Online Calculator | Know The Factors Involved In Deciding Between Fixed Rate And Repricing Home Loans In The Philippines

Know The Factors Involved In Deciding Between Fixed Rate And Repricing Home Loans In The Philippines

The amount of research required to find a home within your tastes and budget is a huge drain on your time, but wait till you then get to the all the loan terms, bank options, rates, docs, and requirements! It’s enough to make you cry. We’ve dug in deep to provide you with some of the answers in this quest. Everyone’s situation is different, so take the advice here and apply it to your individual case.

First, we need to define these two choices. A “fixed” rate mortgage is easier to understand. The monthly payment will stay fixed for the duration of the loan term. For example, if you buy a house for P2,000,000, you will pay P600,000 for the down payment (30%), and the resulting loan of 1.P4,000,000 calculates out to monthly payments of roughly 15,000 pesos for 20 years. The interest rate is locked for the entire length of the loan, thus your payment is locked.

For the home loan “re-pricing” option, you have the choice to lock in an interest rate for 1 to 5 years. When the fixed period ends, your interest rate will fluctuate with the market, and the bank will reset the rate once per year. If the market rate goes up, your home loan’s rate and monthly payment will also go up. Banks implement this low rate as a marketing tool to grab your attention. The low 6% rate will only be available for 1 year, and then it most likely will go up, subject to “prevailing market rates”. Locking in a loan like this might free up some extra cash to buy some fun household items or games such as a playstation, psp, xbox, or Nintendo on installment, or even that iPad2 you’ve been wanting for so long.

How to choose? If you are more conservative, and like knowing that your payment will fixed and you don’t have to worry about increasing your income or cash flow in the future, choose the fixed rate home loan. If you are comfortable with your ability to pay the higher monthly amount in the future, this is the right choice for you is. Most probably the interest rate on the repricing loan won’t quickly increase immediately, and if it does, you can refinance your home loan into another home loan with a low fixed rate!

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