Mortgages and home loans in the Philippines: A foreigner's guide

There are huge numbers of expats in the Philippines, who arrive to live, work or retire in an exotic and friendly country. Around a third of the foreigners in the country live in the Metro Manila area, but others are scattered throughout the other cities and resorts. If you're thinking of joining them, then you might be considering buying a property - to live in yourself, as an investment purchase, or to use as a vacation home.

Before you make your move to the Philippines, you need to understand the type of mortgages available, and how you might go about making arrangements. This handy guide covers which banks offer mortgage products in the Philippines to non-residents, the paperwork you'll need to secure a loan, the legal ins and outs, and how much it might cost.

Mortgages in the Philippines: What types of mortgages are available?

You’ll find both local and global banks in the Philippines offering a wide variety of mortgage products.

Fixed and variable rate mortgages are available. BDO bank, for example, offers fixed rate mortgages of varied lengths, with the rate rising as the duration does. After the term ends, you’ll revert to the bank’s basic interest rate, which is often not the best rate available overall.

Different banks will offer different products, so it’s important to check what suits your needs best. Some mortgages will only be offered for the purchase of commercial properties, for example, while others might be more appropriate if you want a buy-to-let or summer home in the Philippines.

Should I go to a bank or use a broker?

Using a broker to get a mortgage could cost you, but it’s also a useful service if you’re unsure of the best type of mortgage to fit your situation. You can of course, go to a bank directly, but using a broker can be helpful to ensure you get the best possible deal. An alternative if you really don’t want to pay broker fees, is to use a mortgage comparison site which will at least give you a picture of the normal rates on offer from different banks, before talking to individual banks about your personal eligibility.

Be wary of fraudsters who claim to be brokers - especially if they ask for upfront fees. Take recommendations from friends or family when choosing a mortgage agent, or ask to be put in touch with previous customers for a reference.

What are the legal requirements to get a mortgage in the Philippines as a foreigner?

It’s possible to buy some property in the Philippines as a foreigner, but you can not buy land. What that means in practice is that you can buy a condo, but it’s much harder to buy other types of property.

It used to be very difficult to get a home loan as an expat in the Philippines, but this is gradually getting easier as more and more banks are starting to offer expat loans. Exactly how easy it will be to get a home loan as a foreigner in the Philippines will depend to a degree on your visa type and personal circumstances. For example, BDO bank offer mortgages to expats who hold any one of a specific series of visas, including Quota or Preference Immigrant Visas, Special Resident Retiree Visas, or those with permanent residence status and working visas in some areas of the country. To understand your eligibility, it’s a good idea to meet with a few banks to discuss your situation, or hire a qualified broker who is experienced in working with foreigners.

How can I get a mortgage in the Philippines as a foreigner?

As a foreigner you’ll have to provide a little extra documentation to back up your loan application, including your ACR certificate, and your visa. However, aside from this, the requirements are fairly straightforward and similar to the process used for local applicants.

Paperwork (documentation)

The exact documents you'll need will depend on the bank you use. However, you can expect to be asked for the following:

• Alien Certificate of Registration (ACR)
• Copies of your personal identification documents (passport), including your visa type and validity
• Proof of legal residence in the Philippines
• Documents to support your application and prove you have enough money to service the loan (usually a certificate of employment, proof of your wages or a letter from your employer)

Depending on the language they’re issued in, you might find that your paperwork will have to be translated by a sworn translator in order for the bank to accept it.

The step-by-step process

To get a mortgage in the Philippines, you’ll generally need to follow these steps:

• Find a broker who can help you explore your options for a mortgage
• Choose a bank who offers a mortgage that suits your needs
• Provide the paperwork requested and get an offer in principle. In some cases, you’ll be able to submit your application and supporting materials online
• Find a home you love and agree a purchase price with the seller
• Finalise your mortgage through your chosen broker
• A deposit of 20% is usually required to secure your purchase
• Your notary will guide you through the steps required to transfer ownership of the property legally
• Your broker will help you finalise the remaining 80% payment, and you'll be responsible for servicing the mortgage and paying any outstanding fees

Fees

When you arrange a mortgage, whether you choose to do so in the Philippines or in your home country, you’re likely to have fees to pay such as administrative fees and legal costs. The exact costs will vary depending on your circumstances.

In the Philippines, when purchasing a property, you can also expect to pay the following fees:

• Documentary stamps tax: 1.5% of purchase costs in most cases
• Transfer tax: 0.5% to 0.75% of the house price, depending on the municipality you’re buying in
• Notary fees: depends on the deal arranged, average of about 1% to 1.5%
• Possible loan arrangement fees
• Registration fee: based on the property price and location

If you’re arranging your home purchase before moving to the Philippines, you might find paying for things a bit difficult unless you’ve already opened a local bank account in the Philippines. If you already have a bank account here and you need to send money to yourself from abroad to pay for the costs and fees, then it’s important to check the fees you’ll be charged when you make an international money transfer. Often, your home bank won’t offer you the best deal. Even if they claim to offer fee-free transfers, you can be sure that their cut will be rolled up into a poor exchange rate.

A better option is the use a specialist service like Wise who offers the same real exchange rate you can find on Google and adds only a small, transparent fee. Alternatively, you can hold cash in many different currencies in a Wise Borderless account, so it’s ready to transfer over to the Philippines as soon as you close the deal on your new home.

What are the major banks in the Philippines providing mortgages to foreigners?

It's getting easier to secure a mortgage locally in the Philippines as a foreigner. More banks are willing to work with expat workers who are a good credit risk and have legal residence in the country. The situation is changing over time. The market is growing as more banks decide to open their products to foreigners, so it’s worth checking a few places if you're initially rejected for a loan.

If you struggle, however, you can also get a mortgage in your home country and use it to pay the costs of your home in the Philippines.

Depending on your personal circumstances you might be able to get a local mortgage with one of the following banks or brokers:

• Metrobank offer some home loans to foreigners depending on their visa category
• BPI bank can give mortgage loans to expats who have the right visa type, or who are married to a Filipino
• BDO is the largest bank in the Philippines, and has products which are offered to expats depending on their personal circumstances
• RCBC bank has mortgage products which are suited to foreigners with the relevant visas and paperwork
• Loansolutions.ph are brokers working across all loan types, for both local and foreign clients

Glossary of important terms

If you’re starting to look for your perfect new place in the Philippines, it can help to have a few words of the local language. Here are some important terms to help you:

• Mortgage
• A loan-to-value (LTV) ratio
• Repayment mortgages
• Interest-only mortgages
• Fixed rate mortgages
• Variable rate mortgages
• Tracker mortgages
• Discounted rate mortgages
• Capped rate mortgages

Buying a new home is a big step, and when you’re buying in a new country, it can be a daunting process. Understanding your options and getting the right local advice is essential to make sure the process works smoothly.

Do your research and you’ll make sure you get a deal that works for your circumstances. Before you know it, you could be soaking up the sun and enjoying your new home or summer pad in the Philippines.

Good luck with buying your new home!