Understanding the 30% Rule for Home Loans in the Philippines

May 17, 2024

When planning to buy a new home in the Philippines, understanding the financial guidelines set by banks and the Pag-IBIG Fund is crucial. One of the most important guidelines is the “30% Rule.” This rule helps determine whether your income is sufficient to cover the monthly amortization of a home loan.

What is the 30% Rule?

The 30% Rule is a financial principle used by banks and Pag-IBIG to assess if your income is adequate to handle the monthly payments of your desired property. According to this rule, no more than 30% of your gross monthly income should go towards your total monthly payables, including your home loan amortization.

Why is the 30% Rule Important?

The 30% Rule serves as a safeguard for both the borrower and the lender. For borrowers, it ensures that they do not overextend themselves financially, reducing the risk of defaulting on the loan. For lenders, it minimizes the risk of lending to individuals who might struggle to make their monthly payments.

How Does the 30% Rule Work?

Let’s break it down with an example. Suppose you have a monthly income of ₱100,000. According to the 30% Rule, your total monthly payables, including the home loan amortization, should not exceed ₱30,000.


  1. Monthly Income: ₱100,000
  2. 30% of Monthly Income: ₱100,000 * 0.30 = ₱30,000

This means that to be eligible for the home loan, your monthly amortization payment should be ₱30,000 or less. If the amortization exceeds this amount, you may need to look for a more affordable property or find ways to increase your monthly income.

Applying the 30% Rule in Real Life

When you’re planning to buy a new home, here are the steps to apply the 30% Rule:

  1. Calculate Your Monthly Income: Include all sources of income such as salary, bonuses, and other regular earnings.
  2. Determine 30% of Your Monthly Income: Multiply your total monthly income by 0.30 to find the maximum amount you can allocate to monthly payables.
  3. Assess Your Monthly Payables: Consider all your existing debts and monthly expenses. Subtract these from the 30% of your income to see how much is left for the home loan amortization.
  4. Evaluate Your Desired Property: Check if the monthly amortization of the property you want to buy fits within the 30% threshold.

Additional Considerations

While the 30% Rule is a helpful guideline, it’s also important to consider other financial factors:

  • Emergency Fund: Ensure you have savings to cover unexpected expenses.
  • Other Financial Goals: Take into account your other financial commitments and goals.
  • Interest Rates: Be aware of the interest rates and how they affect your monthly payments.

The 30% Rule is a valuable tool in the home buying process in the Philippines, ensuring that prospective homeowners can comfortably afford their monthly amortization without compromising their overall financial health. By adhering to this rule, you can make a more informed and responsible decision in purchasing your dream home.

Understanding and applying the 30% Rule can help you navigate the complexities of home financing, ensuring that your investment is both sustainable and aligned with your financial capabilities.