The assumption of a Pag-IBIG housing loan (commonly called "loan take-out" or "pagpalit ng umutang") is one of the most practical and widely used mechanisms when selling a property that is still under an existing Pag-IBIG housing loan. It allows the buyer to take over the seller's remaining loan balance, monthly amortizations, interest rate, and remaining term instead of the seller paying off the loan in full or the buyer obtaining a brand-new loan.

This procedure is expressly allowed and regulated by the Home Development Mutual Fund (Pag-IBIG Fund) under its existing circulars (particularly Circular No. 428, as amended, and subsequent guidelines up to 2025). It is also governed by the Civil Code provisions on novation (Articles 1291–1304) because the assumption, once approved, releases the original borrower from liability and substitutes the buyer as the new debtor.

When Assumption of Mortgage is Allowed

Pag-IBIG permits assumption under the following conditions:

The housing loan must be updated (no past due amortizations for at least three (3) consecutive months at the time of application).
The property must be a residential unit (house and lot, condominium unit, townhouse, or row house).
The loan must not be under litigation, foreclosure, or dacion en pago proceedings.
The original loan must have been existing for at least one (1) year (some branches strictly implement two (2) years, but the official guideline is one year).
The buyer must be a qualified Pag-IBIG member with sufficient loan entitlement and paying capacity to cover the outstanding balance.

Multiple assumptions are allowed (a property can be sold several times via assumption), provided each new buyer meets the qualifications.

Advantages of Assumption vs. Pay-Off and New Loan

Buyer inherits the original (usually lower) interest rate. Many existing loans are still at 5.375%–7% while new loans in 2024–2025 are being priced at 8.5%–10.5% depending on loan amount and term.
No need to pay the seller's outstanding balance in full; the buyer only pays the equity (selling price minus outstanding Pag-IBIG balance).
Faster processing than a brand-new loan (typically 15–45 days vs. 2–6 months for new applications).
Lower closing costs (no MRI, fire insurance re-issuance in some cases, lower appraisal fees).
Seller is completely released from liability once assumption is approved.

Disadvantages and Risks

The buyer is stuck with the remaining term. If only 10 years are left on a 30-year loan, the monthly amortization will be significantly higher than a new 25–30-year loan.
If the buyer's income does not support the existing amortization, Pag-IBIG will disapprove or require a co-borrower/spouse.
The outstanding balance cannot exceed the buyer's maximum loan entitlement based on current Pag-IBIG pricing tiers.
Any existing payment penalties or condonation availed by the seller may be reversed or charged upon assumption.

Eligibility Requirements of the Buyer

The buyer is evaluated exactly as if he/she were applying for a new housing loan:

Must be a Pag-IBIG member with at least 24 months total contributions.
Age: not more than 65 years old at loan maturity (70 if with co-borrower ≤60 years old).
Gross monthly income must meet the debt-to-income ratio (amortization not to exceed 35–40% of gross income).
Loan-to-value ratio: the assumed amount must not exceed 90–95% of the current appraised value (Pag-IBIG will require a new appraisal).
No derogatory credit record with Pag-IBIG or other institutions.

Step-by-Step Procedure (Updated as of 2025)

Seller requests an updated Statement of Account (SOA) and Certification of Loan Status from Pag-IBIG (online via Virtual Pag-IBIG or branch visit).
Seller and buyer execute a Deed of Absolute Sale with Assumption of Mortgage (DASAM) before a notary public. The deed must explicitly state:
- Total selling price
- Outstanding Pag-IBIG balance being assumed
- Equity/down payment to be paid by buyer to seller
- Clause that the sale is subject to Pag-IBIG approval of the assumption
Buyer accomplishes the Housing Loan Application (HLA) for Assumption of Mortgage and Checklist of Requirements.
Submission of documents to the Pag-IBIG branch with jurisdiction over the property (or online submission via Virtual Pag-IBIG if available in the branch).
Pag-IBIG conducts credit investigation, employment verification, and property appraisal/inspection.
If approved, Pag-IBIG issues a Notice of Approval (NOA) and Letter of Guaranty (LOG) amendment.
Payment of assumption fees and other charges.
Signing of new loan documents:
- Loan and Mortgage Agreement (new set executed by the buyer)
- Promissory Note with Deed of Undertaking
- Disclosure Statement on Loan Transaction
Cancellation of the old Transfer Certificate of Title/Condominium Certificate of Title (TCT/CCT) annotation in the name of the seller and registration of new annotation in favor of Pag-IBIG under the buyer's name at the Registry of Deeds.
Release of the new title in the buyer's name with Pag-IBIG annotation and turnover of property.

Complete List of Requirements (2025)

From the Seller:

Original TCT/CCT
Latest Real Estate Tax Clearance
Updated Pag-IBIG Statement of Account
Certification that loan is updated
Two (2) valid government IDs
Special Power of Attorney if represented

From the Buyer:

Accomplished Housing Loan Application – Assumption of Mortgage (2 copies)
Membership Status Verification Slip (MSVS)
Proof of income (latest 3 months payslips, ITR, Certificate of Employment with compensation, or business documents if self-employed)
Two (2) valid government IDs (and spouse, if married)
Marriage Contract (if married) or Affidavit of Non-Marriage
Proof of billing address
Payment of appraisal fee (₱4,000–₱6,000 depending on location)
One (1) 1x1 ID picture

Joint Requirements:

Notarized Deed of Absolute Sale with Assumption of Mortgage (original + photocopies)
Latest Real Property Tax Clearance and Tax Declaration
Condominium Certificate of Title and Master Deed (for condo units)
Homeowners/Condo Corporation clearance (if applicable)

Fees and Charges (Latest Schedule as of 2025)

Assumption processing fee: ₱3,000 (fixed)
Appraisal fee: ₱4,000–₱6,500 (depending on region)
Notarial fee for new loan documents: ₱5,000–₱12,000
Registration fees, transfer tax (0.5–0.75% of selling price), DST on deed of sale (1.5% of selling price or zonal value, whichever is higher)
Capital Gains Tax (6% of selling price or zonal value, whichever is higher) – paid by seller
Documentary Stamp Tax on assumption of mortgage: 1.5% of assumed amount (usually shouldered by buyer)
MRI and fire insurance premiums (prorated)

Tax Implications in Detail

Capital Gains Tax (6%) – paid by seller within 30 days from notarization.
Documentary Stamp Tax on the Deed of Sale (1.5%) – paid by buyer or seller (as agreed).
Documentary Stamp Tax on the Assumption of Mortgage (1.5% of outstanding balance) – BIR Revenue Regulations require this; usually paid by buyer.
Local Transfer Tax (0.75% in most cities/municipalities).
Registration fees at Registry of Deeds.

Common Reasons for Denial

Buyer’s income insufficient for existing amortization
Outstanding balance exceeds buyer’s loan entitlement under current pricing tier
Property failed technical appraisal (structural defects, occupancy issues)
Derogatory record found during credit background check
Loan has existing penalty condonation that will be reversed

Practical Tips from Lawyers and Pag-IBIG Officers (2025 Practice)

Always include a clause in the DASAM that the sale is automatically rescinded if assumption is denied within 90–120 days.
Have the buyer pre-qualified by Pag-IBIG before paying any reservation or down payment.
Use the services of a Pag-IBIG-accredited broker or lawyer who handles assumptions regularly — they can fast-track the process to 15–25 days.
If the outstanding balance is very high and the buyer cannot qualify, consider partial pay-down by the seller to reduce the assumable amount.
For condominium units, secure the Condominium Corporation’s approval of the buyer before Pag-IBIG processing.

Assumption of Pag-IBIG housing loan remains the most cost-effective and buyer-friendly way to acquire a property with an existing low-interest loan. When done properly with complete documents and a qualified buyer, the entire process can be completed in as fast as 30–45 calendar days, making it the preferred mode of transfer in the Philippine second-hand residential market as of 2025.