How to Rent to Own through PAGIBIG Housing Loan

Pag-IBIG Rent-To-Own Program

HDMF Circular No. 177-C

OBJECTIVE

The Program is aimed at instituting a mechanism through which the HDMF shall further expedite the recovery of its investments in non-performing mortgage loans, and provide Pag-IBIG members, whose current income cannot sustain the monthly amortization on a Pag-IBIG housing loan, with a facility that will provide affordable housing, and ensure home ownership by the time they become eligible for such loan.

THE RENT-TO-OWN SCHEME

Housing units acquired by HDMF shall be leased to qualified Pag-IBIG members, who shall enter into a Contract of Lease with Option to Purchase with HDMF, for a period of not more than five (5) years.

At the end of the term of the lease, a Lessee who complies with the provisions of the Lease Agreement, and who qualifies for a Pag-IBIG housing loan, shall be required to exercise his option to purchase the leased housing unit.

A Lessee who does not exercise his option to purchase shall not be allowed to occupy the housing unit after the expiration of the Contract of Lease.

ELIGIBILITY REQUIREMENTS

An applicant shall satisfy the following requirements to qualify under the Rent-to-Own Program:

1. Must be a contributing Pag-IBIG member at the time of application;
2. Must have a monthly gross family income of at least P4,000. For this purpose, gross family income shall be defined to mean the income of the members of the family up to the 1st degree of affinity or consanguity;
3. Must not be a homeowner;
4. Must not have an outstanding housing loan from any financial institution, whether public or private;
5. Must have the legal capacity to enter into a contract;
6. Must not have previously availed of the Rent-to-Own Program.

TERMS AND CONDITIONS OF THE LEASE

1. Monthly Rental

The Fund shall set the monthly rental on the unit to be leased on the basis of the prevailing rental rate in the area, which shall not be lower than one thousand pesos (P1,000.00).

The monthly rental shall be increased annually by 10%, or at a rate that shall allow the monthly rental to equal the theoretical monthly amortization at the end of the term of the lease, and shall be applied as payment on the purchase price of the property only upon the Lessee’s exercise of the option to purchase.

2. Advance Rental and Deposit

Upon signing of the Contract of Lease, the Lessee shall be required to pay one month's rent in advance and deposit an amount equivalent to two month's rent.

The rental deposit shall not be applied to monthly rentals during the term of the lease. It shall be used to cover unpaid bills, as well as the expenses necessary to repair any loss or damage to the property (except normal wear and tear) attributable to the fault or negligence of the Lessee who does not exercise his option to purchase, and is required to vacate the property upon the expiration of the Contract of Lease.

3. Payment and Remittance of Monthly Rental

The Lessee shall, without need of demand, pay the monthly rental in cash or check to any Pag-IBIG branch office or to any authorized Pag-IBIG collection agent on or before the 20th day of the month following the execution of the Contract of Lease with HDMF, and every month thereafter.

4. Penalty Charge

The Lessee who fails to pay the rent within the month that the payment is due shall be charged a penalty of 1/20 of 1% of the amount due per day of delay, reckoned from the 21st day of the month that payment is due.

5. Default

The Lessee shall be in default when he fails to pay three (3) consecutive monthly rentals, and/or three consecutive monthly Pag-IBIG contributions.

6. Term of Lease

The property subject of the Contract shall be leased by HDMF for a period of not more than five years.

7. Substitution of Lessee

In the event of the Lessee's death or incapacity to pay the monthly rental on account of loss of income due to physical disability or unemployment and such other meritorious reasons acceptable to the Fund, the Lessee may be substituted by a member of his family up to the 1st civil degree of affinity or consanguity. The monthly rentals paid by the original Lessee shall inure to the benefit of the substitute Lessee.

8. Termination of the Contract

HDMF shall terminate the Contract of Lease on the following grounds:

1. Default in monthly rentals;
2. Default in Pag-IBIG membership contributions;
3. Violation of any provision of the Contract;
4. Fraud and misrepresentation; and
5. Voluntary cancellation on the part of the Lessee.
    
9. Application of Total Accumulated Value (TAV)

In case the rental deposit is not sufficient to cover any indebtedness or obligation incurred by the Lessee for the duration of his stay in the property, the Lessor shall have the option to apply the TAV of the Lessee on any indebtedness, and shall be effected:

1. Immediately after cancellation/termination of the contract; or
2. Immediately after eviction.

TERMS AND CONDITIONS OF THE OPTION TO PURCHASE

1. Exercise of Option

HDMF shall require the Lessee to exercise his option to purchase not later than the end of the term of the lease. Failure of the Lessee to exercise this option within the given period shall be ground for the Lessee's eviction from the property.

2. Purchase Price

Shall be equal to the appraised value of the property as of the date of the execution of the Contract of Lease with Option to Purchase.

3. Purchase through Pag-IBIG Housing Loan

The Lessee may exercise his option to purchase by availing himself of a Pag-IBIG housing loan subject to the Pag-IBIG housing loan guidelines prevailing as of the date of purchase.

LEARN more about this and other programs at the PAGIBIG Website, click here.

Rent-To-Own Homes Ready In Central City

NEW ORLEANS -- A tidy, one-story house recently completed in a blighted part of New Orleans is part of a new rent-to-own program for poor to moderate-income people.

By 2009, the Comprehensive Central City Initiative, a coalition of faith-based groups, private developers and bank, hopes 178 homes in its portfolio. They will be leased to tenants whose monthly rent will put them on course to owning the property.

Under a program, those renters could move into a new home and apply their current federal rental subsidy to paying down the cost of the house over 15 years.

The majority of the lots where the group plans to build are in Central City - a the drug-and crime-saturated neighborhood, but a few of the lots are also scattered elsewhere.

Unlike the housing recovery efforts that actor Brad Pitt and Barnes & Noble Chairman Leonard Riggio have launched in other neighborhoods, this initiative is not purely charitable. The developers will turn a profit from renting the houses.

View more on Rent To Own Homes in New Orleans

What is Rent To Own?

Rent to own (RTO) is a means of acquiring ownership over time without taking on debt. RTO companies rent items, most typically furniture, appliances and electronics, with the condition that the item will be owned by the renter if the term of rent is completed. Since rent to own stores do not require a credit check or down payment, they are popular with sub-prime-credit consumers; those with damaged or no credit history. RTO is also popular with corporate travelers on temporary assignment as there is no long term commitment involved; An item can be rented and returned at any time without penalty.

In this site, RTO is limited to Real Estate Rent to Own.

Most RTO transactions are monthly; the tenant agrees to pay a monthly amount for leasing property. Usually at 20-25% downpayment is also required by the leasor. RTO agreements or contracts are generally on a 5, 10, 15 or 20 year term. If the tenant rents the property for the full term, ownership is acquired. Tenant may also pay off the balance before term end to fully acquire property.