Often it is said that a home is the most important—and perhaps most expensive—purchase any
person can make. It is not surprising then that many find homebuying intimidating.
However, buying a house need not be in cash. Banks, the Pag-IBIG Fund (the Philippine
government’s own provident housing fund), and even real estate developers offer loans to
would-be buyers to finance the purchase of their first home. However, even if somebody is
willing to lend you some cash, you still need to cough up a considerable amount, the bulk of
which will go to your deposit or down payment.
What is a Down Payment?
The days of casually walking into a bank and getting a 100 percent loan to purchase a home are
long gone. Today, lenders need homebuyers to provide proof of their solid financial position,
and one of its best indicators is having enough savings for a down payment.
Financial advisors agree that having a down payment lets the buyer weather a financial storm.
If your down payment is considerable, the loan tenure will be shorter, the monthly mortgage
payment will be smaller, and the interest rate will be smaller.
But this is easier said than done. Most Filipinos do not have big enough savings for the down
payment. In fact, only one in four Filipino households have savings, according to a survey by the
Bangko Sentral ng Pilipinas (BSP). This may be one of the reasons homeownership is beyond the
reach of average Filipino families.
However, armed with a bit of financial savvy, constant economizing, and a good dose of self-discipline, finally owning a home may become a reality much sooner than you think. Here are
ways to get started.
1. Set a Realistic Goal
As a would-be homebuyer, the very first thing that you should do is to set a realistic amount
that your financial capacity can accommodate. As a rule of thumb, financial advisors
recommend the “2.5 rule”; that is, take your annual income and multiply it by 2.5. The product
is the cost of the property you can afford.
For example, if your monthly take-home pay (after deductions and taxes) is Php50,000, then
the price of the property you can afford is Php1.5 million. From here you can determine how
much money you should have for a down payment, which at 20 percent of the purchase price
should be Php300,000.
2. Save a Tenth of Your Monthly Take-Home Pay
They say that before you pay anyone else, you need to pay yourself first—in the form of
savings. An old yet reliable approach, saving 10 percent of your monthly net income will take
you a long way, and you have to start this as soon as possible.
The best way to achieve this is to designate one savings account, ideally a different one from
where your paycheck is deposited to make it harder for you to withdraw the money. There are
Philippine banks that still offer savings accounts with just a passbook and no ATM card, which is
ideal for people bent on limiting their spending, as it will be harder for them to just walk into
any ATM and withdraw cash.
3. Sell Stuff You Don’t Need
Look around your room and see if there are items you can live without. If so, consider selling
these unwanted household goods online. The same goes for that PlayStation and Xbox, and
numerous other items that are collecting dust at home. Selling them online can generate you
thousands of pesos in a short time.
4. Eliminate the Luxuries
Although this is no fun, eliminating some of your luxuries can save you thousands in the long
run. For example, you’ll definitely live even without your daily fix of Starbucks’ caramel
macchiato, which by the way sets you back Php150 a day (that’s Php3,300 a month or a
whopping Php39,600 for an entire year). Other luxuries you can definitely survive without
including that once-a-week lunch at a fancy restaurant, that Friday night out with work friends,
and new clothing every 4 weeks. Over a period of 12 months, this strategy can save you
thousands of pesos, not to mention give you a newfound sense of fulfillment and financial
independence.
5. Get a Part-time Job
If you are serious about saving for a home down payment, then you have to look at other
means to boost your income. How about a part-time job? Some people work extra evenings a
week to earn extra bucks, while others do freelance work. There are websites that have listings
of part-time jobs for professionals, such as Writer Access for writers and editors, Design Crowd
for artists and graphic designers, and Elance and oDesk for everyone else.
6. Pay off Your Credit Card Debt on Time
Although not a conventional savings strategy, this will save you on interest payments in the
long term. In fact, financial advisors recommend eliminating the use of your plastic altogether.
They say if you can’t afford to pay for an item in cash, then you can’t afford it, period. It is
definitely worthwhile to sort out your finances first—and you can start with your credit card
debt—before you commit to a mortgage that’s worth millions of pesos.
A home is not only the most important purchase one can make, but it is also probably the most
expensive. But before you even consider buying property, you must have a down payment or
deposit ready. By following these tips, you’re off to a great start.
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