How To Compute the Monthly Amortization of your Housing Loan?

Have you ever wondered how the monthly amortization of your Housing Loan is computed?  There are several Financing institutions like Pagibig, Bank, or In-House Financing and these institutions use a Factor rate to compute for the monthly amortization of your housing loan. Your monthly amortization is composed of the principal plus interest payments paid regularly over a specific period of time.

To compute your monthly amortization, there are several factors that need to be considered:

• Total Contract Price of the Property you are buying

• Downpayment (DP) or Equity required by the Developer. Most Developers usually require 20% Downpayment.  Some of the Developers who offers Pagibig financing just require 10% or less Downpayment, thus, make it more affordable for the buyer. This usually applies to affordable house and lot.  Downpayment are usually payable in installment, thus, make it more easy for the buyer to pay.

• Loanable Amount - This is the Difference of Total Contract Price and Downpayment.  This is the amount that will be process in either Pagibig, Bank or In-House Financing.

TOTAL CONTRACT PRICE LESS DOWNPAYMENT = LOANABLE AMOUNT

• Interest Rate.  This is the dictated rate by the Financing Institution.  Bank rates are usually smaller as compared to Pagibig or In-house rates but they require minimum Gross income to be able to avail of the housing loan, like for BDO, they require at least 50K salary.  In-house financing offers the biggest interest rates as this is financed by the Developer itself. 

• Loan Term. This is the period wherein you plan to pay your loan.  For Pagibig Financing, maximum loan term is 30 years. Bank offers an average of 15-20 years depending on the bank. In-house offers usual loan term of 10 years 

• Factor rate - this is derived by taking into consideration the interest rates and the loan term. This is usually computed by getting the present value factor.

Here's the Factor rate table:

Illustration:

Let's make an example of the house and lot project of Las Palmas Subdivision in Bulacan. An affordable house and lot in Sta Maria Bulacan.

Total Contract Price = P844,000

Downpayment = 59,000

Loanable Amount = P785,000

Loan Term = 20 years

Interest rates = 7%

Factor rate = 0.0077529894

Computation of monthly amortization:

Loanable Amount                P785,000

Factor rate                       X  0.0077529894

Monthly Amortization =  P6,086.09

This is how to compute the monthly amortization.  For you to have simpler means of calculating it, you can go to Pagibig website for the housing loan calculator. You just need to input details of the housing loan you are buying.

Notes:

**Las Palmas Subdivision, is an affordable house and lot in Sta Maria Bulacan.  The Project ranges from 600k+ to 800k+ only, with a monthly amortization of 4-5K only.