How to Process Assumption of Mortgage for a Pag-IBIG Housing Loan (Philippines)

This is a general legal guide in the Philippine context. It is not a substitute for tailored legal advice.

1) What “Assumption of Mortgage” Means

Assumption of mortgage is when a buyer (the “assignee” or “assuming borrower”) takes over an existing Pag-IBIG housing loan secured by a mortgage on real property. The buyer agrees to pay the remaining loan balance under substantially the same facility, and—if Pag-IBIG consents—becomes the borrower of record.

Two transaction patterns are common:

Sale with Assumption of Mortgage (SAM / DSAOM). The property is sold to the buyer, who also assumes the seller’s Pag-IBIG loan. Title is transferred to the buyer, with the Pag-IBIG mortgage annotation remaining on the new title.
Transfer/Assignment of Rights (TOR/AR). Where the unit is still under a Contract to Sell (CTS) with a developer (i.e., not yet titled and the loan may be mid-process), the buyer steps into the seller’s contractual rights and obligations with the developer and Pag-IBIG, subject to consents.

In both cases, Pag-IBIG’s written consent and re-underwriting of the buyer are essential if the original borrower is to be released from liability and the account is to be moved into the buyer’s name.

2) Legal Bases and Key Doctrines

Civil Code on Novation and Assignment of Credits. Assumption of mortgage operates as a novation when the creditor (Pag-IBIG) consents to substitute the debtor. Without consent, the original borrower remains liable.
Real Estate Mortgage (REM) principles. The mortgage follows the property. A buyer who takes title generally takes it subject to existing liens, unless discharged.
Pag-IBIG Fund program rules and loan documents. Housing loan terms typically include due-on-sale / due-on-transfer restrictions and require Pag-IBIG’s prior consent to any transfer or assumption.

3) When Assumption Is Allowed (Typical Eligibility)

For the property/account

Loan must be eligible for assumption under current Pag-IBIG rules.
Account should generally be updated (no arrears) or brought current before processing.
Property should have complete collateral documents (e.g., TCT/CCT or CTS, tax declarations, latest real property tax, developer clearances, etc.).
For titled properties, the REM in favor of Pag-IBIG must be or will be properly annotated on the buyer’s new title.

For the assuming buyer

Must be a Pag-IBIG member in good standing (or complete membership requirements).
Must pass credit and capacity-to-pay evaluation (income documents, stable employment/business proofs).
Must meet age/term limits (loan maturity typically capped by a maximum age).
Must qualify for mortgage redemption insurance (MRI) and fire insurance as required.

For the seller/original borrower

Must provide Pag-IBIG-required consents and disclosures.
If married, observe spousal consent rules (conjugal/community property).
Settle any charges, arrears, or penalties not covered by the buyer.

4) Documents You’ll Usually Prepare

Exact form names vary over time; use the current Pag-IBIG-prescribed versions.

Deed of Sale with Assumption of Mortgage (DSAOM) or Deed of Assignment/Transfer of Rights (for CTS cases) — notarized.
Pag-IBIG Assumption/Transfer application forms signed by both parties.
Valid government IDs of parties (and spouses, if applicable).
Pag-IBIG Membership IDs and latest member contribution proof (as needed).
Income/credit documents of the buyer (COE, payslips, ITRs, business permits/FS for self-employed or OFW equivalents).
Property documents: TCT/CCT (or mother title + CTS for developer units), latest tax declaration, real property tax receipts, house rules/HOA clearance if applicable, developer clearance for CTS.
Loan documents: latest statement of account, payment receipts, amortization schedule, insurance certificates, and REM papers.
Civil status documents (marriage certificate, CENOMAR, court decree for annulment/separation, death certificate for widowed).
Special Power of Attorney for any party acting through an attorney-in-fact (especially OFWs).

5) Step-by-Step Process

A) Pre-Check and Deal Structuring

Verify assumability with Pag-IBIG (and with the developer for CTS accounts): outstanding balance, arrears, penalties, and whether the account may be transferred.
Agree on the commercial terms between seller and buyer:
- Purchase price (cash to seller)
- Amount of assumed mortgage (remaining loan balance)
- Treatment of arrears and fees, cut-off for taxes/utilities/dues
Settle arrears (if any) and gather the latest official computations from Pag-IBIG.

B) Documentation and Consent

Execute the DSAOM (or Assignment/Transfer of Rights for CTS) with clear assumption wording: buyer assumes the debt, acknowledges the mortgage, and agrees to be bound by the loan terms; seller consents and requests release (subject to Pag-IBIG approval).
Submit to Pag-IBIG the application for assumption/transfer with all supporting papers.
Buyer undergoes re-underwriting (credit check, capacity-to-pay, insurance eligibility).
Pag-IBIG issues approval/clearances and the updated loan schedule if qualified.

C) Title/Records Updating

For titled properties:
- Process BIR taxes and LGU transfer tax, then Register of Deeds (RD) for transfer of ownership; the Pag-IBIG mortgage remains annotated on the new TCT/CCT.
- Submit the new title and tax declaration to Pag-IBIG for collateral file updating.
For CTS properties:
- Developer issues transfer of buyer’s rights and endorses to Pag-IBIG; upon eventual take-out or titling, the mortgage will be annotated to secure the assumed loan.

D) Account Migration and Handover

Pag-IBIG migrates the loan into the buyer’s name (upon full compliance), sets new auto-debit/payment arrangements, and updates insurance coverage to the buyer.
Parties close utilities/HOA matters and turn over possession.
Keep a complete closing file (DSAOM/TOR, approvals, receipts, new title, updated amortization).

6) Taxes, Fees, and Cost Allocation

Who pays what is a matter of agreement, but these are the usual items to budget for:

Capital Gains Tax (CGT) – commonly 6% of the higher of gross selling price or zonal/fair market value (seller’s burden when seller is not a real estate dealer).
Creditable Withholding Tax (CWT) – may apply instead of CGT for certain corporate sellers or dealers.
Documentary Stamp Tax (DST) – typically 1.5% of consideration; for assumptions, the consideration may include the mortgage assumed.
Local Transfer Tax – around 0.5%–0.75% depending on the LGU.
Registration Fees – RD fees per schedule based on value.
Pag-IBIG processing/assumption fee – modest, payable at filing/approval.
Notarial fees, certifications, developer/admin fees (CTS), HOA dues/clearances.
Insurance adjustments – MRI and fire insurance recalibration to the buyer.

Practice tip: In the Deed of Sale, clearly break down the cash price and the amount of the loan assumed to avoid disputes and to align tax filings.

7) Effects on the Parties

If Pag-IBIG approves the novation (assumption):

Buyer becomes the borrower of record with all obligations.
Seller is released from the loan (subject to the text of the approval)—this is crucial for credit standing.

If the transfer is purely private (no Pag-IBIG consent):

It is not binding on Pag-IBIG. The seller remains liable if the buyer defaults. Pag-IBIG can foreclose against the property and proceed against the original borrower.

8) Common Variations and Special Cases

Delinquent accounts. Pag-IBIG may require curing arrears first; some delinquent loans are ineligible for assumption.
OFW assuming buyer. Use a consularized/apostilled SPA if signing abroad; provide overseas income proofs.
Spousal rules. If the property or loan is conjugal/community, secure the spouse’s consent on the deed and Pag-IBIG forms.
Death of borrower. Check MRI coverage; if the claim fully pays the loan, there may be no loan to assume (transaction pivots to estate settlement and sale).
Developer CTS swaps. Developer consent is critical; fees and timelines vary.

9) Sample Clause Language (for Guidance Only)

Assumption and Release Clause (excerpt-style):

“Buyer hereby assumes and agrees to pay, as they fall due, the outstanding balance and all obligations under Pag-IBIG Housing Loan No. ______, inclusive of interest, penalties (if any), insurance premiums, and other charges, and agrees to be bound by all stipulations in the Real Estate Mortgage and loan documents. Seller requests that Pag-IBIG approve this assumption and, upon such approval, release Seller from further liability.”

Due-on-Transfer Acknowledgment:

“The parties acknowledge that the loan is subject to Pag-IBIG’s consent and that, until approval and migration of the account to Buyer’s name, the Seller remains the borrower of record.”

Allocation of Costs:

“Taxes, fees, and expenses shall be for the account of the parties as follows: CGT/CWT – Seller; DST/Transfer Tax/Registration – Buyer; Pag-IBIG processing fee – Buyer; Notarial – Buyer; unless otherwise stated.”

(Your notary or counsel can adapt these to the specific deal.)

10) Practical Checklist

Seller

Secure Pag-IBIG computation and confirm assumability
Gather title/CTS and tax documents
Disclose arrears/penalties and settle agreed items
Sign DSAOM/TOR and Pag-IBIG forms (with spouse if applicable)

Buyer

Confirm membership and pre-qualification with Pag-IBIG
Prepare income/credit documents; MRI/fire insurance info
Review property liens, HOA, utilities
File assumption/transfer with Pag-IBIG; pay fees
Process taxes and title transfer (for titled properties)
Arrange payment method (auto-debit, over-the-counter, etc.)

Both

Keep notarized originals and official receipts
Update Pag-IBIG on change of address/contact info
Turnover: keys, IDs, HOA orientation, meters

11) Timelines and Bottlenecks

Credit evaluation/insurance approval can be the longest step.
BIR and LGU processing for taxes/transfer can drive the calendar (particularly for titled properties).
Developer endorsements (CTS cases) may add internal lead times.
Registry of Deeds schedules vary by locality.

12) Red Flags and Pitfalls

Private “assumption” without Pag-IBIG consent. Leaves the seller liable; can damage both parties if default occurs.
Unpaid arrears/penalties discovered late. Always obtain the latest official computation.
Missing spousal consents or wrong civil-status documents.
Undisclosed liens/encumbrances beyond the Pag-IBIG mortgage.
Under-declared selling price (tax risks, future disputes).
Insurance gaps if MRI/fire coverage is not timely re-issued under the buyer.

13) FAQs

Q: Can I keep the same interest rate and term? A: Typically yes, the assumption preserves the existing loan’s terms, but Pag-IBIG’s re-underwriting and insurance may affect final terms/eligibility.

Q: When is the seller fully released? A: Upon Pag-IBIG’s written approval of the assumption/novation and migration of the account to the buyer’s name. Retain copies of the approval.

Q: Do I need to pay the entire set of transfer taxes if we’re just “assuming”? A: In a sale with assumption, the transfer of ownership triggers CGT/CWT, DST, transfer tax, and registration fees. For assignment of rights under a CTS, a different tax treatment may apply, but DST generally still applies; consult a tax professional for your specific structure.

Q: Can a delinquent loan be assumed? A: Often only after curing delinquency and subject to Pag-IBIG’s discretion.

Q: What if the buyer fails re-underwriting? A: The assumption may be denied; parties can renegotiate, cure deficiencies, or pursue a different structure (e.g., a new loan).

14) Practical Tips

Get a written pre-qualification from Pag-IBIG before committing to a sale.
Use clear drafts: DSAOM or TOR tailored to your case, with cost allocations and contingencies if Pag-IBIG declines.
Keep the paper trail impeccable: computations, receipts, IDs, notarials, insurance certificates, approvals.
For OFWs, prepare apostilled or consularized documents early.
Engage a broker/processor or counsel familiar with Pag-IBIG workflows to avoid costly re-filings.

Bottom Line

A Pag-IBIG loan assumption is perfectly workable if you secure Pag-IBIG’s consent, complete the re-underwriting, and properly handle taxes, title/records, and insurance. Draft carefully, document thoroughly, and align the commercial deal with the legal and administrative requirements to protect both buyer and seller.