Home Equity Loans in the Philippines: What You Need to Know

October 30, 2024

A home equity loan is a type of loan that allows homeowners to borrow money using the equity they’ve built up in their property as collateral. It is a popular financial tool in many countries, and while it’s not as common in the Philippines as it is elsewhere, home equity loans offer Filipinos an alternative source of financing. Here’s what you need to know about home equity loans and how they work in the Philippines.

1. What is Home Equity?

Home equity refers to the difference between the market value of your property and the outstanding mortgage balance. As you pay off your mortgage or as your property’s value appreciates, your equity increases.

  • Example: If your property is worth ₱5 million and you still owe ₱2 million on your mortgage, your equity is ₱3 million.
  • How It Works: A home equity loan allows you to borrow against this equity, using your property as collateral. The loan amount typically depends on how much equity you have.

Tip: Building equity is important, as it opens up borrowing opportunities, including home equity loans, to fund major expenses or investments.

2. Types of Home Equity Loans

There are generally two types of home equity loans available to homeowners:

  • Fixed-Rate Home Equity Loan: This type of loan allows you to borrow a lump sum amount with a fixed interest rate, making it easier to predict and manage your payments over time.
  • Home Equity Line of Credit (HELOC): With a HELOC, you can borrow money as needed, up to a certain limit, similar to how a credit card works. This option provides more flexibility, but the interest rate may vary over time.

Tip: Choose the type of loan that best suits your needs. If you need a large, one-time sum, a fixed-rate loan might be ideal. If you anticipate needing access to funds over time, a HELOC might be better.

3. Eligibility for Home Equity Loans in the Philippines

To qualify for a home equity loan in the Philippines, you generally need to meet the following requirements:

  • Property Ownership: You must own a property with sufficient equity. Banks typically require that you have at least 20% to 30% equity in your property.
  • Income Stability: Lenders will assess your ability to repay the loan, so having a stable source of income is crucial. This applies to both salaried individuals and self-employed borrowers.
  • Good Credit Standing: A positive credit history increases your chances of getting approved for a home equity loan with favorable terms.
  • Property Title: The property must have a clean Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT).

Tip: Before applying, review your credit report and ensure that your property is fully titled to your name, as these factors significantly affect approval chances.

4. Loanable Amount and Interest Rates

The loan amount you can borrow through a home equity loan depends on the appraised value of your property and the equity you have in it. Typically, lenders in the Philippines allow you to borrow up to 70% to 80% of your home’s equity.

  • Loan Amount: If your property is valued at ₱6 million and you have ₱3 million in equity, you might be able to borrow up to ₱2.4 million (assuming 80% of your equity is loanable).
  • Interest Rates: Interest rates for home equity loans in the Philippines are typically lower than unsecured loans or credit card debt. Rates can range from 6% to 10%, depending on the lender, your creditworthiness, and market conditions.

Tip: Shop around for the best rates and terms. Comparing loan offers from different banks or financial institutions can help you secure a better deal.

5. Common Uses for Home Equity Loans

Home equity loans offer flexibility in how the borrowed funds can be used. Some common reasons why homeowners in the Philippines take out home equity loans include:

  • Home Renovation or Improvement: Use the loan to upgrade or expand your home, potentially increasing its value.
  • Business Financing: Home equity loans can provide capital for starting or growing a business.
  • Debt Consolidation: Consolidate high-interest debt, such as credit card balances, into a single loan with a lower interest rate.
  • Education Expenses: Finance your or your children’s education.
  • Emergency Expenses: Access cash for unexpected medical bills or other emergency costs.

Tip: Always have a clear plan for how you will use the loan. Avoid using home equity loans for non-essential or luxury purchases, as failure to repay the loan can put your home at risk.

6. Risks of Home Equity Loans

While home equity loans offer many advantages, they also come with risks, particularly because your property is used as collateral.

  • Risk of Foreclosure: If you fail to repay the loan, the lender has the right to foreclose on your property.
  • Variable Interest Rates (for HELOCs): If you opt for a home equity line of credit with a variable rate, your payments could increase if interest rates rise.
  • Over-Borrowing: Borrowing more than you need or more than you can afford to repay can lead to financial difficulties.

Tip: Consider all risks carefully before taking out a home equity loan. It’s essential to ensure that you can meet the monthly repayments without stretching your budget too thin.

7. How to Apply for a Home Equity Loan

The process for applying for a home equity loan is similar to that of a mortgage application. Here are the general steps:

  • Step 1: Contact a bank or financial institution that offers home equity loans and inquire about their requirements.
  • Step 2: Submit the necessary documents, including the Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT), proof of income, valid IDs, and a loan application form.
  • Step 3: The bank will conduct an appraisal of your property to determine its current market value and the loanable amount.
  • Step 4: Once the loan is approved, the funds will be released, typically in one lump sum for fixed-rate loans or as needed for HELOCs.

Tip: Make sure all documentation is complete to avoid delays in the approval process.


Home equity loans can be a useful financial tool for homeowners in the Philippines, providing access to funds for major expenses like home renovations, business investments, or education. However, they come with significant risks, particularly the possibility of losing your home if you fail to repay the loan. Before applying, it’s essential to understand the terms, interest rates, and eligibility requirements, and to use the loan responsibly.