Rent-then-buy: One way to your dream home

Like any starting couple, before getting married, my husband and I scoured the metro for affordable housing.  One thing we knew, we wanted to be independent from our parents and start our life together able to stand on our own — financially. Our then meager finances took us so far away from our workplaces and our families, to get a loan and buy our new home.

This is why for so many newly married couples, the most viable option is to rent first, even a small place, until such time that they have saved enough to afford the down payment for a home and a monthly expense that includes not only the rental but also the equity payments and the loan amortization. Unfortunately, this may not be as easy as A-B-C, so allow me to share some ideas to help you to own your dream home.

Visualize your dream 

Do not lose sight of your dream. Look at magazines and visit home design sites on the internet. Spend your weekends looking at various projects, get brochures and compare the different developments. Do you want to be near work? Near family? How far do you want to travel every day? Consider the convenience of the location in terms of accessibility to schools, hospitals and other amenities. Come up with a dream board to remind you of this dream and inspire you every day.

Research about what it will take to own a home

Talk to your friends and family who were able to buy or build their home and ask them what they did. 

Ask the sales personnel of developers onsite for their financing schemes. Usually, they require a reservation fee, then a downpayment of about 20 percent after 30 days.  Buying a home on pre-selling makes the downpayment more affordable as it is spread over the time the developer needs to complete a project. For condominium units, depending on what stage of construction you buy the unit, you may have 24 to 36 months to pay the required down payment. 

Go to your bank and ask for advice such as the requirements for a loan and what it will take to get approved for a loan.  Once the project is nearing completion, the balance of 80 percent will have to be paid to the developer and this is where you will most likely need bank financing. I suggest you start seeking the advice of your bank at the onset so you know what to expect two to three years down the road. For your convenience and guidance, here are self assessment tools: 

https://cal.bpihousingloans.com/loan-calculator/bpi-family-housing-loan and loan calculator 

https://cal.bpihousingloans.com/loan-calculator/bpi-family-housing-loan

You can access both tools by visiting https://www.bpiloans.com.

Plan ahead and just do it

Nothing comes by chance.  You need to start saving for that reservation fee and down payment as early as now.   Discuss with your spouse how you will manage your finances. 

Do reverse budgeting.  This means setting your monthly savings target and deducting this from your joint income to arrive at what you can afford to spend on a daily and monthly basis. Now that you know how much you can afford to spend, determine what you can afford to give up. Instead of buying coffee or milk tea, brew your own and bring this with you to work. Bring your lunch baon instead of buying outside. Travel local, shop local. Find cheaper options. See how you can save on your utility bills.  Anyway, the pandemic is the perfect time to begin the habit of prudence, aside from the fact that it is safer to stay home.

Be smart about your money.  Avoid the temptation to spend your Christmas and salary bonuses. Automatically set those aside in longer tenor time deposits or put those in higher earning investment funds. To help you become more disciplined, you can sign up for a regular subscription plan wherein you can elect an amount to automatically put in an investment fund on a monthly basis. Your bank can guide you on the best way to secure your money for the required down payment for your dream home.

Build good credit

Make sure you pay your obligations on time — be it your credit card bills, utility bills, and/or personal loans.  We now have credit bureaus such as the following:

• Credit Information Corp. (CIC) at https://www.creditinfo.gov.ph/vision-and-mission 

• TransUnion Philippines at https://www.transunion.ph/about-us/about-transunion

Both are tasked to make credit more accessible to more Filipinos who maintain good credit standing. Banks and other institutions access these databases to ensure that they provide financing to Filipinos who manage their finances responsibly and with the discipline and capability to pay their obligations.  Building good credit is critical to your ability to secure a home loan once the developer is about to complete your dream home and your balance payment of 80 percent is about to fall due.

Renting a home is a great way for couples to start a life anchored on financial independence. As you grow your family, you need to keep going and moving toward owning your dream home. 

As the famous Michael Jackson song in the Wizard of Oz goes, “come on ease on down, ease on down the road, pick your right foot up, put your left foot down, let your legs keep moving, don’t you lose no ground”. Build your home sweet home, one day, one peso, one brick at a time.

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