As discussed in the previous question, the fixed pricing period is one of the three factors that determine the amount of your monthly amortization (i.e., payment for the housing loan).
Also known as the repricing period, tenor, cycle, or fixing period, it refers to the time frame during which the fixed interest rate will apply.
For example, if you choose a 1-year fixing period (please refer to the table below), the interest rate that will be charged from you is 5.375% per annum within the same period.
In other words, you’re guaranteed to only pay 5.375% interest during the first year. Once the one-year period ends, the interest rate is no longer protected from fluctuations and may be higher or lower depending on several economic factors.
Take note that loan term is different from the fixed pricing period.
Whereas loan term refers to the duration of your loan payment, the fixed pricing period may last as short as 1 year to as long as 30 years (see table above).
Let’s say you choose the maximum loan term of 30 years.
The interest rate for the next 30 years may vary depending on the prevailing rate and economic conditions in the country.
By choosing your preferred fixed pricing period (1-30 years), you get to protect yourself against fluctuations and also decide how long this protection will last.
The longer the fixed pricing period, the higher the fixed interest rate will be. However, it also means locking the interest rate for a longer time, giving it protection from the fluctuations in the market.
For example, if your loan term is 30 years and the fixed pricing period is 10 years, it means you’re guaranteed to only pay 8.035% during the first decade.
Only choose longer fixing period if you’re confident about the country’s economy and the stability of prevailing interest rates.
Another option is a shorter fixing period. Ideally, you should pick the shortest period of 1 year which guarantees the lowest interest rate of 5.375%.
The good thing about Pag IBIG is they’re not allowed by law to increase the interest rate above 2% (unlike banks which don’t have a ceiling on interest rates).
Hence, even if you’re no longer protected after the 1-year period, the highest rate you’ll ever get in the next few years will not increase beyond 2%.
Go to the main article: How to Apply for Pag-IBIG Housing Loan: An Ultimate Guide