Case 5: Buying a Loaned Philippine Property

An affordable residential condominium was put up somewhere in Quezon City. The said condo project stood more than 15 stories high and the price range of the units was from Php 700, 000 to Php 2 million. While the condo building was being put up, the owner / developer of the project - Mr. Loan, needed more funds to finish the project.

Mr. Loan had a friend who owned a bank, so the friend's bank loaned him some money. Mr. Loan learned that he would automatically have the condominium units mortgaged when the individual titles (Condominium Certificate of Title) were produced.

As a consequence of the loan, the buyers of the said condominium were forced to avail of in-house financing that had interest rates ranging from 21% to as high as 28% per annum. The buyers could not avail of other banks financing with lower rates since their unit was already mortgaged. The developer in turn could not refinance his project because he had no more collateral for the loan.

Glance at the lessons to learn from this occurence.

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