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We list here the reasons why bank loans can be more advantageous for homebuyers in the long run
Want to buy a property now but do not want to shell out your entire savings for an upfront payment? There are various ways to finance your home purchase, with certain pros and cons to each, but there are tried-and-tested ways to receive a loan for your dream home that would not burn a hole into your pocket.
Although it is recommended to choose a financing method according to your own credit history and financial capacity, bank financing lords over other methods, primarily because it offers much lower interest rates and, in turn, lower monthly repayment.
Let us share with you the differences and the perks of bank loans over other financing methods and how to get the most out of bank loans, plus how to ensure the approval of your application.
Bank Loans vs. In-House Financing: What’s the Difference?
Bank loans are funds provided by commercial banks to borrowers, secured by the property itself. Interest rates are applied over a set period, and approval depends on meeting certain eligibility criteria.
In-house financing, on the other hand, is offered directly by real estate developers. While it often has a simpler application process, it is typically limited to the developer’s projects and comes with higher interest rates and shorter repayment terms.
What Are the Advantages of Bank Loans Over In-house Financing?
- Lower Interest Rates – Bank loans generally come with lower rates compared to developer loans, which helps reduce monthly repayments and the total amount paid over time. With fixed-rate options, borrowers are protected even if market rates rise.
- Longer Repayment Terms – Banks can offer loan tenors of up to 15 years or more, making it easier to manage monthly cash flow.
- Flexible Use – Bank loans can be used not just for buying new or resale properties, but also for purchasing residential lots, building a house, or renovating an existing home.
In comparison, in-house loans are often restricted to pre-selling units, carry higher interest, and come with shorter repayment periods.
The main downside of bank loans is that the application process is more rigorous. However, with preparation and guidance, the benefits often outweigh the challenges.
How to Apply for a Bank Loan
Step 1: Prequalification
Start by assessing your financial capacity. Prequalification helps you understand:
- How much you can borrow
- Whether you are eligible for a loan
Check your credit history, clean up outstanding debts, and calculate your projected down payment.
Step 2: Check Eligibility
Most banks in the Philippines generally require:
- At least 21 years old at the time of application and no older than 65 at loan maturity
- Filipino citizenship (permanent resident visa holders may be eligible)
- Employed or self-employed, with at least 2 years of work history
- Minimum monthly income of Php 30,000 for self-employed individuals; equivalent gross family income for salaried applicants
- Special provisions for Overseas Filipino Workers (OFWs) planning to buy property for their families
Step 3: Prepare Required Documents
To move from prequalification to preapproval, you’ll need:
- Completed application form
- Valid IDs (government-issued or company ID)
- Proof of income (income tax returns, latest payslips)
- Proof of employment (certificate of employment, business registration for self-employed)
- Collateral documents for the property, such as:
- Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT)
- Tax declarations
- Contract to sell or reservation agreement
- House plans, specifications, or bill of materials (if applying for construction or renovation loan)
Step 4: Make a Strong Down Payment
A down payment of at least 20% of the home’s total contract price shows financial stability and reduces overall interest. It also improves your chances of loan approval and lowers monthly repayments.
How IDEAL Can Help You Get Approved Faster
While traditional bank loans offer low interest rates and long repayment terms, the application process can feel overwhelming—especially for first-time buyers or Overseas Filipino Workers managing transactions from abroad. This is where IDEAL Home Loans comes in.
IDEAL Home Loan acts as a one-stop solution to simplify your home loan journey. It helps you:
- Check eligibility quickly without manually crunching all the numbers. See your buying power in seconds with IDEAL Home Loan’s calculator
- Compare multiple banks’ loan offers to find the best rate and terms for your situation
- Prepare and organize all required documents so your application process is faster and smoother
- Estimate your monthly repayments and total loan cost, giving you a clear picture of your buying power
With IDEAL Home Loan guiding the process, you can take advantage of all the benefits of bank financing without the usual hassle of paperwork and uncertainty.
