20 Things That Might Surprise You About Buying a Condo

Are you considering buying a condo? Will it be your first time? Then make sure to read as many tips as you can about buying a condo in the Philippines before making your reservation payment and signing your reservation agreement.  If later on something goes wrong, and you’re forced to cancel your purchase, you won’t be able to recover all your money.

After going through the list below, you might think that I’m against buying a condo. No, I’m not. There are a lot of good condo investments around. I just like to help and make sure you are ready to buy a condo.

buying-a-condo

Here are 15 things that might surprise you about buying a condo:

1.  Just changing your mode of payment for your balance to the developer can set you back by 15,000 pesos!

There’s at least one big condo developer who has this policy of charging a huge fee when you change your mode of payment for the balance, after completing your down payment, from “Bank Financing” to “Cash.”  I really cannot understand what they will lose or what damage will arise if this kind of change is made.

2.  Most developers will NOT help you with your bank loan application, even if your agent promises assistance.

It’s written in your reservation agreement that you will apply for a bank loan on your own, but most likely you will miss reading it because the fonts are so small.

“If I decide to avail of bank financing, I shall be solely responsible for filing the bank loan application and all necessary requirements prescribed by the bank.”

Your agent might also assure you that their partner banks will take care of your loan application even if he knows that bank loan approval is not guaranteed.

While certain developers have agreements with their banks about guaranteed loan approvals and guaranteed appraisal values for qualified buyers, many developers do not. You will do your own research about applying for a loan, and you will collect the required documents on your own.

3.  If your plan is to use a Pag-ibig housing loan, know that there are many condo projects that don’t allow you to buy your unit with a Pag-ibig loan.

Why? Because many condo projects, even those built by some big-time developers, do not yet have individual Condominium Certificate of Titles (CCTs) ready for their unit buyers. And since you need a title to comply with Pag-ibig Fund’s requirement that your unit must be titled in your name before they release your housing loan proceeds, you cannot use a Pag-ibig housing loan to buy your condo unit.

These condo builders expect you to buy their units in cash, or through in-house financing, or through home loans from their partner banks.

Why can’t the developer provide individual titles? The most probable answer is that the mother Transfer Certificate of Title (TCT) has not been subdivided — it’s still with the bank that lent money to the developer for the construction of the condo buildings.

Note though that in recent years, banks have been offering interest rates LOWER than those offered by Pag-ibig Fund for higher loan amounts.

4.  If you’re buying a condo unit in projects with no individual titles yet, you will have to apply for a home loan only with the developers’ partner banks. 

Since unit titles are not yet available, you cannot apply for a home loan from your bank if it’s not a partner bank of the developer.  You have to choose from the developer’s list of partner banks for your home loan application.

There are 2 advantages though for this situation:

  • Loan processing will be faster, as the condo title won’t need to be transferred yet to your name.
  • And your shelling out a big amount for the title transfer costs will be postponed to a time when you hopefully have saved enough.

5.  It’s possible that the bank will not approve your home loan application.

This will be so hard to take if you find this out only after you’ve already paid your equity (10 to 25% of property cost). Where will you find the money to pay 75% to 90% of the total property cost?

Why will your application be rejected? It could be one of the following reasons:

.  You don’t qualify for Mortgage Redemption Insurance because you have a health problem

.  You applied for, let’s say, a 15-year loan but because of your age, the bank can give you only a shorter-term loan, and your monthly income is not enough to cover the higher monthly amortization.

6.  It can also happen that the bank will approve your home loan application but for a smaller amount, much lower than what you need. 

What will you do if the bank approved a loan amount much much lower than what you requested? Where will you get 300,000 pesos or half-a-million peso to fill the gap on short notice? Cancel and lose your 500,000 downpayment?

You will also soon realize why your developer set the term for paying your down payment to only 21 months, and not 24 months. Why? So you will not qualify for the Maceda Law refund!  See how shrewd people are?

7. It’s also possible that your Pag-ibig or bank loan proceeds will not be released on time.

If your Pag-ibig housing loan or bank home loan is not released on or before the due date of your balance to the developer, the developer will charge you a penalty of 3% or more per month based on the whole balance amount. For a balance amount of 2 million pesos, the penalty would be 60,000 a month!

If it’s likely that your Pag-ibig or bank loan will be delayed, talk with the developer to give you in-house financing in the meantime. The interest rate is much higher than bank rates but it will be better than paying the 3% penalty. Know also that the bulk of your monthly amortizations to the developer for this interim financing will all go to interest payments and will barely make a dent on the original balance.

8.  Most probably, you already know you’ll pay monthly dues forever. But have you heard of working capital? or joining fee? or membership fee?

Nowadays, almost every prospective condo buyer knows about monthly dues. Obviously, security, garbage collection, maintenance and other property management personnel need to be paid from month to month.

But working capital? I asked the persons at the property management office what is it about, and they just repeated it: “working capital po.” They could just have said “Sorry po hindi ko po ma-explain, pero andon po sa pinirmahan niyong document ang payment of working capital.” It turns out “working capital” is mentioned in the “Master Deed and Declaration of Restrictions” document.

buying a condo contract

Paano naman kasi, magnifying glass na,

mahirap pa ring basahin yong document.” 

 

In other condo projects, working capital is called joining fee or membership fee.

Working capital is for jumpstarting the condominium corporation that will be formed by all condo unit owners. In the meantime that the condo corporation is not yet formed, the property management company hired by the developer manages the project.

Your total working capital is usually equal to 6 times your monthly dues

If you like to read some more about condo fees and rules, here are rules and regulations for owners of:

DMCI Condominium Units

SMDC Condominium Units (some rules applicable only to Mezza Residences)
(Rules for SMDC Grass Residences)

9.  Monthly condo dues will increase. 

Increases in condo dues didn’t enter your mind yet, right? Well, every year it will increase. The property manager says it might increase or decrease depending on the earnings of the condo management company during the year. But what’s the probability of monthly dues being decreased even if earnings increased?



10. If you aren’t able to buy a condo parking unit, postpone buying a car.

Where would you park? Maybe in a nearby mall or commercial complex which will charge you by the hour, plus overnight fees. Even if you’re lucky, and you can find a gas station space or an open ground space that you can rent monthly for parking, the monthly rental will most likely be upwards of 5,000 pesos, and can go as high as 10,000 pesos if there are many of you asking for space. It might be wiser to just use Uber or Grab.

11.  Not all condo amenities are free for unit buyers.

Do you think you can just jump anytime into the condo pool with your family? No. Only one or two of you might be free. The other children will have to pay. With 3 to 5 high-rise high-density condo towers looking down on just two regular-size pools, you have to wonder how many residents can enjoy even just a few hours of swimming.

Condo gyms? Playgrounds? Sooner or later, when these amenities get busy, they will have to impose fees to control people and earn more money too.

12.  Do not buy a unit you have not seen in person.

In many condo projects, even if they’re good as a whole, there are units situated in not-so-good spots. You should visit the unit, and ask if you can open the windows  A unit closest to the MRT/LRT will be invaded by noise all day. Another unit might only have one view and it’s an old cemetery full of decaying concrete. A unit nearest the garbage room might get much of the smell during times the room is not well-maintained. Or maybe the worst situation is part of your paid condo space is occupied by a big concrete post, and you soon find out it’s part of the huge corner posts that support the entire condo building.

About corner units. These are usually more desirable and therefore more expensive than inner units because they’re usually bigger in area and you have views of the outside from two sides. The problem arises when the walls are poorly done and they’re not watertight. Imagine paying millions for a corner condo unit, and finding later on that rain water has seeped into your walls! And then the property manager reminds you of the one-year period within which to raise problems with the unit! Are the exterior walls supposed to last for only a year?

If you’re not fond of the afternoon sun, specially in the summer when your aircon cost shoots up, avoid the southwestern corner units, unless the views on those sides make you happy.

13.  A portion of your construction bond is NOT refundable.

Since many condo units now are BARE (walang cabinets sa bedroom at sa kitchen, kulang ang installations sa bathroom), you will have to construct or install some things. Know that your construction bond, ranging from 20,000 to 50,000 pesos, most likely will not be refunded in full. And you’ll most likely wait for 2 or more months after your improvements have been completed before getting back part of your construction bond.

Note also that noisy construction tasks like drilling, heavy hammering and tile cutting are not allowed during certain hours, so plan your construction with your contractor to avoid wasting paid man-hours.

14.  Some real estate agents are hit-and-run.

They’re there with you only up to your first monthly down-payment amortization. When it’s time to apply for a bank loan, you can no longer find your real estate agent, and you’re left alone learning how to apply for a bank loan and gathering documents needed from your condo developer for your bank loan application. Wala kang mahihingan ng insider tips and help.

14.  Most important!  Can you really afford buying a condo unit?

Nakakalungkot magbasa online ng mga hinaing ng mga OFWs at iba pang buyers na hindi na nila maituloy ang kanilang payments sa home loan nila sa bank after paying 300,000 pesos, or half-a-million, or more than a million. More often, nauuwi ito sa foreclosures at hindi na nila mababawi pa ang perang pinaghirapan nila for years sa abroad o dito sa Pilipinas.

Before handing out money to reserve a unit, make sure you are able to complete all the payments. Is your job stable? Can your spouse or parents pay the monthly amortizations if you suddenly lose your job?

Are you sure you will qualify for a bank loan? Check your bank’s website for home loan requirements.  Lilipad lang sa ere yong 20,000 pesos na reservation fee mo plus initial down payments mo kapag later on hindi ka pala qualified for a home loan sa bank man o sa Pag-ibig. Remember, reservation fees are NOT refundable.

Kasama sa pipirmahan mo ito:

 “I understand and acknowledge that the Reservation Fee is non-refundable. If I decide to cancel my reservation, or fail to submit all documentary requirements, or fail to pay the amounts due on the due dates stated, I agree that my reservation fee shall be forfeited in favor of the developer.”

If you lose your source of income and you stop paying, you might not be able to get back the hundred thousands or millions you have paid.

Kasama rin sa pipirmahan mo ito:

“In case I fail to pay any amount due, fail to submit required documents, fail to sign the Contract to Sell and Deed of Absolute Sale, or fail to comply with any other term of the purchase, the developer has the sole option to cancel the sale and forfeit in its favor all payments made.”

 

Kung iniisip mo yong Maceda Law, also known as The Realty Installment Buyer Act or Republic Act 6552, applicable lamang ito kapag nakabayad ka na ng at least 24 installment payments mo sa developer. At hindi pa buo ang ibabalik. Fifty percent lang ang sinabi ng Maceda law. Babawasan pa yan ng mga processing fees, at etc. etc. etc.

Wala kang mababawi kung 23 installments or less pa lang ang nababayaran mo. Meron pang mga developers na ini-ignore lang yong mga refund requests mo at inaantay na mag-hire ka ng lawyer.

Remember also this: Hindi applicable ang Maceda Law sa bank loan at sa Pag-ibig loan. Ang Maceda Law ay para lang sa buyer and seller of real estate on installment payments. Yong seller puedeng developer-seller or homeowner-seller. Kapag nakakuha ka na ng home loan sa bank o sa Pag-ibig at naibayad na yong loan proceeds sa developer, ang banko at Pag-ibig na ang kausap mo. Ang bank at Pag-ibig Fund ay lenders, hindi sellers.

Sa bank at Pag-ibig, once na hindi mo nabayaran ang 3 months of amortization, ide-demand na nila ang payment mo for the whole outstanding loan amount plus penalties. At kung hindi mo ito mabayaran before their deadline, ifo-foreclose na nila ang property mo.  Nakasaad itong lahat sa iyong Mortgage Loan Agreement with your bank or with Pag-ibig.

Napakasakit talaga na nasayang lang ang mga pinaghirapan mo.

Remember these:

  1.  You need to pay your first down payment amortization 30 days after you made your reservation payment. Otherwise, you will lose your reservation money. Remember, the reservation payment is NOT REFUNDABLE.
  2.  You need to pay your BALANCE in FULL (75% to 90% of Total Cost) on the date written in the Schedule of Payments that you signed. It could be 30 days after your 21st monthly down payment amortization, or 30 days after your 24th monthly amortization. Keep in mind your Schedule of Payments.
  3. This means you need to apply for your bank loan or Pag-ibig loan several months before your BIG BALANCE is due. Plan your loan application so your loan check will be released before your due date. Some developers require you to submit your bank guarantee or Letter of Guarantee (LOG) on a certain date BEFORE your due date.

You might be able to afford buying a 2-million-peso condo unit if:

a.  You are earning at least 50,000 pesos a month.

b.  Your credit card debt is not that big. You’re using only a small percent of your credit card limit.

c.  You’ve been a regular employee of a stable company for at least 2 years.  In case you lose your job, it’s easy for you to get employment with another company.

d.  You can afford to pay around 20,000 a month to pay your down payment, and later on, your monthly amortization to pay your bank loan.

e.  You might see ads for lower monthly incomes, and lower monthly payments.  Investigate. The building might be very far from public roads, or the unit is just a few square meters.

The websites of many banks offer free calculators so you can check if you can afford buying a condo unit or any other residential property.

You can estimate your monthly payment based on your loan amount, or
You can estimate how much you can borrow based on your monthly income.

The following are just some of many bank home loan calculators:

BDO Home Loan Calculators

UCPB Home Loan Calculator

BPI Housing Loan Calculator

BPI Family Home Loan Calculator

Union Bank Home Loan Calculator

PNB Home Loan Calculator

Metrobank Home Loan Calculator
PSBank Home Loan Calculator

ChinaBank Home Loan Calculator

15.  There is risk in choosing a home loan with flexible interest rate or variable interest rate.

Fixed interest rate means you will have the same monthly amortization for the whole life of your bank loan. This will give you peace of mind. There will be no surprise increases in the future.

Variable or flexible rate means the bank can change your interest rate from year to year. Banks will dazzle you with a low interest rate for the first year or first 2 to 5 years of your loan, but will increase your interest rate right after your variable-rate year ends. And that will be from year to year.

16.  Title transfer costs and home loan application fees can reach up to 10%, or even more, of the total contract price of your condo unit.

If you’re buying from a developer that does it all, meaning it also does the title transfer and bank loan application, then you will outright know the overall total cost of buying your condo unit.
They add the bank charges and title transfer costs to the total cost price of the condo unit.

But if it’s in your contract that you will process the title transfer on your own and apply for a bank loan on your own, prepare for additional costs — usually about 5% to 10% of the total price of the unit. These will pay for the bank loan application fees (which includes the usually big MRI cost) and Register of Deeds transfer tax and registration fees.

If you don’t have time to deal with banks and with the Register of Deeds, find a condo developer that does it all.  They deal with their partner banks and with the Register of Deeds themselves.

Two developers that undertake title transfers and bank loan applications in behalf of their buyers are Robinsons Residences  and Camella, A Vista Land Company. There might be others.

18.  The impact of bad-neighbor problems can be much worse in condos than in subdivisions because in condos, you share walls, hallways, stairways, garbage rooms, and other common areas.

If you happen to live next-door to residents who smoke, shout all the time, fight frequently, put speakers on high volumes, or don’t get rid of garbage before it smells, what will you do? You either talk first with your neighbors, or you ask help from your condominium officers.

This leads to the next thing..

19.  Quality of life in condos depends a lot on the integrity and chutzpah of persons heading the condominium corporation or the property management company.

If the people heading your condo corporation lack integrity, or don’t have plans for adverse situations, or don’t know how to implement rules, then you’ll most likely suffer from things such as cigarette smoke from other units, noisy get-togethers at night, dents in your car, groups smoking in the hallways, dirty swimming pools, defective gym equipment, clutter in the hallway or entry of unauthorized persons.

20.  There are lots of feedback, complaints or comments about condo projects and developers online.

This Internet thing, I know you know already. Invest time in reading buying-a-condo guides, reviews of condo projects and complaints against condo developers. Go to forums like pinoyexchange.com, pinoymoneytalk.com, femalenetwork.com, and the Philippine forums of skyscrapercity.com.

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