land valuation and foresee the property’s resale potential in case of remortgage or foreclosure. BDO’s appraisal fee for example is at PhP 3,500 and PhP 4,000 for Metro Manila and outside, respectively. PNB on the other hand has its appraisal fee at a non-refundable minimum of PhP 3,500.
Mortgage Registration Fees
Once the loan is granted, the Land Registration Authority requires Mortgage Registration Fees to be settled upon transfer or purchase of the parcel of land. The rate varies depending on the appraised value of the property.
Handling/Processing and Notarial Fees
BDO’s Handling Fee is at PhP 5,000 while Notarial Fees are at PhP 500. As the name suggests, Handling and Notarial Fees cover fees to process the requirements, legal and otherwise. Handling fees would usually cover only those required by the bank – anything else outside of their jurisdiction may have to be accomplished by the borrower.
The applicable interest rate differs depending on the fixing period or tenor set upon application. This will of course be determined by your financial status and lifestyle. PNB has a minimum term of one (1) year up to a maximum term of twenty (20) years, same as BDO. BDO’s rate ranges from 7.75% to 11.50% while PNB’s welcome interest rates range from 5.25% to 11.00%.
Documentary Stamp Tax
As defined by the Bureau of Internal Revenue, Documentary Stamp Tax is “a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto.” Tax Rates vary depending on the sold or transferred property. Check out the BIR website for the full schedule of fees and conditions.
Mortgage Redemption Insurance
In case of the borrower’s death within the mortgage payment period, the Mortgage Redemption Insurance covers for the unpaid mortgage payments.
The amount varies depending on the appraised value of the property. The amount for borrowers aged 50 and above are usually a bit higher than those from 49 and younger.
Fire insurance covers for expenses in case of fire and other calamities. For BDO, it is purely labeled as Fire Insurance while PNB includes other calamities such as earthquakes and other natural disasters. For construction projects, BDO also has the Contractor’s All Risk Insurance which is automatically converted to Fire Insurance upon project completion. They also have Master Fire Policy available for condominiums.
Once you have put these fees into consideration, ensure that all the information that you have gathered is correct and complete. Exact information about taxes and fees may be identified by the bank as soon as an appraised amount is determined. It would also be advisable to request for a complete and updated schedule of fees from your bank representative to avoid loan processing delays and unwanted surprises. While the details discussed in this article are checked and researched at the time of writing this article, you as the borrower need to complete your own research and check the details of contract you are entering into.