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How 4 Pinoys managed to buy a home before turning 30


 

Most people dream of owning a house, which is both an emotional and financial investment.

As an emotional investment, your home is where you will raise your family and probably retire in it. It is also a financial investment because the value of real estate appreciates over time. On that note it can be considered as a forced savings scheme – you buy it, live in it, and sell it decades later for a much higher rate of return.

Surprisingly, 70 percent of Filipinos own their homes, according to the 2012 Consumer Finance Survey of the Bangko Sentral ng Pilipinas.

At OLX, a Philippine-based buy-and-sell portal, you can see that houses in Metro Manila cost upwards of P1 million.

While owning a home is part of the Filipino dream, there are those who may find it far-fetched or wishful thinking.

The down payment, for example, requires hundreds of thousands of pesos and the monthly amortization may prove to be a real challenge.

However, through hard work, discipline, and determination, it can be a realistic aspiration.

MoneyMax.ph interviewed four Pinoys who bought a home before they turned 30.

Roy Silang was a plant operator for a petroleum company. He bought a property in Batangas to “... provide a good shelter for my family, since we have been struggling financially in the past.” He used the memories of those financial struggles “... to fuel my drive, to aim for better living conditions.”

Zim Kho was a sales executive in the fast-moving consumer goods industry. He bought a house in Pasig City, to “make reality my mid-term goals of owning a house for myself that can also be a potential investment for me.”

Maria Mariano was an overseas Filipino worker (OFW) in the airline industry. Before turning 30, she bought two properties – one in Parañaque City, the other in Laguna. The Parañaque property was meant to be a home for her growing family, Laguna property as an investment.

Ronald Panopio was a telco engineer. He bought his property when he was 28, primarily as shelter for his family.

 


Saving for a down payment

One of the main challenges to buying a home is the down payment – usually an amount equivalent to 20 percent of the property value or around P100,000. For those in their 20s, the amount is somewhat too large to shoulder.

How did Roy, Zim, Maria, and Ronald come up with the down payment?

“I allocated each portion of my salary for all necessary expenses as well as for savings while taking into account that I will be able to meet my goal of having a house. One thing I did was follow a savings chart for the down payment needed for the house,” said Roy

For Zim it was, “Working for two years, I saved up my bonuses and a part of my monthly salary to have enough money to buy my house.”

Maria, on the other hand, “... believed in the saying that when the opportunity presents itself, you have to take it.

“The first property was a resale and the conditions made it a good deal or bargain. The second was purely for investment. I didn’t use my savings and other investments to make a down payment. Instead, I applied for a bank loan and got approved overnight.

In Hong Kong, where I used to work, you can get approval after 24 hours. The loans are what I used to make the down payment,” Maria added.

For Ronald, “I have a permanent job. I do some consulting and liaison works in my professional field during my rest days. Also, for the original 20 percent down payment, we made a deal to make it just 10 percent with the remaining 10 percent  payable in installments for one year while the house was being constructed. It’s a good deal for a tight budget.”

Based on the four’s respective experiences, hard work, discipline, negotiating skills, and a bit of risk-taking allowed them to hurdle the down payment challenge.

If you want to have your own home some years from now, start saving today. At the same time, don’t just buy a property for the sake of becoming a homeowner. Make sure that when you take on the risk of buying real estate, the property has the potential to really appreciate through the years.

 


Factors to consider

Roy, Zim, Maria, and Ronald considered location as a prime factor.

In addition, “Accessibility to public transport, distance to the public highway, and house orientation,” were the three sub-factors Roy focused on when he bought his first house.

As for Zim, Maria, and Ronald, they looked at the proximity of their properties to hospitals, schools, and commercial establishments.

The real estate developer is another factor. What is the vision of the developer? Will the developer’s future plans increase the value of the property?

If you look at Cavite, Laguna, Pampanga, and Bulacan, the property values in those provinces increased as more real estate developments occurred. In some cases the lot prices were nearly the same as those in Metro Manila.

Expect land values to rise whenever a well-known developer plans to advance a particular area. Well-established developers will ensure that that the quality of the products and materials they use – roof and floor tiles, structural foundation – are above average.

In the Philippines the current trend is to develop self-sustaining communities or mix-use developments. They don’t build only residential communities, but the whole package that include malls, parks, and schools.

 


Keeping up with the amortization

After securing the down payment and settled on the location, there is the monthly amortization to take care of when buying a house.

The monthly payments may seem like a daunting task. A five-digit amortization can take a good chunk off your monthly income, and having a five- or 10-year payment term may seem like forever.

How did our young homeowners kept up with the monthly payments?

Here are some of their fail-safe tips.

  • Your monthly income must be greater than your monthly expenses
  • You monthly budget must specify the money for your amortization
  • Always set aside percentage of your salary for the amortization
  • Use incremental income – bonuses, raises – pay off the loans faster

Roy, Zim, Maria, and Ronald showed us that there’s no magic or secret or formula to being able to afford a home. It takes planning and discipline.

Roy allocated 25 percent of his monthly salary to cover his amortization. Ronald took on freelance and consulting work on the side to increase his monthly income.

Track your expenses, establish a budget that covers your amortization, and stick to your budget. 

Before you know it, your home is fully paid.

 


Challenges to owning a home

Because owning a home is both a financial and emotional investment, but an emotional one as well, it totally differs from owning stock certificates that you can stash in a drawer until you decided to sell.

From decorating your home to maintaining it regularly, home ownership poses a number of challenges.

For Roy the main challenge was the experience of a lifestyle creep. “Most new homeowners are attracted to what they see in other homes, particularly upscale houses that they want to keep up and have what others have. Avoid this until such time that you are financially stable to fund your house improvements.”

The bottom line is that you worked hard to owning a home and you may want to make it the most beautiful home on the block. But if your budget doesn’t have room for renovations and other enhancements, delay for a few years until you can really afford them.

Keep up with the monthly payments, Zim noted. “Be consistent… Just miss one monthly payment and you’ll be paying more on interest. Stick to your monthly payments to avoid additional charges.

The main challenges for Maria were to meet the maintenance and utility costs. “Replacing broken tiles, re-varnishing wooden floors, changing the blinds, and checking for water leaks and faulty wires all add up to maintenance costs. In addition, homeowners’ association fees and water bills can go higher or become more expensive due to inflation. To prepare myself for these, I always made it a point to set a portion of my salary towards savings.”

For Ronald, the main challenge came when he lost his job “... while paying for the monthly dues on the loans. Losing a permanent job can surely tear you down. It’s a good thing I have a secondary job. I also always advise others to have some money in savings, in the amount total to one year’s installment to survive the crisis of losing a job while having loans to pay.”

 


A realistic goal

Now we know that owning a house is definitely possible. Even better, if it happens before you turn 30.

Nurture the following points and your dream home may come true sooner than you thought.
  • Willpower to create a budget and stick to it
  • Foresight to see the upside potential owning a property
  • Discipline to save for a down payment
  • Diligence to keep up with the monthly payments

As a leading comparison portal for financial products, MoneyMax.ph provides the numbers for housing loans from different financial institutions. Before comparing housing loans, read the Guidebook first on the ins and outs of applying for a housing loan.
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This article was previously published on Moneymax.ph.

 

Tags: moneymax, housing
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