Scope. This article explains, in Philippine legal and practice terms, how a Pag-IBIG Fund housing loan can be transferred from the original borrower (seller/assignor) to a new buyer (assignee/transferee) through an assumption of mortgage—popularly called assume balance or pasalo. It covers legal bases, eligibility, documentary requirements, step-by-step procedures, taxes and fees, common pitfalls, and practical checklists for both developer-taken (CTS) and retail (TCT/CCT) accounts.

I. Key Concepts and Legal Basis

1) What “Assume Balance / Pasalo” Means

Commercial usage. “Assume balance” or pasalo is a sale where the buyer takes over the seller’s remaining Pag-IBIG housing loan amortizations and becomes the new borrower on record.
Legal characterization. In law, this is typically a novation by substitution of debtor (Civil Code), which requires the creditor’s consent—here, Pag-IBIG Fund’s written approval. Without Pag-IBIG’s consent, any private arrangement is merely between the parties and does not release the original borrower.

2) Why Consent Matters (Due-on-Sale and Novation)

Novation: A change of debtor with the creditor’s consent extinguishes the old obligation and creates a new one with the transferee.
Without consent: Pag-IBIG may treat an unauthorized transfer as a breach of loan covenants (akin to a due-on-sale event). The property remains encumbered under the original loan, and the original borrower stays liable despite private “pasalo” agreements.

3) What Can Be Transferred

Loan obligation and security. The existing real estate mortgage (REM) on a titled property, or the Contract-to-Sell (CTS)/Assignment of Rights on developer-taken accounts, may be transferred, subject to Pag-IBIG approval.
Improvements, possession, and title/rights pass to the buyer only after compliance with Pag-IBIG’s process and, for titled properties, completion of BIR/LGU/Registry of Deeds (ROD) requirements for title transfer and mortgage re-annotation.

II. Eligibility and Pre-Qualification

A) For the Buyer/Assignee

Pag-IBIG membership. Generally, an active member with at least the minimum required contributions (or willingness to remit catch-up contributions).
Borrower limits. Must not have an existing active Pag-IBIG housing loan or any defaulted/foreclosed/cancelled Pag-IBIG housing loan.
Age and term. Age at loan origination and at maturity must be within Pag-IBIG’s limits (commonly: maturity capped around senior age; check prevailing rules).
Capacity to pay. Must pass underwriting: verifiable income, reasonable debt-to-income ratio, stable employment/business, and satisfactory credit/background checks.
Insurance eligibility. Must qualify for Mortgage Redemption Insurance (MRI) (and Fire/Allied Perils Insurance) per Pag-IBIG’s underwriting; health declaration and medical exams may be required depending on age/amount.

B) For the Seller/Assignor

Loan status. Account should be updated/current, with no active foreclosure or legal impediment. Arrears, if any, are typically settled before processing.
Title/CTS condition.
- Retail (TCT/CCT): Title is in seller’s name with REM in favor of Pag-IBIG. Real property taxes updated; no adverse liens other than the mortgage.
- Developer (CTS): CTS and developer’s documents in order; account not cancelled; developer consents to assignment when required.
Marital property. If the property/rights are conjugal or community, spousal consent is required (Family Code). For separated spouses, provide proof (e.g., judicial separation/annulment) or a valid SPA.

III. Required Documents (Typical)

Note: Exact forms and checklists are issued by Pag-IBIG and may be updated. Below is a consolidated, practice-based list to help you prepare.

A) Buyer/Assignee (Transferee)

Valid government-issued IDs (and spouse’s, if applicable).
Pag-IBIG Membership details/MID and contribution proof (or catch-up plan).
Income documents (as applicable):
- Employed: Certificate of Employment and Compensation, recent payslips, BIR Form 2316.
- Self-employed/Professional: DTI/SEC papers, Mayor’s/Professional license, ITR/FS, bank statements.
- OFW: Employment Contract/POEA docs, consularized COE/compensation, proof of remittances.
Health/MRI forms (and medical reports if required by underwriting).
Proof of billing/residence; birth/marriage certificate (civil status proof).
Notarized:
- Deed of Sale with Assumption of Mortgage (or Deed of Assignment of CTS/rights, as applicable), subject to Pag-IBIG approval.
- Special Power of Attorney (SPA) if represented.

B) Seller/Assignor (Transferor)

Valid government-issued IDs (and spouse’s, if applicable).
Original loan documents:
- Retail (TCT/CCT): Owner’s Duplicate TCT/CCT, Tax Declaration, Real Property Tax (RPT) receipts, REM/annotations.
- Developer (CTS): CTS, Official Receipts for downpayment/amortizations, developer’s consent to assign rights (if required).
Updated Statement of Account from Pag-IBIG (no outstanding penalties/arrears, or arrange settlement).
Notarized Deed(s) supporting the transfer (see above).
Spousal consent and marital regime documents, if applicable.
BIR/LGU clearances as needed for title transfer stage.

C) Property-Related (as applicable)

Latest RPT and Barangay/LGU clearances.
Vicinity/location plan or appraisal access (Pag-IBIG may re-appraise).
Homeowners’ Association clearance/no-dues (if any).

IV. Step-by-Step Process

Step 1: Pre-Check and Deal Terms

Seller and buyer agree on selling price, who pays arrears/penalties (if any), who shoulders taxes/fees, and effective date of possession and risk.
Confirm that the buyer qualifies under Pag-IBIG underwriting and MRI. Consider pre-screening with Pag-IBIG for faster processing.

Step 2: Secure Pag-IBIG’s Application Forms and Preliminary Approval

File a Loan Assumption/Transfer of Rights application with Pag-IBIG, attaching the buyer’s financials, IDs, membership, and the seller’s loan details and account status.
Pag-IBIG conducts credit evaluation, verification, and may require re-appraisal of the property.

Step 3: Execute Transfer Documents (Subject to Approval)

Prepare and notarize the appropriate instruments:
- Retail (titled): Deed of Absolute Sale with Assumption of Mortgage (or Deed of Sale + separate Assumption Agreement), acknowledging the existing REM in favor of Pag-IBIG and stipulating that assumption is subject to Pag-IBIG’s consent.
- Developer (CTS): Deed of Assignment of CTS/Buyer’s Rights with Assumption of Mortgage/Obligations, with the developer’s written consent if required.
Include spousal consents and warranties (taxes paid, no hidden liens, etc.).

Step 4: Pag-IBIG Approval and Loan Substitution

Upon approval, Pag-IBIG issues documentation effecting novation (substitution of debtor) and updates the account under the buyer’s name.
Amortization schedule, interest terms, and insurance are re-issued under the buyer; premiums are recalibrated as needed.

Step 5: Title/Record Work (Retail/Titled Accounts)

BIR: Pay Capital Gains Tax (CGT) (or Creditable Withholding Tax if seller is an entity engaged in real estate), and Documentary Stamp Tax (DST) on the sale.
LGU: Pay Transfer Tax; secure Tax Clearance if required.
Registry of Deeds: Process transfer and issuance of new TCT/CCT to the buyer, then annotate the Pag-IBIG mortgage in the buyer’s name.
Assessor’s Office: Update Tax Declaration.
Note on consideration: For BIR, the tax base is typically the higher of (i) the gross selling price (which usually includes the assumed mortgage component) or (ii) the zonal value/FMV.

Step 6: Post-Transfer Housekeeping

Pag-IBIG insurance endorsements (MRI/Fire) updated to the buyer.
HOA/condo admin: register new owner; settle association dues and secure move-in clearances.
Utilities: transfer accounts for electricity, water, internet, etc.
Keep a complete file: approvals, receipts, title, annotated mortgage, tax proofs, insurance certificates, and amortization schedule.

V. Taxes, Fees, and Typical Cost Items

Shares of expenses are negotiable. Put allocations in writing in the Deed or a separate Cost-Sharing Agreement.

BIR:
- CGT (individual seller) or CWT (if seller is a developer/real estate business), payable within statutory deadlines.
- DST on Deed of Sale (percentage of consideration/zonal value).
- DST on Loan/Assumption may apply depending on the structure and current revenue rules.
LGU: Transfer Tax (rate varies by locality).
Registry of Deeds: Registration fees, entry/annotation fees.
Pag-IBIG: Processing and possible appraisal fees; replacement insurance premiums (MRI/Fire) as re-computed.
Notarial/Legal: Notarial fees; SPA costs; professional fees if using counsel or processors.
Miscellaneous: Certified copies, clearances, association dues arrears, utilities arrears if any.

VI. Special Situations

1) Developer (CTS) vs Retail (Titled)

CTS accounts: No TCT/CCT yet under the buyer’s name; you transfer contractual rights first (via Assignment of Rights) with Pag-IBIG’s consent (and often developer’s consent). Title transfer to the buyer occurs after full payment or upon conversion to a take-out with title, depending on project mechanics.
Retail (TCT/CCT): Title already issued; you must process BIR/LGU/ROD title transfer, then re-annotate the mortgage.

2) Arrears or Near-Default Accounts

Pag-IBIG may require arrears settlement or a loan restructuring first before allowing assumption. Unauthorized private “pasalo” of a delinquent account is risky for both parties.

3) Properties with Subsidies or Special Programs

Some Pag-IBIG programs (e.g., subsidized interest socialized housing) have eligibility limits and use/transfer restrictions. Expect Pag-IBIG to verify whether the buyer qualifies; a transfer might forfeit benefits or disallow the assumption.

4) Overseas Seller or Buyer (OFW)

Use apostilled/consularized SPAs and documents. Ensure wet-ink signatures if required. Align timelines with BIR/ROD/LGU processing windows.

5) Marital and Co-Ownership Issues

Spousal consent is required for the sale/assignment and for mortgage assumption when property/rights are conjugal/community.
For co-owned properties, all co-owners (or duly authorized attorneys-in-fact) must sign.

VII. Risks and How to Manage Them

Private “pasalo” without Pag-IBIG approval
- Seller remains fully liable; buyer risks eviction or foreclosure if the original borrower defaults.
- Fix: Never hand over possession or large payments until Pag-IBIG issues written approval and loan substitution.
Incomplete taxes/title work
- Leads to untransferable title or defects that later buyers or banks will flag.
- Fix: Follow the BIR → LGU → ROD → Assessor chain; keep certified receipts and certified true copies (CTCs).
Insurance gaps
- If MRI/Fire endorsements aren’t updated, claims may be impaired.
- Fix: Obtain insurance endorsement proofs naming the buyer.
Hidden liens/dues
- Utility arrears, HOA dues, or other liens can follow the property.
- Fix: Require no-dues/clearances; hold a retention until clearances are delivered.

VIII. Practical Checklists

Seller’s Checklist

Loan is current; arrears/penalties settled.
Pag-IBIG account summary printed.
Title/CTS and tax documents on hand; RPT updated.
Spousal/co-owner consents ready.
Deed(s) drafted with assumption clause; notarized after final review.
Allocation of taxes/fees agreed in writing.
Deliver keys/possession only after Pag-IBIG approval and (for titled) BIR/LGU/ROD milestones are reached as agreed.

Buyer’s Checklist

Pag-IBIG membership active; contributions in order.
Income documents and credit ready for underwriting.
MRI/Fire forms and medicals (if required).
Property due diligence: physical inspection, HOA dues, utilities, liens.
Tax/title roadmap understood; budget for CGT/CWT, DST, Transfer Tax, ROD fees.
Keep originals and CTCs of approvals, title, and annotations.

IX. Common Clauses to Look For (and Negotiate)

Assumption clause expressly stating buyer’s substitution as debtor subject to Pag-IBIG approval and seller’s release upon approval.
Cost-sharing clause for CGT/CWT, DST, Transfer Tax, ROD fees, notarial, appraisal, processing, and HOA/utilities arrears.
Condition precedent: transfer and possession effective only upon Pag-IBIG approval and (for titled) lodgment of taxes and ROD documents.
Warranties: no other liens; taxes and dues updated; disclosure of defects.
Default/termination and refund mechanics if approval is denied or timelines lapse.

X. Frequently Asked Questions

Q1: Can we do a private “pasalo” and just tell Pag-IBIG later? A: Risky. Without Pag-IBIG’s written consent, the original borrower remains liable and the loan can be called or foreclosed if covenants are breached.

Q2: Will the interest and term change? A: Pag-IBIG may re-underwrite and re-issue the amortization schedule and insurance under the buyer’s profile. Terms and rates may be aligned to current policies at the time of approval.

Q3: Who pays the taxes and fees? A: It is negotiable. Traditionally, seller pays CGT (or CWT if applicable); buyer pays DST on the sale, Transfer Tax, and registration—but parties can agree otherwise. Put it in writing.

Q4: How long does the process take? A: It varies by case (underwriting, appraisal, BIR/LGU/ROD volume, completeness of documents). Build in contingencies in your contracts.

Q5: Can a buyer with an existing Pag-IBIG housing loan assume another? A: Generally no; Pag-IBIG typically allows only one active housing loan. Check current policy for any exceptions.

Q6: What if the account has arrears? A: Expect Pag-IBIG to require settlement and/or restructuring before assumption. Align on who shoulders the arrears.

XI. Drafting and Execution Tips

Use clear, lender-friendly language acknowledging the existing mortgage and making the assumption conditional on Pag-IBIG approval.
Ensure names, marital status, tax IDs, property technical description, and loan/account numbers are accurate and consistent across all documents.
Attach Annexes: computation of remaining balance, amortization, cost-sharing matrix, and a closing checklist.
If either party is abroad, prepare apostilled/consularized SPAs in advance.

XII. Bottom Line

An assume balance (pasalo) through Pag-IBIG is legally safe and commercially sensible only when it is processed with Pag-IBIG’s formal consent and accompanied by proper title/tax work. Treat it as a novation that substitutes the debtor, refreshes underwriting and insurance, and requires the usual BIR/LGU/ROD steps (for titled properties). Handle spousal/co-owner consents, cost-sharing, and risk allocation in writing, and do not deliver possession until the approval and key registries have been completed as your contracts require.

If you want, I can tailor a document checklist and Deed of Sale with Assumption template to your exact scenario (titled vs CTS, marital status, OFW representation, and cost-sharing preferences).