Dear home 911,

My family bought a modest house two years ago in Marikina on a 10-year bank loan. During typhoon Ondoy, floodwaters reached up to the second floor of the house, damaging everything inside. The wooden floors and walls have warped and all appliances and furniture have been destroyed. Luckily, we all survived without physical harm. The problem is that with the extent of repairs to be done to make the house livable again, we just can’t afford to pay the mortgage. And nobody wants to buy a house that was damaged by Ondoy, even if you sell it way below the market value — and what value is the house and lot now anyway? It is more practical for us to rent an apartment. While we can still meet the basic necessities, we feel desperate about the mounting bills. It’s easier for us to just let the bank repossess the property. Can we just stop paying and abandon the house? What are the consequences?

Maya

Dear maya,

When I was watching and reading about the aftermath of Ondoy, my heart broke for the loss of lives and for all the hardworking families whose homes were destroyed. There haven’t been many reports about the middle class whose homes were destroyed and I can only imagine the hardship they are going through at seeing all those years of hard work literally being swept away by the floodwaters. Where do they go now? These families will not line up at the relief centers because they still have jobs to go back to, but how do they deal with the loss of decades of hard work, saving a little money here and there, denying themselves vacations or purchases — to eventually buy their own home? And then Ondoy happened. Now they have to face the realities: mortgage payments on a house that is now worth a fraction of what they are paying for. It sounds like a nightmare.

The first thing you have to do, if you haven’t done so, is to meet with your bank manager. Ask about a moratorium. Banks are in the business of making money, but what happened to the country in these past three weeks has so shaken everybody that perhaps they might have payment schemes for Ondoy victims.

I asked my banker friend who works in the loans department of a top bank in the country and this is her answer:

“If the house was damaged by Ondoy, the mortgage with the bank remains and the obligation of the borrower remains just the same. If the borrower opts not to settle, interest, penalties and charges will accrue, lalaki pa lalo ang utang. The bank will exert its effort to collect and if it is futile it will exercise foreclosure procedures. Once the bank has repossessed the property, the former owner will have a default credit record, the loan will still remain outstanding as far as the borrower is concerned but in the books of the bank it will be considered a bad debt. It may be best to sell the property and use the proceeds to pay off the loan.”

Obviously, with a bad credit record, you will not be able to take out a loan from a bank again. While this may seem like a small thing now, think of the future, when you might need to take out a loan for whatever reason and you can’t because of your record.

Source:www.philstar.com- Modern Living

It is a fact that home improvement loans are usually taken out for making a home larger or adding value to it. This may be done by adding rooms or bathrooms, building a swimming pool, enclosing a porch or patio, updating the plumbing and repainting the homes exterior and or interior. Generally, it is cheaper to extend or repair a home than to buy or build a new house.

Before going ahead and getting a home improvement loan, it is advisable to contact your local builder and get a quote and any other information about the associated costs involved in improving your home. Don’t be afraid to get as many quotes on building costs and improvement home loans as possible.

Make sure that when you speak to the lending institutions, ask if you can borrow money above the quoted price for the home improvement. Often, when building, extra costs seem to come out of the woodwork unexpectedly. It is better to borrow a few dollars extra and not need it, than have to contact the bank for an extension on your credit in the middle of a project.

The ideal home improvement loan to look for is one that has a low interest rate. Visit many different lending institutions and see what they are offering. Don’t just commit yourself to the first home improvement loan that comes along. Home improvement loans are usually short- term loans.

A home improvement loans rate of interest is determined by the amount of collateral that the borrower has. This is most often the equity in your home. If the borrower has a bad credit rating, the home improvement loan will probably be calculated at a higher rate.

The rate of interest, loan amount offered to you by the bank and the term of the loan will often have a lot to do with the market value of the home or the value of the collateral. The lending institution will often ask what type of home improvement you are planning. A market appraisal may be needed before the loan is passed. This is often to ensure that the improvements will add value to the home. They may also ask you to provide quotes from builders or contractors that you may be using for the home improvements.

Home improvement loans usually require the borrower to only pay the interest while the home is being improved. Once the home improvements have been completed, the borrower will be required to make full monthly payments on the principle and interest. The monthly payments will be calculated on the amount of money used for the home improvements, the interest rates and the term or number of years you have to pay off the loan.

If you are unsure of any of the details and/or term of the home improvement loan, make sure that you discuss your concerns with the institutions lending consultant. A good lending institution will be very happy to address any questions or concerns that you may have. Make a list of anything you can think of to ask the loan officer you speak with.