Condo-living is great for several reasons. Whether you live alone or with family, settling in one will entitle you to many benefits for that complete urban experience. To name a few perks, condo owners have access to high-quality amenities, so they don’t have to worry about security and maintenance, and can potentially use their units to generate profit. 

While these advantages sound fantastic, it’s important to keep in mind the financial obligations that come with owning a condo. As you prepare for your move, you’ll need to be mindful of factors such as upkeep, utility bills, and association dues. To help you budget accordingly, the guide below will talk about the costs of owning a condo.

The Cost of Owning a Condo: A Complete List of Homeowner Fees

Condo Living: A Breakdown of Your Expenses

Recent trends suggest that the demand for condominiums is on the rise. Thanks to the security and convenience they provide, they’re seen by many as a desirable housing option. At the same time, they can be lucrative investment options that can yield high returns. As such, it’s no surprise why many people are looking to get one. 

As you settle into your new condo, you’ll need to take note of both upfront and recurring fees to manage your budget wisely. Here are some of the expenses that come with condo living.

  • Upfront costs – This encompasses all of the initial payments that come with purchasing the property. These expenses may be charged by your real estate partner, chosen service provider, and governing agencies. These balances must be settled before you officially acquire your title.   
    • Moving costs – As you move from one place to another, you’ll need to consider the fees that come with transferring equipment. This includes truck rentals, manpower, and other related services.
    • Property cost/Downpayment – This is the price you pay to officially acquire a property. This can be done either through an upfront transaction or a downpayment with periodical amortizations.
    • Legal document fees and property taxes – These are expenses you incur to acquire the property title. Notarial fees, documentary stamps, and charges imposed by the government are some common examples.
    • Loan/financing fees – If you’re looking to mortgage your home or acquire a loan to pay off your condo unit, then you’ll need to consider lender charges. Interest rates aside, service fees and miscellaneous expenses should also be taken into account. 

 

  • Recurring payments – These are essential services that are billed periodically. These transactions are necessary for maintaining your standard of living and are usually settled every month, quarter, or year.
    • Rent – Usually paid every month, this refers to the amount a tenant pays when leasing space. Note that this does not apply to you if you own your condo unit 
    • Mortgage payment – For those who have mortgaged their units, there is a balance you need to pay off to settle off your debt. While this is usually done monthly, terms may vary from one lender to another. Projecting your expenses will ensure that you don’t walk on a financial tightrope.
    • Association dues – These are monthly payments by unit owners and tenants for the maintenance of the condominium. The fees are used to preserve common areas, manage amenities, and pay security.
    • Amenity fees (parking, etc.) – You may get billed for using your condo’s facilities. While some amenities, such as pools and common areas, are complimentary, some real estate providers may charge you for parking or renting conference rooms. 
    • Utility bills – These expenses are essential for maintaining your quality of life. Some examples are water, electricity, and internet bills. You are usually charged monthly, and prices vary according to your needs and usage. 
    • Yearly property tax – These are real estate taxes imposed by the government. Take note of the necessary due dates since failure to settle balances will subject you to penalties. 

 

  • Maintenance – This is the payment for the general upkeep of your living space to minimize wear and tear, from minor repairs such as leaks to major design renovations.
    • Landscaping/Gardening – If your condo has a designated area for greenery, expect to shell out some money for gardening. Budget properly to keep your plants healthy! 
    • Cleaning the home – Regularly cleaning your home to maintain the atmosphere of your unit is crucial. Consider the price of cleaning materials or the rates of sanitation services when budgeting.
    • Appliance maintenance – Naturally, appliances such as stoves and washing machines will break down with regular use. With that said, you should plan for eventual repairs and replacements. 
    • Pest treatment and prevention – Pests can cause a great deal of inconvenience. If you have a rodent or bug infestation, extermination services should be on your list of expenses.
    • Furnishing and décor – Proper furnishing will pave the way for a happy and comfortable living space. Set aside some cash when canvassing for fixtures and other essential pieces.

 

  • Emergency fund – Accidents or breakdowns can happen unexpectedly, so it’s always good to have a safety net to fall back on. Having an emergency fund can help you pay off sudden repairs and give you more breathing room in case of an emergency. 
    • Unexpected repairs – Appliance malfunctions and accidents can happen at any point in time. As you allocate your monthly budget, set some money aside for unexpected repairs and emergencies. 
    • Broken fixtures, pipes, and electrical wires – Down the line, wear and tear will eventually diminish the inner workings of your home. Whether your home is in good shape or not, don’t forget to budget for broken fixtures, pipes, and electrical wires. 
    • Insurance (Fire and Mortgage Redemption) – The best way to protect your home is to have it covered with a comprehensive insurance plan. Getting one will give you financial flexibility in case of a fire or any other disaster that can destroy your home. 

Budget Wisely

Despite the effects of the COVID-19 pandemic, it’s good to know that there is still a lot of optimism surrounding the real estate industry in the Philippines. Now that prices and terms are more favorable than ever, today is arguably the best time to purchase a property. 

Taking note of the factors above will ensure your comfort and guarantee a smooth transition. Budgeting effectively will help you address the needs of the present while preparing for what’s to come. If you’re on the lookout for prime condo units in the country, head on over to Federal Land today!

Buying a property is one of the biggest financial decisions a person will ever make. Whether it is for investment or personal housing, you will have to be wise on how you finance a property purchase.

Federal Land offers three payment terms: Cash Term, Bank Financing Term, and In-house Financing Term. To help you decide which financing option is best for you, here is a short guide of payment options, housing loan calculator, and amortization tips.

WHAT ARE YOUR FINANCING OPTIONS?
Payment terms vary per project. Typically, Federal Land offers three payment terms: Cash Term, Bank Financing Term, and In-house Financing Term.

Cash Term means paying cash up front within a 30-day or 60-day period. The easiest and fastest way to homeownership, cash term means you can enjoy certain advantages such as discounts, fewer requirements, easier and quicker processing of real estate documents and no long-term payment concerns.

For cash term, the following are the factors you should consider:

  • Allotted funds for the closing costs and the Total Contract Price (TCP) to be paid within the 30-day or 60-day period
  • Discount offered as compared to your foregone investment earnings for in-house financing
  • Interests attached to the other payment terms
  • Advantages of installment options
  • Easy transaction and documentation

In-house Financing Term is an extended payment term with above-average interest rates offered by the developer. Federal Land offers in-house financing payable in five to ten years for 80% of TCP or a maximum amount of Php 5 million with a fixed interest rate for the first five years, then subject to review for succeeding years.

While banks are known for their strict housing loan application, in-house financing has a relatively low risk of being denied. A down payment of 20% to 30% of the TCP is enough to guarantee.

Requirements for in-house financing include a certificate of employment indicating position, length of service and compensation, your latest Income Tax Return, your latest pay slip, and utility bills.

For foreigners and non-permanent residents of the Philippines, in-house financing and cash term are the only available payment options, since bank financing have a required number of years of residency in the country and familial ties to support loan agreements.

Bank Financing Term is an agreement between the lender (a bank) and the borrower (the homebuyer) wherein the borrower pledge to pay the loan or mortgage over an agreed period or loan tenure.

Depending on the bank policy, property value and paying capacity, a buyer can loan up to 90% of TCP and pay for the loan and its interest for up to 25 years. The homebuyer would then shoulder the remainder of the TCP or the equity. However, some real estate projects may have a limited allocation of units offered for long-term payment via bank financing options. It would be best to verify the real estate project being offered and the availability of units allowed for this type of payment before making a decision to buy.

For bank financing, the factors are similar to in-house financing, except for lower interest rates, stricter bank documentary requirements, and the benefit of having the Title transferred to your name sooner if you use a different property as your collateral. If you choose to use the property you purchased as your collateral, the Title will be transferred to your name; however, it will be kept by the bank until you complete your mortgage payments.

For all projects of Federal Land, a homebuyer can apply a housing loan to its accredited banks: Metrobank and PS Bank. Selected Federal Land projects also accept housing loans from PNB Savings Bank, UCPB, Banco De Oro, Union Bank and Chinabank. It would be good to buy during the pre-selling period of real estate projects during which time there are units available for bank financing payment option.

WHAT IS MONTHLY AMORTIZATION?
Should you choose either bank or in-house financing to pay off your condominium, you will have a monthly obligation called amortization.

Amortization is an accounting process of spreading payments over a specified time. A mortgage due to be paid in 20 years, will have the same amount due every month for 20 years with the first few installments going towards payment of interest before reducing the loan balance or principal.

To illustrate, see below an example of amortization table (or amortization schedule) for a mortgage of Php 2,800,000 with a five-year fixed rate of 5.88% payable in 10 years.

A Sample Condo Amortization Schedule
A Sample Condo Amortization Schedule

To see full amortization schedule or calculate for your schedule, use a loan amortization calculator.

In the table, you will notice how your monthly payments affect the loan and the interest. While each monthly fee is the same, the portion of each payment changes over time. At the beginning of a long-term loan, payment to interest is higher than to principal. As you progress to the middle of the loan tenure, a more significant portion of the monthly payments goes towards your principal than to the interest. This system will go on until both the interest and principal is paid.

How to compute for your monthly amortization?
For convenience, you can use the bank loan calculator on the side or check out the online calculators of your chosen bank. But if you ever wonder how banks compute your monthly amortization, here is how they calculate it.

Condo Financing 101
Factor Rate Table

Banks and other financing institutions use a factor rate table in computing for monthly amortization. The monthly amortization is in payment of the loanable amount (principal) and interest spread evenly over a specified time. To compute for your monthly amortization, simply multiply the amount you loaned with the appropriate factor rate (interest rate and loan tenure) from the table.

Loanable Amount X Factor Rate = Monthly Amortization

For example, you want to buy a condo unit with a total contract price of Php 3,500,000. You paid 20% of TCP for down payment and wanted to finance the remaining 80% through a bank loan with a five-year fixed rate of 5.88% payable in 10 years.

Total Contract Price: Php 3,500,000

Down Payment: Php 700,000

Loanable Amount: Php 2,800,000

Interest Rate: 5.88%, 5-year fixed

Number of Years to Pay: 10 years

Factor Rate: 0.01104188

Monthly Amortization = Loanable Amount X Factor Rate
= Php 2,800,000 X 0.01104188
Monthly Amortization = Php 30,917.28 per month for 10 years

HOW TO PAY YOUR MONTHLY AMORTIZATION THE EASY WAY?
When you found your dream home and secured an appropriate home financing, it is easy to think you can commit to your chosen mode of payment. However, sometimes life happens, you get distracted, and then you cannot pay on time.

In a housing loan, like in other kinds of credit, late payments can lead to unfortunate consequences. A late, a short or a non-payment can incur penalty charges. Late fees for one missed month may seem easy, but when allowed to accumulate for several months, then it starts to become a full-on headache. This can amass late payment fees and interests and can lead to default mortgage and foreclosed property.

So, instead of paying cash, sending checks, or charging credit card every month, here is a pro-tip: automate your payments.

Auto Debit Arrangement allows you to deduct scheduled payments against your registered bank account automatically. Auto debit is an electronic payment option that permits your lender to take payments directly from your account. With developers having partner banks, the amount is easily verified as coordination is easier between the developer, the bank, and the buyer. However, this arrangement is to be coordinated by the buyer directly to the bank who approved the loan and not the developer.

Postdated check is a check written by the payer for a date in the future. Most developers and banks require complete postdated checks for practical and convenient payment schedules. A postdated check can only be encashed or deposited on the date written on it.

When you automate your payments, you do not need to worry about making the deadlines. You only have to ensure enough funding for the registered accounts.

Now that you understand what payment options there are available to buy a real estate property, the next step is for you to evaluate the following: your real estate property of choice, the availability of payment options specifically for the unit you wish to buy, and most importantly, your financial capability during the time of purchase and future income projections.

Being a major investment decision, real estate purchase should be seen more as a business capital that is projected to bring in additional income in the future. If you know how to weigh the risks and prepared for the financial investment required, making a decision when and how is not a problem especially if you have saved enough from the start.

To learn about available real estate projects in the country’s central business districts, please check out the Property section of our website: https://federalland.ph/federal-land-condo/.