What You Need to Know About the Home Mortgage Relief Act

If you take out loans to buy or construct a family home, you can deduct the mortgage interest from your income tax. This is the essence of Senate Bill No. 2148 authored by neophyte senator Sonny Angara. It proposes tax incentives for qualified first-time homebuyers by way of home mortgage interest relief.

The Bill, Explained

On the bill’s explanatory note, it stated that a home gives a person a sense of security and stability. But many individuals rent instead of purchase their own homes, not because they want to, but because they don’t have any choice.

Indeed, houses are such a huge financial burden. The bill cited the recent research by the National Economic and Development Authority’s Statistical Research and Training Center that among 21.5 million Filipino households, 1.5 million of them are renters.

The bill’s author mentioned that many developers currently offer reasonably priced housing options that require easy payment terms and low down payments for homebuyers. But Angara also pointed out that there is still one deterrent in home purchase, which is the aspect of financing.

Developers and banks charge high interest rates, which discourage many potential homebuyers from making a purchase. Thus, the senator proposes this new bill that will give a tax incentive to people who are interested to buy a house.

How the Bill Can Help Pinoys?

Home Mortgage Interest Relief is one of the outstanding features of this bill. It aims to give tax incentives to individuals for buying a home. Through this, the bill aims to aid Filipino families in finally acquiring their first family home. Thus, any interest actually paid during a taxable year from any loan obtained to acquire or construct a family home is deductible from your gross income.

In addition, when this bill comes into effect, the interest rates of your loan will be removed. Consequently, you will only have to pay the principal amount of your property. You don’t have to worry anymore about mounting interest payments. Besides, this relief will also provide tax savings for you.

The bill hopes to encourage more lenders to offer affordable financing to first-time homebuyers—those who need shelter the most.

Senator Angara hopes that this legislation will get to the bottom of housing shortage problem in the country, currently estimated at 3.9 million housing units. It hopes to encourage more lenders to offer affordable financing to first-time homebuyers—those who need shelter the most.

However, when enacted, the law will cover only loans that meet the following prerequisites: (a) housing loans from any reputable Philippine bank, from the Home Development Mutual Fund (Pag-IBIG), and duly approved cooperatives; (b) loans that are used for the sole purpose of constructing or buying a family home; and (c) loan amounts not over Php2.5 million.

Can the Bill Help OFWs?

Most Filipinos think of real estate as a stable and practical investment. Overseas Filipino workers (OFW), in particular, often prefer real estate over any other forms of investment. That’s why they choose to buy farms, house and lot, and other types of real properties. But real estate requires a large amount of money. If this bill is passed into law, many financing companies may be encouraged to offer flexible and low-priced financing options. With greater competition, OFWs can choose the most suited financial option available.

The Bill’s Benefit to Newlywed Couples

Filipinos are known for their close family ties. Extended family is also very common. Just look at comedy sitcoms where the in-laws would barge into a newlywed’s bedroom during the honeymoon, or grandparents fighting over their grandchild’s attention. But with the passing of time, more and more Filipino couples prefer to live on their own. Some rent apartments, while others buy or build their homes. This is because having a house you can call your own can give you the following benefits.

1. Privacy

Although living with in-laws has great benefits, especially when a newlywed couple is not yet financially stable (in some cases having in-laws around means instant and willing yayas for your kid), there are times that conflicts may arise out of simple misunderstanding or interference. If you stay in your own house, you and your spouse can have more space to be intimate and to get to know each other better. You can also deal with your issues and resolve them before they get out and ruin your relationship.

2. Pride of Ownership

Having a house gives you a sense of financial accomplishment. You can also relax and do anything you want with it. Unlike renters who have to seek permission from the landlord before making home adjustments, you can change anything with your home anytime.

3. Stability and Security

You may lose your job or your business may turn bad, but if you have a house to come home to, you may not feel so bad at all. You can snuggle on your bed and make plans to redeem your financial status.

4. Future Investment

Everyone needs a lucrative investment. Though you can’t get the returns outright in the real estate niche, you can reap its long-term benefits with the passing of time. You don’t have to rent anymore; you can rent it out, sell it, or use it as a guaranty for your loan. A home is a sanctuary for many Filipinos. It gives us a sense of permanence. It is also wise to spend money on home financing than throwing it all on monthly rents. Your house is a good investment. Wait until this bill turns into a law and see how it will encourage Filipinos to take a brave step in buying a house.