Buying a home is one of the most exciting milestones in life, but it also comes with a range of financial responsibilities—including closing costs.
These are fees and expenses you’ll need to pay before you officially become the owner of a new home. In this guide, we’ll break down everything you need to know about closing costs so you can budget wisely and avoid surprises.
What Are Closing Costs?
Closing costs are the various fees associated with the final step of a real estate transaction. They typically include services provided by lenders, attorneys, and government offices. These costs are paid at the time of closing—when the title of the property officially transfers to the buyer.
Common Types of Closing Costs
Here are the most common closing costs that home buyers should prepare for:
1. Loan Origination Fee
This is the fee your lender charges for processing your mortgage. It usually ranges from 0.5% to 1% of the loan amount.
2. Appraisal Fee
Before approving your mortgage, lenders require an appraisal to determine the home’s market value. This fee typically costs between ₱10,000 and ₱20,000 in the Philippines.
3. Title Search and Insurance
These protect you from any legal claims on the property. A title search ensures that the seller has the legal right to sell, and title insurance covers future disputes.
4. Documentary Stamp Tax (DST)
This is a government-mandated tax equal to 1.5% of the property’s selling price or fair market value, whichever is higher.
Learn more about Documentary Stamp Tax requirements and procedures by visiting the Bureau of Internal Revenue (BIR).
5. Transfer Tax
This fee, usually 0.5% to 0.75% of the property value, is paid to the local government for the legal transfer of property ownership.
6. Registration Fee
This fee is charged for the registration of the title under the buyer’s name and usually ranges from 0.25% to 0.5% of the property value.
For guidelines on property title transfers and registration, refer to the Land Registration Authority (LRA).
7. Notarial Fee
The Deed of Sale and other documents must be notarized, which usually costs around ₱1,000 to ₱5,000.
How Much Are Closing Costs in the Philippines?
In general, closing costs can range from 5% to 7% of the property’s purchase price. For a ₱3,000,000 home, that means you should budget at least ₱150,000 to ₱210,000.
Who Pays the Closing Costs?
In the Philippines, it’s common for buyers to shoulder the following:
- Documentary Stamp Tax (DST)
- Transfer Tax
- Registration Fees
- Notarial and Miscellaneous Fees
Sellers typically pay the Capital Gains Tax and the Broker’s Fee, if applicable. However, payment arrangements may vary, so always clarify terms before signing any agreement.
Tips to Reduce Closing Costs
- Negotiate with the Seller: Ask the seller to shoulder a portion of the costs, especially in a buyer’s market.
- Compare Lender Fees: Shop around for mortgage lenders offering lower fees.
- Review All Charges: Carefully review the breakdown of closing costs to avoid paying unnecessary fees.
Final Thoughts
Understanding your closing costs is crucial to a smooth home-buying experience. By knowing what to expect and budgeting accordingly, you can avoid last-minute stress and confidently move into your new home.
Looking for your dream home on a budget? Browse our listings of affordable houses for sale in the Philippines, then learn how to apply for a housing loan and check out our first-time home buyer tips to get started.
