Real Estate Taxes and Home Financing

When buying, plan for documentary stamp tax, transfer tax, registration fees, and notarial fees, which together typically come to about 3 to 5 percent of the price. Documentary stamp tax is 1.5 percent of the selling price or fair market value, whichever is higher. Transfer tax is up to 0.5 percent in a province and up to 0.75 percent in Metro Manila cities and municipalities. Registration fees follow the Land Registration Authority schedule. If you take a loan, add mortgage registration, appraisal, and insurance fees. For new units from developers, VAT may be included in the price, and developers often charge separate miscellaneous or move-in fees. Who pays what is negotiable, so put it in the contract.

Source: Bureau of Internal Revenue

By custom the seller pays the capital gains tax, but the buyer and seller can agree otherwise in writing. Capital gains tax is 6 percent of the selling price or the fair market value, whichever is higher, and applies to real property held as a capital asset, meaning not used in business. It must be paid to the BIR within 30 days from the notarization of the Deed of Absolute Sale. Late payment adds surcharges and interest, and the title cannot be transferred until it is paid and the eCAR is issued.

Source: Bureau of Internal Revenue

By custom the buyer pays the documentary stamp tax, though it is negotiable. It is 1.5 percent of the selling price, zonal value, or assessed fair market value, whichever is highest. For a PHP 5,000,000 sale where the selling price is the highest value, the documentary stamp tax is PHP 75,000. It is filed and paid to the BIR on or before the fifth day of the month following the month the deed was notarized.

Source: Bureau of Internal Revenue

Capital gains tax applies when the property sold is a capital asset, such as a family home or an investment property not used in business. Creditable withholding tax applies when the property is an ordinary asset, such as inventory sold by a developer or property used in a trade or business. Capital gains tax is a final 6 percent tax. Creditable withholding tax is withheld by the buyer at rates that generally range from 1.5 to 6 percent depending on the seller's status and the price, and the seller credits it against their income tax. Ask the BIR or an accountant to classify the property correctly before the sale.

Source: Bureau of Internal Revenue

Zonal value is the BIR's per square meter value for an area, used as a floor for computing sale taxes. Fair market value for tax purposes is the higher of the zonal value and the value on the local tax declaration. Assessed value is the portion of the local government's fair market value that real property tax is charged on, using assessment levels set by the province or city. Market value is what a willing buyer actually pays, which in Cebu is often well above zonal value. Taxes on a sale are computed on whichever of the selling price or the official values is higher.

Source: Bureau of Internal Revenue

Related: Market value of land

Real property tax is charged every year on the assessed value of land and buildings, at a rate set by the local government. Under the Local Government Code, the basic rate is up to 1 percent of assessed value for property in a province and up to 2 percent for property in a city or a Metro Manila municipality, plus an additional 1 percent for the Special Education Fund. Assessed value is lower than market value because it uses assessment levels. Many LGUs give discounts for early or full-year payment. Ask the city or municipal assessor for your tax declaration and the treasurer for the current amount due.

Related: Real property tax in Cebu

For deaths on or after January 1, 2018, estate tax is a flat 6 percent of the net estate. The net estate is the total value of the decedent's property minus allowed deductions, including a PHP 5,000,000 standard deduction and a family home deduction of up to PHP 10,000,000. The estate tax return is due within one year from death, and heirs need the eCAR from the BIR before inherited property can be transferred or sold. The estate tax amnesty for older estates lapsed in June 2025; extension bills were pending in Congress during 2026, so check with the BIR for the current status before filing.

Source: RA 10963 (TRAIN Law); Bureau of Internal Revenue

The three options differ mainly in interest rate, approval difficulty, and loan term. Bank financing usually offers lower rates than in-house financing, with terms up to 20 or 30 years, but requires stronger income documents and a good credit record. Pag-IBIG financing is available to members with enough contributions and offers some of the lowest rates for qualified borrowers, with loan amounts of up to PHP 10,000,000 under its current program. In-house financing is a loan from the developer itself, easier to get but often at higher rates and shorter terms. Many buyers start with in-house terms and later move the balance to a bank.

Related: Current loan rates; Pag-IBIG housing loan requirements

Loan takeout is the point when a bank or Pag-IBIG releases your housing loan and pays the remaining balance of the price directly to the developer or seller. After takeout, you no longer owe the developer; you owe the lender and start paying monthly amortization to them. For pre-selling units, takeout usually happens after you finish the down payment and the unit is near completion or turned over. Your loan approval and the takeout date should be aligned with the developer's schedule to avoid penalties.

Most lenders ask for proof of identity, proof of income, and documents about the property. Employed applicants usually submit valid IDs, a certificate of employment with compensation, recent payslips, and their latest income tax return. Self-employed applicants submit income tax returns with audited financial statements, a business permit, DTI or SEC registration, and bank statements. OFWs submit an employment contract or certificate of employment and proof of remittances. Property documents include a copy of the title, tax declaration, and the Contract to Sell or Deed of Sale. Pag-IBIG also requires an active membership with at least 24 monthly contributions.

Related: Pag-IBIG housing loan requirements

Yes, but check for prepayment penalties first. Many banks allow partial or full prepayment without penalty when your fixed-rate period ends and the rate is due for repricing, but charge a fee if you prepay during the fixed period. Pag-IBIG generally allows partial and full prepayment. Paying early reduces the total interest you pay. Ask the lender for a written statement of the outstanding balance and any fees before you pay.

Yes. You can refinance with another bank, usually when your fixed-rate period ends, if the new lender offers a lower rate or better terms. The new bank pays off your existing loan and you start a new loan with them. Factor in the costs: appraisal, mortgage cancellation and registration fees, and any prepayment penalty from your current lender. Refinancing makes the most sense when the rate difference is meaningful and you still have many years left on the loan.

Missing payments leads to penalties, then default, and eventually possible foreclosure or cancellation. With a bank or Pag-IBIG loan, late payments incur penalty charges, and continued non-payment, often three or more months, can lead the lender to declare default and foreclose on the property. If you are paying a developer in installments, the Maceda Law gives you a grace period and, after two years of payments, a partial refund if the contract is cancelled. Talk to your lender early, since restructuring is usually easier before you fall far behind.

Related: What is the Maceda Law?