Why Should You Pay Your Principal Amount Gradually in your PAG-IBIG Housing Loan?
In 2010, I availed a housing loan thru PAG-IBIG, payable for 30 years for 5, 620 monthly. The principal amount is worth 750, 000. It means if you have that certain amount on hand, you can fully pay PAG-IBIG on the spot without waiting for 30 years.
One time, when I computed my monthly amortization, multiplied by 12 months, then multiplied by 30 years, my house would reach 2-million something. My eyes bulged out a bit. Imagine a huge difference? 750, 000, and 2 million?
I had been paying P5,620 per month for almost 4 years, and I noticed it would only deduct 500 plus from our principal amount every month. Question? Where did the 5000 pesos go? I assumed, it just went to interest and fire insurance alone. It seems like I'm just paying the interest forever. And for four (4) years of paying, the principal amount went down to only 723, 000.
A few days after contemplating, I headed to PAG-IBIG office, Davao branch, to personally talk to one of their staff to seek advice on how to lower my loan interest rate. She told me to pay the principal amount little by little so the interest would be lowered and the number of years as well.
As a Math teacher, and out of curiosity, I asked her how they computed that thing. She just said hurriedly, (since there's another person next in line) "just keep paying the principal amount on top of your monthly amortization so the Diminish Interest Rate will be reduced. Her explanation left me hanging.
In spite of the confusion, we decided to pay P275,000 to the principal amount. Then it went down to 447,000. And we waited for the SOA (statement of account) to be delivered to our home to see how much was deducted to our Principal Amount. A month later, P2, 400+ was already deducted from our principal amount instead of 500. Month by month, I noticed that the deduction was consistent as reflected again in the SOA.
Latest: Watch my video from start to end how PAG-IBIG housing loan is computed.
Watch this video on YOUTUBE, if the video is too small on your screen.
If you wish to pay the principal amount, just go to the PAG-IBIG branch near you and mention to the cashier that you are going to pay the "principal amount" then it will reflect in your receipt. Take note that you have also to pay your regular monthly amortization.
Final Thoughts
The best reason to pay off the principal amount in advance is to save money and stop paying interest. Once your house is paid in full, the money you’ve been putting toward monthly amortization becomes available for other uses. Aside from that, eliminating debts can give you peace of mind, reduce your stress, and give you happiness.
Feel free to comment below or don't hesitate to ask a question. I will try to respond the best I can.
Updated
This is just a sample Statement of Account (not mine). You can see your monthly amortization and principal amount or outstanding balance highlighted in orange. If you wish to pay the principal amount in advance, always monitor your statement of account.
In 2015 with the help of our God Almighty, our house loan was already paid off by paying the principal amount gradually. It really entails a lot of hard work and discipline especially in handling money. We really fight the temptations over instant buying just to satisfy our present self (ex latest cellphone, dress, shoes, etc.) because we set aside the money for our house.
Final Thoughts
The best reason to pay off the principal amount in advance is to save money and stop paying interest. Once your house is paid in full, the money you’ve been putting toward monthly amortization becomes available for other uses. Aside from that, eliminating debts can give you peace of mind, reduce your stress, and give you happiness.
Feel free to comment below or don't hesitate to ask a question. I will try to respond the best I can.
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