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July 2, 2019 by: Ryan

What Is the Ideal Debt-to-Income Ratio for a Home Loan?

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First-time home buyers in the Philippines should follow the 36% rule as a good benchmark for debt-to-gross income ratio.

Some experts even suggest a 28% ratio as an alternative way to manage your finances. The rule applies to your disposable income. In other words, you shouldn’t spend more than P14,000 of your disposable income on debt payments if you earn P50,000 every month. The actual amount will vary based on how much you need to borrow as well as the location. For instance, a loan for a new house ‘n’ lot in Cavite may cost less than a similar property in Manila.

Calculating the Expenses

Let’s say you found a house worth P1.5 million. You intend to pay 20% as down payment, which reduces the price to P1.2 million. If you applied for a loan with a 6.88% annual interest with a five-year fixed rate over a 20-year term, you should expect to pay around P9,217 per month.

If you decide to follow the 38% rule, your monthly repayments shouldn’t cost more than P18,000 from a gross income of P50,000. Most financial experts recommend this ratio because it prevents you from overspending on housing payments, causing you to sacrifice other important expenses such as healthcare and emergency funds.

Fixed or Variable Rate: Which Is Better?

Disposable income refers to the leftover money after paying tax, spending on food and utilities among other mandatory expenses. You need to shop around for housing loan rates among different banks to determine the exact monthly payments. Choose loans with variable rates only when you understand the risks. Your monthly repayments will depend on interest rate movement. If interest rates increase, so does your loan installments.

Banks aren’t the only option for home loans. You can apply for in-house financing from the developer of your chosen house. An in-house loan requires less paperwork and faster processing, but you need to pay a bigger monthly installment because of the shorter terms. In-house loans also entail higher interest rates than banks.

Why Location Matters

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You will have a hard time to look for properties worth P1.5 million in Metro Manila especially in cities like Makati and Taguig. In fact, the cost of living in Manila has increased this year based on a survey. The capital city now ranks as the 109th most expensive place in the world. While the new ranking seems low, Manila registered the fourth-biggest jump after landing on the 138th spot in the previous year.

Hong Kong remains the most expensive city worldwide particularly because of eye-watering home prices. Tokyo, Singapore, Seoul and Zurich completed the top five, while Beijing and two other cities landed on the top 10. Zurich and New York City are the only cities outside of Asia to join the list.

Conclusion

You can save money by saving as much as you can for a down payment. A higher upfront cash payment lets you reduce accumulated interest payments over the housing loan’s term. How much do you plan to borrow for your first home purchase?

 

Environmentally Friendly Cryptocurrencies To Invest In

February 14, 2023 By Ryan Leave a Comment

Currently, it seems like almost every business practice is in some way harmful to the natural environment of our planet. The crypto industry is certainly not exempt from this negative environmental impact as many crypto mining projects consume high amounts of electricity. Industry experts, leaders, and engineers are aware of this problem and are working hard on projects that are more eco-friendly. There are a

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Useful Sports Betting Tips For NCAA Football Enthusiasts

January 26, 2023 By Ryan Leave a Comment

NCAA college sports, and particularly football, has become incredibly popular in recent times, attracting masses of fans and leading to a huge surge in spectatorship, as well as sports betting. Read on for some pro tips could help give you a winning edge. Taking Advantage In The Early Season Oddsmakers are skilled at predicting how the public will bet and set their lines accordingly. Though

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What a Time Lapse Camera can do for You (personally and professionally)

December 29, 2022 By Ryan Leave a Comment

As the New Year is upon us, everyone is looking to change something in their life, to make it better. Although you can’t find happiness in objects, you may be surprised how much acquiring a time lapse camera will increase the quality of your life, personally and professionally. Here is the explanation. On a Professional Level Let’s start with work. Whether you are independent or

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Tips to Remember When Starting a Career in Entertainment Journalism

December 21, 2022 By Ryan Leave a Comment

Contrary to popular understanding, journalism is multidimensional career and writing is a skill that can be used in different ways. Not all journalists are the same and different types of journalism require different types as skills – as well as many of the same ones too, of course. While entertainment journalism may be perceived by many as a lesser form of the craft, this couldn’t

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About

Hi guys! I’m Ryan. I am a recent graduate from a Journalism program and have a huge passion for writing. I am also the editor of Get Under Skeleton.

A little bit about me is that I love learning about all things and I am always inquiring and asking questions about,

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  • 7 Timeless Sports Console Games From The Past Two Decades
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about me

Hi guys! I’m Ryan. I am a recent graduate from a Journalism program and have a huge passion for writing. I am also the editor of Get Under Skeleton.

A little bit about me is that I love learning about all things and I am always inquiring and asking questions about, Read More…

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