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?
September 13th, 2008 at 2:28 am
all of your tips are so helpful…i got a lot of precautions in housing…
thanks.
July 16th, 2008 at 11:58 pm
do they experienced some sort of electrical problems?
May 31st, 2008 at 4:32 pm
I think Im out of the topic here but if anyone care to answer.
Does the government had any credit facilities for small scale investor on real estate?Say on purchasing of apartments.
Thank you so much.
May 27th, 2008 at 4:41 pm
At 21, I have tried acquiring a house in a subdivision thru in-house financing. But my bad spending habits then had caused me to miss my monthly amortization and eventually as the debt worsen, I never bothered paying it anymore That was after paying almost P24K on it (it was forfeited later). It was a great lesson for me concerning money and plans for future to be disciplined when it comes to money matters. If I was faithful before in paying my amortization, that house would have been mine already by the year 2016. The only consolation I had now is that, the place turned out to be sinking in flood waters during rainy season so poor me if I still had my house there. This scenario also goes for rice fields turned to low cost subdivisions offering good deal that ends up untrue after 3-5 years. (be wary)
Currently, I am faithfully paying for the house I acquired thru PAG-IBIG loan last May 2006 and everything seems alright but not as good as I have planned and expected. Having a background on electrical installation and wiring, I am frustrated that the electrician I hired to install the pin lights and the mini chandelier turned out to be a hit and miss one. He had installed them on the proper place but the 2 way switch function is not right as well as its grounding (we always replace bulbs due to loose connections. Finding a reliable person for the job especially if you don’t have the time to supervise how it is done is very important even if it means paying an extra amount for it.
This time, my wife is regularly paying the amortization in a monthly basis but to make sure we never miss the deadline, I made an advance of one month payment so that we have the liberty to pay our amortization any day of the month without worrying for bounced cheques and penalties.
My tip for those who want to buy a ready made house in a subdivision outside Metro Manila, ask a resident there regarding all the issues you want to know (local security, water supply, drainage and waste disposal and nearby industrial establishment (piggery, factories)
May 25th, 2008 at 10:18 pm
in finding contractors, all the caveats must be observed, no matter how you know the person. i got someone with good referrals to do my condo and after 70% paid, only 35% was actually done. then he totally spoiled the schedule of work. i had to hire my own carpenters and electricians to finish the job. i took leaves from work just to supervise the job. i think that if i did not closely supervise the job, i wouldn’t be satisfied with the end result as i am now. the sad thing is i had to be gypped to learn the lesson.