Buying a Property in the Philippines through a Bank Loan in the Secondary Market: A Comprehensive Guide

31 August 2023
Your path to homeownership, bank loan guide for the secondary market

Navigating the world of real estate can be both exciting and overwhelming, especially for first-time buyers. When it comes to purchasing property in the Philippines, understanding the intricacies of the secondary market—where properties are sold by individual owners rather than developers—is essential. One popular avenue for financing these purchases is securing a bank loan. If you’re embarking on this journey for the first time, you’re in the right place. This guide is designed to walk you through the step-by-step process of buying property through a bank loan in the secondary market, ensuring that you’re well-informed and prepared as you embark on your property ownership journey.

Defining the Secondary Market:

In the realm of real estate, the secondary market refers to a space where properties are bought and sold by individual property owners rather than through developers or primary market channels. This means that as a potential buyer, you’re interacting directly with someone who already owns the property. This often adds a personal touch to the transaction, as you’re dealing with the property’s history and the motivations of its current owner. Additionally, buying in the secondary market can offer a broader range of options, including established neighborhoods and unique properties that might not be available through developers.

Now, let’s dive into the comprehensive step-by-step guide to buying property in the secondary market using a bank loan.

Property Exploration and Offer:

  • Buyer identifies a property they want to purchase.
  • Buyer makes an official offer letter to the seller, indicating the proposed terms of the sale.

Acceptance, Appraisal and Loan Application:

  • Once both parties agree to the terms, the buyer will have the property appraised through the bank’s approved appraiser.
  • Buyer pays the appraisal fee and initiates the bank loan application, submitting required documents such as income proofs and identification.
  • The bank processes the loan application and determines the loanable amount based on the appraisal and income documents submitted.

Contract to Sell and Earnest Money:

  • Buyer, aware of the loanable amount, drafts a Contract to Sell (CTS) outlining the sales terms and conditions.
  • Buyer and seller meet to exchange earnest money.
  • Both parties sign the Contract to Sell, solidifying the agreement.

Title Transfer Process:

  • Buyer starts the process of transferring ownership of the property’s title to their name.
  • This step usually takes around 2 months, during which title-related taxes are settled.
  • Seller: 6% Capital Gains Tax
  • Buyer: 1.5% Documentary Stamp Tax, 0.75% Transfer Tax, Notarial Fee, Miscellaneous

Bank’s Letter of Guarantee:

  • Once the title is successfully transferred to the buyer’s name, the bank issues a Letter of Guarantee (LOG).
  • LOG confirms that the bank is ready to finance the property purchase.

Final Payment and Deed of Absolute Sale:

  • Buyer completes any remaining payment (balance minus the loan amount) to the seller.
  • Buyer presents the Letter of Guarantee to the seller as payment of the remaining balance.
  • Both parties sign the Deed of Absolute Sale.
  • The sale is concluded.

Congratulations, you’ve reached the end of our comprehensive guide to buying property in the Philippines’ secondary market through a bank loan. Acquiring property is a significant milestone that requires careful planning, due diligence, and understanding of the steps involved. By following this guide, you’re equipped with the knowledge to confidently navigate the journey toward property ownership.

Remember, each property transaction is unique, influenced by location, property type, financial institutions, and various legal considerations. While this guide provides a solid foundation, seeking advice from professionals—real estate agents, lawyers, and banking experts—is crucial to ensure that your specific transaction aligns with your goals and the current regulations.

As you embark on this exciting venture, take your time to research, ask questions, and make informed decisions. By following the steps outlined here and seeking expert guidance, you’ll be well on your way to realizing your dream of owning a property in the Philippines’ secondary market.

Happy property hunting and successful ownership!

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