What Are The Upfront Costs Of Buying A Home?
Buying your first home is a big milestone. It requires a lot of time, effort, research, paperwork, and most importantly, money.
Your Loan to Value ratio, also known as an ‘LTV’, refers to the percentage of the value of a property a buyer needs to borrow. All buyers should be familiar with this term as lenders use it as a metric to determine your borrowing power.
Your LTV is calculated by dividing your loan amount by the value of the property and converting that into a percentage.
For example, let’s say the value of the property you’d like to buy is P3,000,000. You have a P500,000 deposit ready, meaning you’ll need to borrow P2,500,000. Your LTV would be: P2,500,000 (loan amount) / P3,000,000 (value of property) x 100 = 83%.
There are lots of factors that go into securing a home loan, and your LTV is only a small part of it. This is why so many documents about your income, savings, employment, assets and debts are required as part of the loan process, as they provide banks with an estimate of your financial capacity and your reliability in repaying a loan.
Banks consider loans to be risky endeavours, and they want to ensure the loans they give out are as risk-free as possible. Therefore, they use your LTV as one metric to determine your risk. Borrowers with a higher LTV are a higher risk for banks.
The lower your Loan to Value ratio, the better.
As mentioned before, borrowers with a high LTV are high risks for banks. However, having a high LTV is not uncommon in the Philippines, but it does mean that you will likely receive a higher interest rate on your loan than someone with a significantly lower LTV.
It is unlikely that a bank will agree to lend to you. The average Philippine bank generally requires a 70 or 80 percent LTV for a mortgage to be approved, though there are some that are higher and many government loan programs that can go up to 90% or more.
Hope is not all lost! If you don’t have the correct LTV for your chosen bank, there are certain situations where this can be adjusted; for example, if you have collateral or equity, your past lending history is good, if you have a guarantor sign, excellent references, and so on. Certain accredited developers will allow borrowers to loan up to 90% of the selling price.
Admittedly, in most cases, it is better to wait until you have a higher deposit to avoid these complications.
Unfortunately there are only two ways to increase your LTV. The first way is to have more money. Review your spending habits and try to identify where you can save money, or ask friends and family to pitch in. You cannot get a personal loan to help increase your LTV, and you shouldn’t consider any loan in this circumstance because it will only increase your debt.
Your second option is to buy a different house. Accredited developers will allow you to borrow up to 90% of the total amount, but cheaper houses will also increase your LTV percentage. Of course, it is important to not just settle for any house, because that may add up in more costs renovating or repairing in the long run, so be careful when choosing your home.
Your LTV is the percentage you need to borrow. A Maximum Loan Amount is how much the bank is willing to give you, regardless of every other variable.
Banks commonly list their maximum loan amounts on their website and they vary depending on whether you’re purchasing an empty lot, home and land, or a condo.
Buying your first home is a big milestone. It requires a lot of time, effort, research, paperwork, and most importantly, money.
Borrowing power refers to the amount of money that a bank is willing to lend you. It can also be called your borrowing capacity.
You see the phrase everywhere and hear people talk about them, but what exactly are interest rates?
Your Loan to Value ratio, also known as an ‘LTV’, refers to the percentage of the value of a property a buyer needs to borrow.
Buying your first home is a big milestone. It requires a lot of time, effort, research, paperwork, and most importantly, money.
Borrowing power refers to the amount of money that a bank is willing to lend you. It can also be called your borrowing capacity.
You see the phrase everywhere and hear people talk about them, but what exactly are interest rates?
Your Loan to Value ratio, also known as an ‘LTV’, refers to the percentage of the value of a property a buyer needs to borrow.
*This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and if necessary, seek appropriate professional advice. Interest rates displayed are dependent on qualifying for a home loan with your chosen Bank. We cannot guarantee clients will avail the advertised rate.
Copyright © 2025 Estra Financial Consultancy Service® (trading as Estra Finance). All rights reserved