Amount you can Borrow

The amount you can borrow for a home construction loan depends on several factors, such as the appraised value of the property, your income, your debt-to-income ratio, and the bank’s specific loan policies. Here's a breakdown of how banks in the Philippines typically determine the loanable amount:

Key Factors That Determine How Much You Can Borrow:

1. Loan-to-Value (LTV) Ratio

What It Is: Banks usually lend a percentage of the appraised value of your property, known as the Loan-to-Value Ratio (LTV). In most cases, banks in the Philippines offer up to 80% of the appraised value of the lot and the house to be constructed.
Example:
- If the appraised value of your property (land + construction cost) is ₱5,000,000, the bank may lend up to ₱4,000,000 (80% of ₱5M).
- You would need to cover the remaining ₱1,000,000 (20%) as a down payment or equity.

2. Debt-to-Income (DTI) Ratio

What It Is: Your Debt-to-Income Ratio (DTI) measures how much of your monthly income is used to pay off existing debts. Banks generally want to see a DTI ratio of 40% or lower to ensure that you can comfortably repay the loan.
How It Affects the Loan: The lower your DTI, the higher the amount you can borrow, as the bank is more confident in your ability to repay the loan.
Example:
- If your monthly income is ₱100,000 and you have existing monthly debt payments of ₱20,000, your DTI is 20%. Banks will likely allow you to borrow an amount that results in monthly payments of no more than ₱20,000–₱30,000 (keeping total debt payments below 40%).

3. Your Monthly Income and Repayment Capacity

What It Is: Banks typically allow you to borrow an amount that ensures your monthly amortization does not exceed 30%-40% of your gross monthly income.
How It Affects the Loan: The higher your income, the more you can borrow. Banks calculate how much you can borrow by estimating your loan's monthly amortization based on interest rates and loan term.
Example:
- If your gross monthly income is ₱150,000, and the bank allows up to 40% of income for loan repayment, your maximum monthly amortization would be around ₱60,000.
- With a 7% interest rate and a 20-year loan term, you could borrow approximately ₱6M–₱7M.

4. Interest Rate and Loan Term

What It Is: The interest rate and loan term (number of years) directly affect how much you can borrow because they determine your monthly payments.
Example:
- For a ₱5,000,000 loan at an interest rate of 7% over 20 years, the monthly payment would be around ₱38,765.
- If the interest rate were lower (e.g., 6%), you might qualify for a slightly larger loan because the monthly payments would be lower.

Typical Loanable Amounts from Major Banks

Bank	Maximum LTV Ratio	Minimum Loan Amount	Maximum Loan Amount	Loan Term
BPI	Up to 80%	₱400,000	Depends on property appraisal	Up to 20 years
BDO	Up to 80%	₱500,000	Depends on income and appraisal	Up to 20 years
Security Bank	Up to 80%	₱1,000,000	Depends on property value	Up to 20 years
Pag-IBIG	Up to 80%	₱750,000	Up to ₱6,000,000	Up to 30 years

Loanable Amount Calculation Example

Let’s say you want to build a house and the total estimated cost (including land) is ₱5,000,000. Here’s how much you can borrow:

Appraised Value and LTV:
- Appraised Value: ₱5,000,000
- LTV Ratio: 80%
- Loan Amount: ₱5,000,000 x 80% = ₱4,000,000
- You need to cover the remaining ₱1,000,000 as your down payment.
Income and DTI:
- Monthly Income: ₱150,000
- Current Debt Payments: ₱20,000
- DTI Target: 40% of income
- Maximum monthly payment allowed = ₱150,000 x 40% = ₱60,000
- With an interest rate of 7% over 20 years, this monthly payment would allow you to borrow approximately ₱6M–₱7M, assuming you have no other significant debts.

Key Considerations for How Much You Can Borrow:

Down Payment: Be prepared to provide at least 20% down payment or equity from your own funds.
Repayment Ability: Banks will evaluate how much of your monthly income is available for loan repayments (30%-40% of gross income).
Existing Debts: If you have other debts, the bank will factor them into your DTI ratio, which can reduce the amount you’re eligible to borrow.
Property and Construction Value: The appraised value of the lot and construction will set the ceiling for how much the bank can lend (up to 80% of the appraised value).

How to Maximize Your Loanable Amount:

Improve Your Credit Score: A higher credit score can help you secure better loan terms and a larger loan amount.
Reduce Your DTI: Pay off some of your existing debts to lower your DTI ratio before applying for the loan.
Increase Your Down Payment: Offering more than the minimum down payment (20%) can increase the amount the bank is willing to lend.
Choose a Longer Loan Term: Opting for a longer loan term (e.g., 20 years) can reduce your monthly amortization, allowing you to borrow more.
Add a Co-Borrower: If your income isn’t sufficient, adding a co-borrower (e.g., spouse) with stable income can help you qualify for a larger loan.