Pag-IBIG vs. Bank Loans: Things to Know

One of the things that many Filipinos find difficult when it comes to owning a house is the cost. While low-cost housing is available, most Filipinos do not even have enough funds to cover a bare property.

Thankfully, there are several options available to finance a major purchase such as a home. Two of the most popular options are Pag-IBIG loans (from the government) and bank loans.

What to Know About Pag-IBIG Loans

Pag-IBIG is a government-controlled agency under the HUDCC or Housing and Urban Development Coordinating Council. The HUDCC aims to provide affordable housing to all Filipinos.

Home Mutual Development Fund and General Requirements

Pag-IBIG offers HMDF or Home Mutual Development Fund. If you are an active member with regular contributions, you have a higher chance of securing a housing loan. However, you still need to pass certain requirements such as the following:

  • Legally capable and able to acquire property
  • Not more than 65 years old when applying for the loan and not more than 70 years old at the loan’s maturity date
  • Able to pass background/employment checks
  • No previous housing loan that has been foreclosed or canceled due to default or dacion en pago

The Purpose of the Loan

So what can you purchase with a Pag-IBIG loan? Here are some of them:

  • A fully developed residential lot, or a condo, or a townhouse
  • Building a residential home in a lot your already own
  • Make improvements to your current home
  • Refinance a home loan subject to further conditions

Interest Rates

As of June 2021, interest rates range from 5.75% for 1-year loans up to 9.875% for 30-year loans. For minimum-wage earners, the interest rate stays at 3% per annum.

The Advantages of HMDF

There are plenty of benefits if you opt to apply for a Pag-IBIG Loan. These include the following:

  • The interest rates are more predictable and far lower than other financial institutions, such as banks.
  • The longest repayment period is at 30 years, which means that your monthly payments will also be lower and that you have a considerable time to repay the loan. However, take note that compounded interest means that you’re also paying more interest than the borrowed amount. Always check your finances to know the best repayment period for you.
  • If you are a low-income earner, you can still qualify for the Affordable Housing Loan for Minimum-Wage and Low-Income Earners program.

For more information on the Pag-IBIG loan, feel free to visit the Pag-IBIG website:

You can also check this article out for tips on how you can get approved:

What About Bank Loans? What You Should Know

There are a lot of banks in Cebu that offer housing loans, such as BDO, BPI, and Metrobank, to name a few. In most cases, they usually have stricter requirements, qualifications, and guidelines for loan application eligibility than Pag-IBIG.

Bank Loans and General Requirements

The requirements may vary from bank to bank. But here are the general guidelines:

  • Must be 21 years old and above during application
  • Must not be over 65 years old at the loan’s maturity date
  • Must be a Filipino citizen
  • Must have a minimum gross family income of a certain amount, depending on the bank
  • Must either be salaried or self-employed

The Purpose of the Loan

Most bank loans can be used for similar purposes as the ones from Pag-IBIG.

Interest Rates

The interest rates may range from 5% to 10%, depending on the bank you choose. The rates may also either be fixed or variable. It’s best to always compare rates with different banks to know which one best fits your financial situation.

The Advantages of Bank Loans

Bank loans usually offer better interest rates than Pag-IBIG. But, you have to take into account the loan term, which usually ranges from 1 year to 10 years.

Banks also tend to have a wider range of loanable amount options and higher appraisal values for the property.

To know more about the home loans from certain banks, feel free to check out our guides below:



Metrobank –

The Takeaway: Which is Better?

Each option has its own set of features and advantages. The bottom line is, you’ll have to choose which one best fits your current financial situation. Opt for which one you can afford to pay whether in a short period or for a whole 30 years.

Do your due diligence. Whether you take out a Pag-IBIG or a bank loan, your decision will help you get the home you have been dreaming of!

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