Understanding Equity and Downpayment Upon Getting a Housing Loan

Both originally have different and specific meanings, being:

Downpayment n. - An initial payment made when a property or house and lot is bought on credit or loan.

Equity n. - a property right valued at the difference between the market price of the property and the amount of any mortgage or other encumbrance.

These terms now start to develop a superficial significance and unified meaning - that is the amount in a percentage of the total price of the property that a real estate developer requires of you to pay up in cash or installment if you plan to avail a housing loan. 

To fully understand these terms, let us look at it this way. 

Downpayment is how a real estate developer sees it. They see it as your initial payment, but at the same time, an amount that secures them from the encumbrance of a loan.

Equity is how the financing institution will see it. They gauge how well you can pay off your initial payment to the real estate developer as one of the factors (but not necessarily) for approving your loan.

BUYER'S TIP: Considering that you have no other loans to pay off every month and that you're pretty much working with a clean slate, you can use this method to guide you on measuring the affordability of the monthly equity that is required of you, by taking at least 30% of your net monthly income.

Affordability = Net Monthly Income x .30


MOST AFFORDABLE: PROMO Php4,700 only Equity on Haniyyah Homes Mactan