EVERY Filipino dreams about having their own home, especially this time of the year when the holiday season is in the air and there is no substitute to having a nice Christmas tree in a place you can call your own. How does one turn this dream into a reality? I have some ideas for you to consider.First is that you have to believe that your dream can become a reality and have a plan towards achieving that goal. Work backwards in determining what is the value of the house or condominium unit you can afford to acquire. There are some rules of thumb that I have seen that give a formula of three times the gross annual household income. So if both you and your spouse are working and each of you get P50,000 each, your gross household income would be P1.3 million. Multiplying this by three times would give you P3.9 million as the value of the house you can afford.
Another way to see how much you can afford to buy a house is by determining how much you can pay in terms of a monthly amortization, assuming you are able to get a bank home loan. From whatever is your take home pay you need to set aside your basic living expenses, such as food, utilities, transportation expenses, tuition and school fees of your children and so on. In the case of rental payments if you are not living with a relative, you can add this back to your available funds to pay the monthly amortization of your loan.
Assuming that you and your spouse could set aside P40,000 a month, at the prevailing interest rate of about 11.5 percent for a 20-year home loan, this means that you can have a home loan for P4,173,913. On a minimum home loan collateral value of 70 percent the home value should be about P6 million which means you need to come up with equity for the difference.
There are a few things you need to keep in mind. First is assuming you are good at what you are doing and know how to take care of your job, chances are over the years you would also be getting more income or pay. While it is possible that things can go really bad like losing your job, it is more likely that not that you will earn more as you become more senior and experienced.
Second, getting a home exclusively on the basis of where you work may be convenient but always keep in mind that the company can change locations, you can be reassigned to a different location or you may even end up working for another company. The best way to mitigate this is get a property that would not only be convenient for you but would also have a good resale value in the event you need to move.
Third, owning a home entails other costs aside from the monthly loan amortization, such as real estate taxes, association dues, and insurance premiums. This means you have to set aside the money for these expenses as well.
The upside to owning a home is the appreciation in real-estate value. This is a nice bonus to having a place to stay. However, as we have recently seen, realty prices could also decline even in very good locations. Not only that, your cost of home ownership could skyrocket for reasons beyond your control such as the jacking up of real estate taxes. You should view your home as a major long term investment that you have to set aside mandatory savings, only after you have provided for this should you even think about other non-essential expenditures. Over longer periods of time, it is a good bet that you will be ahead.
If our government was really serious about helping Filipinos get their own homes and keeping them, there are a variety of ways they can help in. There are a number of ways to do this like allow interest expense to be a deductible expense in our income tax, or keeping real estate taxes at their original levels. The reason local governments jack up real estate taxes is because they claim that the value of the property has gone up! Well yes, that may be so but the property owner does not benefit from that until he sells his property. You can just imagine a retiree whose income stream is already limited and in most cases in a decline, to increase his real estate taxes is like forcing him out on the street. In addition, I have yet to see a local government unit lower real estate taxes even when property prices in there are collapse.
At any rate, investing in your own home is a proposition worth considering. As a major investment proposition, it is unlike other investments that you have little or no control over, you can see where you invested your money in every day, and you are able to enjoy your investment even if there is a momentary decline in the value of your investment. Remember a Christmas tree always looks better in your own home!
No comments:
Post a Comment