In the world of finance and real estate, the term assume balance—locally known as pasalo in the Philippines—plays a crucial role, particularly for homebuyers and investors.
Assume balance is a concept that allows buyers to take over the remaining loan or balance of an asset, typically a house or a property, from the original owner. This arrangement can be advantageous for both parties, but it’s essential to understand its implications before proceeding.
This guide explores the meaning, benefits, risks, and steps involved in pasalo agreements to help you make informed decisions.
What Is Assume Balance (Pasalo)?
Assume balance refers to an arrangement where a buyer takes over the remaining balance of a loan or mortgage from the current owner of a property. In the Philippines, this setup is often used in real estate transactions. For example, if the original homeowner is unable to continue paying for the property, they may transfer the obligation to another party, typically at a lower cost than buying a new property.
How Does Pasalo Work?
- Agreement Between Parties: The seller and buyer negotiate the terms, including the price for taking over the property and any additional payments.
- Transfer of Obligation: The buyer assumes the remaining balance of the seller’s loan, typically with the approval of the financing institution (e.g., a bank or Pag-IBIG).
- Documentation: Proper legal documents are required, including a deed of assignment or transfer and acknowledgment of the financing institution.
- Payment Continuation: The buyer continues paying the remaining installments of the original loan until fully settled.
Benefits of Real Estate Assume Balance
- Lower Costs: Buyers can acquire properties at a more affordable price than purchasing a brand-new unit.
- Faster Transactions: The process can be quicker than traditional home-buying as the property is already financed.
- Flexible Terms: Negotiations between the seller and buyer allow for customized payment terms.
Risks and Red Flags in Pasalo
While pasalo agreements offer significant advantages, they come with risks:
- Hidden Liabilities: There might be unpaid dues, arrears, or penalties on the property that the buyer may inadvertently assume.
- Lack of Approval: Financing institutions must approve the transfer; without this, legal ownership remains with the original borrower.
- Fraudulent Sellers: Verify the legitimacy of the seller to avoid scams or illegal transactions.
- Incomplete Documentation: Missing documents can complicate ownership transfer and loan assumption.
Key Considerations Before Entering a Pasalo Agreement
- Conduct Due Diligence: Inspect the property, review the loan agreement, and check for unpaid dues.
- Seek Legal Assistance: Consult with a lawyer to ensure all documents are in order and the terms are fair.
- Understand the Financial Implications: Make sure you can afford the remaining balance and any associated costs.
- Coordinate with the Lending Institution: Get written approval from the bank or financing company before proceeding.
Steps to Finalize a Pasalo Transaction
- Verify Property Ownership and Loan Status: Ensure the property is free from disputes and the seller has the legal right to transfer ownership.
- Draft the Agreement: Work with a lawyer to create a legally binding deed of transfer or assumption of balance.
- Coordinate with the Lender: Submit the necessary documents to the bank or financing institution for approval.
- Finalize the Payment: Pay any negotiated fees to the seller and continue the loan payments under your name.
Looking for affordable home financing options? Learn more about PAGIBIG Financing and how it can help you achieve your homeownership goals.
Conclusion
Assume balance (pasalo) is a practical option for individuals looking to acquire property at a lower cost or sellers aiming to offload financial obligations. However, it’s essential to proceed cautiously and ensure that all legal and financial aspects are addressed. By understanding the process, benefits, and risks, you can make informed decisions and protect your investment.
Pasalo transactions can be a cost-effective option for homebuyers, but they come with legal considerations. Be informed by reading our article on Pasalo transaction legality.
