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    Guide

    How to Budget for Your Home Purchase

    It has been said and written that the rule of thumb for buying a house is this: its price should not be more than 2 ½ to 3 times of your annual income. For example, if your combined monthly earning as a couple is P100,000, then your combined annual take-home pay is P100,000 x 13 (assuming that you are both employed, we included the 13th month bonus which is a statutory or government-mandated pay to all employees working in the Philippines) or P1,300,000 per year. If we multiply your annual salary with the lower 2.5 ratio, then you can buy a house worth P3,250,000.00 or using the higher 3 ratio, your maximum house cost should be in the area of P3,900,000.00. If you have other sources of income (business on the side, commissions, professional services for which you get paid in addition to you employee salary, like website creation, events planning, freelance writing or tutorials, or bonuses expected over and above the statutory bonus), then you increase your potential of buying a bigger or more pricey house.

    Financial pundits believe that your total monthly debt payments shouldn’t exceed 35% of your gross monthly income. If you are buying your first home, please keep in mind that you should not be paying more than 35% of your gross monthly income for your debts, including the monthly amortizations for your housing loan.

    Of course, you may think that there was something overly conservative in the way your earnings were estimated vis-à-vis your loan potential. We did not intentionally factor in your salary increases over the years or the potential of other income sources in the computation of your annual pay. Why? We hope that (1) you will not feel over-confident that you can buy a bigger and more upscale house, and therefore a more expensive one, and then eventually find yourself over your head, unable to pay and reneging on your bank obligations; and (2) you can build that wiggle room for savings which you can earmark for education, for emergencies, for improving your home or for retirement. Having option no. 2 creates a pretty good feeling – and we speak from experience.

    Buying your own house should create happy, pleasant memories over years of living there, not stressful experiences or sleepless nights, agonizing over your next monthly amortization.

     

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    Jacqueline G. De Pedro
    Director for Sales & Operations | Co-Founder

    Real Estate Broker License
    PRC Reg Certificate AA019210
    PRC License No. 0019560

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