How much does it cost to buy a home? Can I afford it?
A house is the biggest investment you'll ever make, so the expenses you’ll incur should be a major consideration in your home-buying decision.
Understanding the house construction cost, taxes, and other fees you have to pay for a home purchase will help you create a realistic budget and give you ample time to get your finances ready. This also helps you avoid any unpleasant surprises and unplanned expenses.
Here's a general guide to the costs involved in buying a house in the Philippines. Note that the cost estimates here are just ballpark figures to give you an idea of how much you'll spend as a homebuyer.
What are the Upfront Costs of Buying a Home?
Certain fees have to be paid outright before acquiring a home. Here are the initial expenses you should save up for to buy a home in the Philippines.
1. Reservation Fee / Earnest Money Deposit
- Reservation fee: PHP 15,000 to PHP 50,000 (as much as PHP 100,000 for a high-end home), depending on the property's value
- Earnest money: 1% to 5% of the property's selling price (or whatever amount the buyer and seller agree on)
If you plan to purchase a house or condominium unit, you have to pay a reservation fee and/or earnest money.
To secure the unit you want to buy, you pay a deposit to the property developer or seller. This shows you're serious about purchasing the property and ensures that it won't go to another buyer.
For locking down a new unit (whether it's a pre-selling or a ready-for-occupancy project), you have to pay a reservation fee to the developer. In the case of a resale house, you give an earnest money deposit to the seller to put the property on hold for you.
Read more: Here’s How You Can Buy a Home in Your 30s
2. Earnest Money vs Reservation Fee
The reservation fee or earnest money is part of the selling price and will be deducted from the down payment or total price. However, their main difference is that the earnest money is refundable if the sale is canceled, while the reservation fee is usually non-refundable.
Reservation payment on a property is valid only for one to three months, depending on the developer. If you cancel your home purchase or fail to pay the first down payment within the validity period, you won't get your money back. But you may transfer the reservation to your immediate family, to a corporation, or a different property from the same developer.
3. Down Payment
Cost: 10% to 30% of the total contract price
Property developers require prospective buyers to make a down payment. This can be either a one-time upfront cash payment or spread out in monthly installments.
You can negotiate the amount with the developer based on your goal. For example, you may choose a higher down payment if you want to improve your chance of getting approved for a home loan or have a lower mortgage payment.
4. Home Loan Fees
If you'll finance your new home through a housing loan, prepare to pay for processing fees and appraisal fees—both of which are non-refundable—when you file your application with banks and other home loan providers.
5. Processing Fee
Cost: PHP 1,000 to PHP 7,000
A processing fee is a fixed amount you pay upon submitting the home loan requirements to the lender.
If you'll be applying for a home loan with multiple banks, you can save money by getting a home loan through a mortgage broker. Nook, the first online mortgage broker in the Philippines, can connect you with a bank that offers the best home loan for you, without charging any processing fees.
6. Appraisal Fee
Cost: PHP 3,500 to PHP 5,500
An appraisal fee is what you pay for the services of an appraiser who will assess the value of the property you're going to buy. Property appraisal helps lenders determine the right loan amount and interest rate to approve for a borrower.
7. Building Permit Fees
Cost: Varies depending on the house construction cost, location, floor area, height, and other factors
Before your house construction starts, you should apply for a building permit from the Engineering Office of the municipal/city hall with jurisdiction over your new home's location.
A building permit is a document that authorizes you to proceed with constructing your property after meeting the local regulations and the requirements under the National Building Code of the Philippines. Without a building permit, you would have to stop your house construction until you've secured the document.
Along with the building permit, you also have to acquire other permits such as occupancy permit, electrical permit, sanitary plumbing permit, and more. Processing all these documents will cost you money.
To compute the required building permit fees for your house construction, refer to the National Building Code's schedule of fees. If your house will be built in Quezon City, you may check the city hall's website for its sample computation of building fees.
How Much Do I Need to Build a House in the Philippines?
House construction costs form the bulk of your home buying expenses. Prices of construction materials and services in the Philippines are high, so you must account for them properly when planning your budget.
Average House Construction Cost in the Philippines
For terraced houses and average standard one to two-bedroom homes, the construction cost is estimated at PHP 48,111 to PHP 58,865 per square meter as of 4th quarter 2019. The house construction cost includes homebuilding expenses (materials, tools, equipment, etc.) as well as construction services (mechanical, electrical, plumbing, and fire protection systems).
This data comes from the Construction Cost Handbook 2020 by construction consultancy firm Arcadis Philippines.
To get a rough cost estimate for building a house in the Philippines, multiply the house construction cost per square meter by the property's total floor area.
But if you're looking for a more detailed cost estimate, you need to coordinate with a contractor or architect who will create a floor plan and house design based on your budget and specifications.
Aside from the size of the property, many other factors will affect your house construction cost. These include the location, construction materials and method, type of finishes, and project timetable.
Read more: What is the Best House Type for My Family?
Architect Fees for Residential Design in the Philippines
You should also consider house design fees when making a budget for building your home. The United Architects of the Philippines (UAP) recommends a professional fee equivalent to 10% of the house construction cost. This rate for architectural and engineering design services applies to single-detached homes, duplexes, row houses, townhouses, and small apartments.
Labor Cost for Construction in the Philippines
Labor cost may seem like a minor expense, but it actually makes up 20% to 40% of the total house construction cost, according to the Construction Labor Market Analyzer (CLMA).
Construction workers are paid on an hourly or daily rate. According to engineers, the average construction labor cost in the Philippines ranges from PHP 280+ to PHP 815 per day (or PHP 35 to PHP 94.98 per hour).
The salary of each laborer depends on the project location (Metro Manila vs provincial rates), skill level, and type of construction work. For example, the foreman receives the highest pay, while helpers receive the lowest pay. Carpentry, masonry, and electrical labor costs are in the middle range of the payscale.
What is a Closing Cost?
Even after your house has been built and you're approved for a home loan, you'll still shell out some money before you can occupy it. This is the closing cost, which includes taxes and other fees to pay for finalizing your home purchase transaction.
Home Loan Fees
When you get a housing loan approval, the lender will charge several fees before your loan amount is released to the property developer or seller.
Mortgage Redemption Insurance
Cost: Varies depending on the loan amount, loan term, homeowner's age, property's appraised value, and other factors
The mortgage redemption insurance (MRI) protects lenders against loss due to unpaid mortgage payments in case of the homeowner's death during the loan term.
Handling Fee and Notarial Fee
- Handling fee: PHP 2,000 to PHP 5,000, depending on the lender
- Notarial fee: PHP 100 to PHP 500 per document
Banks and other lenders charge a handling fee and a notarial fee to cover the processing of legal requirements for your home loan.
Cost: Varies depending on the property's location and appraised value
Fire insurance covers damage on your property due to fire, earthquake, or other calamities.
Notarial Fee for Deed of Absolute Sale
Cost: 1% to 1.5% of the property’s selling price but not lower than PHP 1,000
As a legal document proving the sale or transfer of a property, the deed of absolute sale needs to be notarized—which comes with a fee.
Taxes to Pay When Buying a House in the Philippines
Local Transfer Tax
Cost: 0.50% to 0.75% of the property's selling price or fair market value, whichever is higher
Payment of transfer tax in the Philippines is a requirement for the transfer of ownership from the seller to the buyer. The actual transfer tax rate depends on the city or municipality where the house is located.
Documentary Stamp Tax
Cost: 1.5% of the selling price or fair market value, whichever is higher
The documentary stamp tax is the tax on any document, such as the deed of absolute sale, stating the sale or transfer of a property in the Philippines.
Real Property Tax
Cost: Up to 2% (in Metro Manila) or 1% (in the provinces) of the assessed property value
Better known as "amilyar," you pay real property tax to the city/municipal treasury office every year. Whether you buy a condo or a house and lot, you need to pay your first RPT before the turnover of your unit.
Mortgage Registration Fee
Cost: Varies depending on the property's appraised value
Once your home loan is granted, you're required to pay for the registration of the Deed of Absolute Sale to the Land Registration Authority (LRA) or the local Registry of Deeds with jurisdiction over the location of your property.
Find out how much you must pay for the registration fee by checking the LRA's schedule of fees.
Move-in fees consist of expenses to settle before the developer officially turns over the property to you. These fees are necessary to make your house suitable to live in, as well as to contribute to the cost of amenities you’ll share with other homeowners in the subdivision or condo community.
Prepare to pay for the following move-in fees:
- Electrical connection fee
- Water connection fee
- Homeowner’s association dues
- Condo fees (including membership fees, association dues, parking fees, etc.)
This guide to house construction cost and other fees associated with buying a property serves only as a rough estimate. Although the details here have been researched and validated at the time of writing, you as the homebuyer are still responsible for doing your own research.
Consult with licensed professionals such as real estate agents, contractors, engineers, and accountants to get a more definite cost estimate for your home purchase,
To know how much you can borrow for buying a home or how much your home loan will cost you, you can use the home loan calculators on the Nook website. While you're at it, avail of Nook's free mortgage brokering service, so you can easily secure the best home loan for financing your new house.
-  Earnest Money in Buying Manila Properties - Should I or Not? (Nitafan, 2020)
-  Schedule of Fees and Other Charges of the National Building Code (DPWH)
-  Sample Computation for Building Fees (Quezon City Government)
-  Construction Cost Handbook Philippines 2020 (Arcadis Philippines)
-  Architect's Guidelines for Standards of Professional Practice (UAP)
-  Project Labor Cost Allocation (CLMA)
-  Construction Labor Cost in the Philippines (TheProjectEstimate.com | PHILCON Prices)
-  LRA Schedule of Fees