Part 1:Can you afford it?

Buying Your First Condo Unit

(Part 1 – Can you afford it?)

Here in the Philippines, when you drive through the main thoroughfares of the urban centers, it is almost impossible for someone not to find a billboard or advertisement about a brand new condominium, with very affordable monthly rates. Of course, being a professional or small business owner, it may seem easy for one to take advantage of these low rates, and buy a condo unit, as your primary or secondary home.

In reality, any condo for sale will always cost you more than that monthly 12,000 Philippine Pesos (or 300 US Dollars). So it is best to always read the fine print and ASK QUESTIONS before making a decision to invest in a condominium. Now, let’s start at some of the initial questions you should ask yourself before buying a Philippine condominium.

Do you really need a condo unit?

Most if not all first time buyers of condo units often don’t ask this simple question and start looking for a condo unit right away. It is imperative in fact that a person always asks this question first, and if your answer is one of these answers below:

  • I am looking for a safer and more convenient neighborhood than where I am now.
  • I like to live in the city center where everything is reachable for me.
  • My place of work is nearer or more accessible in this condo.
  • I am searching for a safe investment opportunity.
  • My children will benefit in using this condo unit for their school or work in the future.

Then, you should read on.

Can you afford this condo unit?

As I said earlier, the monthly rates advertised in the billboards and flyers don’t necessarily give you the whole picture of the entire payment scheme. There are a few terms you have to familiarize yourself with:

Total Contract Price (TCP): This is the entire amount you have to pay for your condo unit, including all fees and charges.

Reservation Fee (RF): The amount you need to pay to reserve the specific unit you want to buy. This is usually refundable up to a certain period of time. This fee is credited to your downpayment (it will reduce the downpayment amount).

Downpayment (DP): The amount you have to pay the developer of your condo, usually prior to finishing the project/moving in your condo.

Balance: This refers to the amount you have to settle after finishing payment of your DP. It is usually settled through in-house or bank financing.

Monthly Amortization: This is what you pay monthly to service your DP or Balance.

You should know from the start that these condo units being advertised are in general, pre-selling units, meaning these are condo units that are not yet fully constructed, more often than not actual construction has yet to be started. Pre-selling units give condo buyers a chance to invest their money in the development while it is still cheaper. By stretching payments prior to completion, Philippine real estate makes the condo more affordable to condo buyers.

Normally, the amounts advertised refer to the monthly amortization of the downpayment, not the balance. To pay for your balance, you have to apply for in-house financing with your developer, which will amortize the remaining balance into equal monthly payments based on your chosen scheme, or a bank loan, which will do the same. The advantage of the bank loan is in almost all cases it offers a lower interest rate, but will be more stringent in their requirements. A good estimate if you would be approved for a bank loan would be if your chosen monthly scheme is less than 30% of your gross monthly income. Of course banks and developers will be doing credit investigations on your sources of income, so you must be aware of this beforehand.

Finally, one should always remember that once the contracts for purchase of your unit are final, all payments made are non-refundable. Thus, a condo buyer must be diligent in paying the monthly amortization or risk losing the condo unit if 2 or more months have been missed. So, check your monthly budget and ideally have extra savings before buying a new condo unit.

In the next article, I will be talking about choosing an ideal location for your condominium.


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