From 2008 to 2010, official estimates show that Filipinos will need almost two million new homes for families that are either currently renting, living with their parents, or are just about to start a family. Many will most likely be bought through bank financing.
For those who are in been-there-done-that mode, you probably know how easily a dream home can turn into a nightmare. Johnny Noe Ravalo today tackles several issues that most homebuyers find out only after the move.
Do you build the home yourself, hoping to find a hassle-free contractor, or go for a house ready for its new occupants?
I don’t know about you, but the words hassle-free and contractor don’t exactly sound like they should go together. On the other hand, the problem with buying a house ready for occupancy is the likelihood that you’ll wake up the next rainy season with seepages in your walls, or some other surprises that will drive you mad.
Noet says there is no golden answer to this.
There is no golden answer. I know of one couple who took a mortgage to buy a home before getting married. They ended up with outlets that short circuited anything plugged into them, aircon outlets that didn’t work because there was no electrical wires attached, a fuse box that was underpowered for the house and a living room that were eight to ten inches deep when rains were heavy. Oh, did I also tell you that the kitchen sink refuse went straight out of a hole into the street so their neighbors literally knew what was cooking for the day?
Building a home isn’t any easier. If you don’t have any reliable contacts, hiring the labor is going to be a big problem. Would you or your spouse have the time to physically supervise the day-to-day build up of your dream home? More importantly, could you tell if something being dug, cemented or wired was not in order?
My own experience with contractors hasn’t been encouraging either. Again, even if you are physically present on site, you depend on the contractor to get several different things moving at the same time, working towards the same goal. Since contractors end up committing to several simultaneous projects, they often outsource jobs with contractual workers. This is a hit-or-miss situation since it is difficult to impose a quality standard. Besides, even if the contractor’s own employees do the work, individuals do the digging, cementing, cutting, welding, the wiring. It is impossible, and unproductive, to have someone second-guess each and every worker. In the end, there is a fair amount of trust — and luck — involved here.
Financing a home is equally tricky. Although interest rates are very friendly these days to homebuyers, there’s still the issue of whether to get fixed interest rates or not. In his column, Noet says fixed rates for 25 years is not a bad deal. But if you’re tempted to stretch the loan to 30 years to lower the mortgage to, say, P5,000 monthly, keep in mind that interest is paid on outstanding balance and not on declining balance.
Those who argue that a fixed rate loan prevents the borrower from taking advantage of falling rates lose sight of the fact that the borrower is protected from the repricing uncertainty. The borrower cannot be protected from repricing risk (both up and down) and still have the benefit of downward flexibility if rates fall.
Kamille, check the website of different banks, especially the housing loan calculators. This gives you a clear idea of the monthly amortization, depending on the amount to be borrowed and the term of the loan.
Going for a very long-term housing loan will not always be good. Remember that interest is paid on the outstanding balance and so the longer you maintain a loan the more you pay in interest. Choosing too short a term will also not work well because a higher monthly amount may be too much to bear. If something unexpected happens with Kamille’s income, the mortgage is in trouble.
As Noet pointed out, every homebuyer ends up with a unique house story. Even those who are satisfied renters have their own. I got swarmed with comments when I wrote “On my Christmas wishlist: a new house”. Check it out here.
So, what’s your story?
May 15th, 2008 at 8:35 am
We are on the retirement-2nd-home mode already. We are still living on our 1st house we bought via Pag-ibig 10 years ago which just finished amortization last Feb08.
My story/experience related to housing construction projects.
1. Mass housing use cheap, loose, poor quality electrical outlets to save on cost, you will see them when you visit model houses. If you happen to buy a house with cheap outlets , buy sturdy/good outlets (you may need suggestions from people who undertand outlets,use branded ones like National etc., expensive but worth it ) and have them installed during construction instead of the cheap outlets. The cheap outlets installed by developers/contractors will give you lots of headache (appliances intermittently turning on/off , blowing fuses, etc. may even destroy your electrical appliances. If you happen to have fuse boxes for a new house on this age, replace them with circuit breaker boxes and see to it that those boxes are located in an accessible location in case you need to shut them down on an emergency situation (fire, electricution, etc) See to it as well that the electrical cables used are within the specs designed for your house and not under specs (thinner), housing projects provide specs to government for approval before constructions.
2. Check the septic tank drainage during construction. See to it that the excess water pipe goes to the main drainage. We knew nothing about this before till after several years of living in our house, and noticed difficulty on flushing the toilet. We thought it was clogged and had the septic tank opened to remove the clogging. We found out that the excess water in the septic tank is not flowing out to the drainage freely which should be the case. During further investigation we found what is causing this unusual problem.
The septic tank pipe output which should go directly to the drainage below the road was missing several foot of pipe. It was on a dead end and did not continue to the drainage. As a result excess water just goes to the surrounding soil to dissipate and eventually overtime, the soil will turn to mud and will have problem taking in more water to dissipate making the septic tank always full of water and then difficult to flush…I thought it was just a an isolated case or a mistake in the part of the construction workers but then I found out from the maintenance people in the subdivision that they have already several similar cases before which led me to believe this was intentional problem introduced , (maybe they are on those septic tank business payroll..or they are just shitting the developers for their low salaries…)
Anyways these are may share , hope it helps.
May 15th, 2008 at 2:56 am
Not yet thinking of building my home. Perhaps, when i retire? We sometimes rent a fully furnished condo when we go home. Expensive but I think, building a house for a once a year vacation is more expensive - not to mention depreciation, realty tax, etc.
Many fellow OFW took a loan to build/buy a house as soon as they got confirmed which I think is not a very good move. Some of them are still paying debts.
May 14th, 2008 at 11:31 pm
we got our home before getting married thru pag-ibig financing. we used our wedding money gifts to pay for the extra DP. Thus, the supposed to be loan amount was reduced. Term we chose was 20Y. we’ve been paying the loan for almost 3yrs now but based on my computation, we may be able to finish the amortization in 2011 instead of 2025 because we are paying an extra amount which is being deducted to the principal whenever we have some extra cash.
about the house, we had some problems with our carport. we asked the contractor to fix it but the 3x fixing didn’t make any difference. good thing that my dad knows about fixing such issues.
May 14th, 2008 at 9:58 pm
Our future house is literally still a “dream house” because we have not started on it but am happy that we have started and on the process of paying a lot for 2 years at basically zero interest but because we loaned the 40% of the price we used to pay for the down payment at 8% interest in a bank that makes it 60% zero interest only
Its nice to read blogs like this for it gives you an idea on how to go about this things when the time comes that you will be building your house.
May 14th, 2008 at 6:32 pm
my future home is currently being paid at zero interest for three years. reason why my checking account’s bleeding for two years now…and another year to go.
We’re saving for the construction and interior decoration for it too. had experience already with contractors who nearly didn’t follow my instructions due to their insistence on superstitions…i myself bought the materials from tiles to bidet, p traps et al to avoid price “increases” and always check work. I planned the electricals also that i designed to be more like a hotel control
problem is that we’re looking for people to work in my new home. capable and trustworthy people that is