Buying a property is a significant milestone, especially for first-time buyers. Beyond the excitement of owning a new home, there are often unforeseen fees that can catch buyers off guard. In the Philippines, where the real estate market is dynamic and diverse, understanding these additional costs is crucial for a smooth transaction. Let’s delve into some of the unexpected fees that prospective property buyers should be aware of to avoid financial surprises down the road.
1.) Title Processing or Title Transfer Fees and Miscellaneous Fees
Transferring property ownership involves various government-mandated fees and taxes. Capital Gains Tax, paid by the seller, amounts to 6% of the gross selling price or the current fair market value, whichever is higher. Additionally, buyers are responsible for the Documentary Stamp Tax, equivalent to 1.5% of the actual consideration for the sale, and Notarial and Registration Fees, which typically range between 1-2% of the property value. Being aware of these additional costs ensures a transparent and hassle-free property transaction.
2.) Bank or Loan Processing Fees
Many buyers opt for housing loans to finance their property purchase. However, it’s important to note that banks or loaning firms may charge processing fees, which are deducted from the initial loan amount. These fees can vary, with some institutions levying a percentage of the loan amount, while others impose a fixed charge. Prospective buyers should inquire about these fees upfront to avoid any surprises during the loan application process.
3.) Value Added Tax (VAT)
One of the unexpected fees that may come as a surprise to first-time property buyers in the Philippines is the Value Added Tax (VAT). Properties exceeding the threshold value of PHP 3,600,000 are subject to a 12% VAT. However, properties below this threshold are exempted from VAT payment. It’s essential for buyers to factor in this tax when budgeting for their property purchase.
4.) Required Insurances
Property ownership comes with responsibilities, including the obligation to have certain insurances, especially while the property is under mortgage. Two common insurances required are Mortgage Redemption Insurance (MRI) and Fire Insurance. MRI ensures that outstanding mortgage debt is settled in the event of death or total disability, while Fire Insurance covers damages caused by fire. Buyers should budget for these annual insurance premiums to protect their investment.
5.) Homeowners Association or Condominium Dues
Living in a community often entails shared responsibilities for maintenance and amenities. Homeowners Association or Condominium Dues cover expenses such as security, sanitation, landscaping, and administrative costs. These dues are typically calculated per square meter of the property and are paid on a monthly basis. It’s important for buyers to factor these recurring expenses into their budget when considering a property purchase.
Purchasing a property in the Philippines is an exciting but intricate process. Beyond the sale value, buyers must consider various unexpected fees that can significantly impact their budget. From taxes to insurance and association dues, being informed about these additional costs is essential for a successful property investment. By understanding and budgeting for these fees upfront, first-time buyers can navigate the real estate market with confidence and peace of mind.