Selling a house and lot with an outstanding Pag-IBIG housing loan through installment is one of the most common yet most misunderstood transactions in Philippine real estate. When done incorrectly, the seller risks losing both the property and the unpaid balance, while the buyer risks paying for a property that may be foreclosed or whose title cannot be transferred. When done correctly, however, it is perfectly legal, secure, and highly profitable for the seller.

This article explains everything you need to know as of 2025 under Philippine law and Pag-IBIG Fund rules: the legal basis, the two (2) main structures used in practice, the step-by-step procedures, required documents, fees, taxes, risks, and the safest way to structure the transaction for both parties.

Legal Basis

Civil Code of the Philippines
- Articles 1458–1637 (Contract of Sale)
- Articles 2085–2123 (Real Estate Mortgage)
- Articles 1291–1304 (Novation – relevant in mortgage assumption)
- Article 1602–1604 (Maceda Law – RA 6552) applies only when the seller is engaged in real estate business or subdivision development on installment basis. Individual sellers of single residential house and lot are NOT covered by Maceda Law.
Republic Act No. 9679 (Pag-IBIG Fund Law) and its IRR
Pag-IBIG Circular No. 428 (Housing Loan Takeover Guidelines, as amended)
Pag-IBIG Circular No. 446 (Updated Housing Loan Restructuring and Takeover Policies, 2022–2025)

Pag-IBIG expressly allows the takeover/assumption of housing loans provided the buyer qualifies under the same criteria as a new borrower.

Key Concepts You Must Understand

The property title (TCT/CCT) has an annotation of Real Estate Mortgage in favor of Pag-IBIG Fund.
The mortgage follows the property whoever owns it (Article 2126, Civil Code).
The seller may transfer ownership even while the loan is outstanding, provided Pag-IBIG approves the assumption or the structure is properly documented.
There are only two practical and legally accepted structures for installment sale of Pag-IBIG-mortgaged properties:

Structure A: Assumption of Mortgage + Installment Payment of Equity (Title transfers immediately or upon Pag-IBIG approval)

Most common among brokers and agents because it releases the seller early from the loan obligation.

Structure B: Contract to Sell + Buyer Pays Installment to Seller + Seller Continues Paying Pag-IBIG (Title transfers only upon full payment)

Most common among direct sellers and lawyers because it is infinitely safer for the seller.

Both are legal. Choose only one. Never mix them poorly.

Structure A: Assumption of Mortgage + Installment Equity (Recommended only if downpayment is at least 50%)

Advantages for Seller

Released from Pag-IBIG obligation immediately upon approval
Can move on completely once assumption is approved

Disadvantages/Risks for Seller

Once title is transferred to buyer, you no longer have security for the unpaid equity
If buyer stops paying you the monthly equity, your only remedy is to file collection case (you cannot automatically get the property back)
If buyer also stops paying Pag-IBIG, the property will be foreclosed and you lose whatever unpaid balance the buyer owes you

How to Make Structure A Acceptably Safe

Require minimum 50–70% downpayment (the higher the better).
Execute a Deed of Absolute Sale with Assumption of Mortgage (DASAM) that expressly states the equity is payable in installments.
Have the buyer execute a Promissory Note with post-dated checks covering all monthly installments.
Require the buyer to execute a Special Power of Attorney (SPA) authorizing you to sell the property or sign on his behalf in case of default (very useful in practice).
Include an acceleration clause and attorney’s fees (20–25%) in case of default.
Most important: Require the buyer to execute a Deed of Real Estate Mortgage (second mortgage) over the property in your favor for the unpaid equity amount.
- Pag-IBIG now routinely allows second mortgages for seller-financed equity provided it is disclosed during the takeover application and the total monthly amortization (Pag-IBIG + seller) does not exceed 40% of buyer’s net disposable income.

Step-by-Step Procedure (Structure A)

Seller and buyer agree on price breakdown:
Example:
Original Loan Availment: ₱3,000,000
Outstanding Balance: ₱2,200,000
Agreed Selling Price: ₱5,500,000
Equity to Seller: ₱3,300,000 (₱5.5M – ₱2.2M)
Buyer pays downpayment (minimum 50% of equity recommended = ₱1,650,000+).
Execute and notarize the following documents:
- Deed of Absolute Sale with Assumption of Mortgage (DASAM)
- Promissory Note with PDC schedule
- Deed of Real Estate Mortgage (in favor of seller, if allowed)
- Special Power of Attorney
Submit takeover application to Pag-IBIG with the required documents (list below).
Pag-IBIG processes (30–60 days). Buyer must qualify: at least 24 months contributions, proof of income, no derogatory credit, etc.
Upon Pag-IBIG approval:
- Pay takeover fee (3% of outstanding balance or ₱5,000 minimum, whichever is higher – updated 2025 rate)
- Pag-IBIG issues Release of Original Borrower and new Loan Restructuring Agreement with buyer
- Pay Capital Gains Tax (6% of selling price or zonal value, whichever higher) – paid by seller
- Pay Documentary Stamp Tax (1.5% of selling price)
- Pay transfer tax (0.5–0.75% depending on locality) and registration fees
Register the DASAM at Registry of Deeds. New title issued in buyer’s name with mortgage annotation in favor of Pag-IBIG (and second mortgage in your favor if executed).
Buyer starts paying Pag-IBIG directly and pays you the monthly equity.

Structure B: Contract to Sell (Safest for Seller – Highly Recommended for Installment Sales)

This is the structure used by almost all cautious individual sellers and most lawyers.

Advantages for Seller

Title remains in your name until full payment
If buyer defaults, you can cancel the contract and keep all payments as liquidated damages or re-sell the property
You control the title completely

Disadvantages

You remain liable to Pag-IBIG until the buyer fully pays you and you pay off or transfer the loan
If you fail to pay Pag-IBIG (even if buyer stops paying you), the property can be foreclosed

How to Make Structure B Very Safe

Require 20–30% downpayment.
Monthly installment must be higher than your Pag-IBIG amortization (e.g., your amortization ₱18,000 → charge buyer ₱30,000–₱35,000 monthly).
Require buyer to issue post-dated checks for the entire balance.
Include notarization clause and unilateral cancellation clause for default.
Option: Require buyer to pay Pag-IBIG amortization directly to Pag-IBIG under your loan account number (Pag-IBIG allows this via “Authorized Representative” form).

Step-by-Step Procedure (Structure B)

Execute a notarized Contract to Sell (CTS) or Deed of Conditional Sale containing:
- Full price breakdown
- Monthly installment amount and due date
- Statement that title and ownership remain with seller until full payment
- Default clause: 3 months default = automatic cancellation, all payments forfeited as liquidated damages
- No Maceda Law protection (state expressly that seller is not a subdivision developer)
Buyer takes possession and starts paying monthly.
Seller continues paying Pag-IBIG (or buyer pays directly via authorization).
Upon full payment of agreed price:
Option 1: Buyer assumes the remaining Pag-IBIG balance (follow Structure A procedure above)
Option 2: Buyer obtains bank financing to pay off entire Pag-IBIG loan, then clean title is transferred
Execute Deed of Absolute Sale, pay taxes, transfer title.

Required Documents for Pag-IBIG Takeover (2025)

For both structures when assumption is eventually done:

From Seller:

Original TCT/CCT
Pag-IBIG Loan Statement of Account (updated)
Latest Realty Tax Clearance
ID and marriage contract (if applicable)

From Buyer:

Pag-IBIG MID number and proof of 24 months contributions
Certificate of Employment & Compensation
Latest 3 months payslips or ITR
2 valid IDs
Marriage contract (if applicable)
Proof of downpayment to seller

Joint:

Notarized Deed of Absolute Sale with Assumption of Mortgage
Letter of Intent to Assume Mortgage
Takeover application form

Fees and Taxes (2025 Rates)

Pag-IBIG Takeover Fee: 3% of outstanding balance (minimum ₱5,000)
Capital Gains Tax: 6% (seller)
Documentary Stamp Tax: 1.5% of selling price
Transfer Tax: 0.5%–0.75% of selling price
Registration fees, notarial fees, etc.: ≈ ₱30,000–₱60,000 total

Final Recommendation (What 95% of Experienced Sellers and Lawyers Do)

Use Structure B (Contract to Sell) if the equity downpayment is less than 50%.
Use Structure A only if downpayment is 60% or higher and you secure a registered second mortgage or very strong SPAs and PDCs.

Never transfer title until at least 70% of your equity has been paid, unless Pag-IBIG and the Registry of Deeds have already annotated a mortgage in your favor for the unpaid balance.

When properly documented with a competent real estate lawyer, selling a Pag-IBIG-mortgaged property through installment is not only safe — it is one of the fastest and most profitable ways to liquidate a property in the Philippines today.