This article explains how restructuring works for Home Development Mutual Fund (HDMF or Pag-IBIG Fund) housing loans in the Philippines—what changes, what does not, how earlier payments are treated, and the legal principles that frame the process. It is written for borrowers, counsel, and housing finance practitioners.

Executive Summary

Restructuring does not erase your prior payments. All amounts you have already paid remain credited to your account. What is “reset” is the repayment schedule going forward, based on the updated outstanding balance after Pag-IBIG applies those prior payments and any condonations or capitalizations allowed by policy.
The loan term can be adjusted (“reset” in practical effect)—typically by extending or re-amortizing the remaining obligation—subject to institutional caps (e.g., maximum loan term and age limits) and the Fund’s current program rules.
Penalties and certain charges may be condoned (forgiven) under specific Pag-IBIG restructuring programs; accrued interest is usually either paid or capitalized into the restructured principal, depending on program terms.
Your mortgage and collateral remain. Restructuring does not release the real estate mortgage or transfer title; it merely revises payment terms to avoid foreclosure.
You sign a restructuring agreement. This is generally a modification of the original obligation (novation in part), not the creation of an entirely new loan—unless the agreement expressly provides otherwise.

What “Restructuring” Means in Practice

Restructuring is an agreement between Pag-IBIG and the borrower to revise payment terms on a delinquent or soon-to-be-delinquent housing loan to make it affordable and sustainable. Typical elements include:

Recomputation of the Outstanding Obligation.
- Start with unpaid principal.
- Add accrued interest up to a cutoff date (some or all may be capitalized, some programs condone a portion).
- Condone (forgive) penalties and certain charges if the program provides for it and borrower qualifies.
- The result is the restructured principal, which becomes the basis for new monthly amortizations.
New Amortization Schedule (the “reset”).
- The term (number of months/years) is chosen within Pag-IBIG’s rules.
- A new interest-rate fixing or program rate is applied, with a corresponding re-pricing cycle if applicable.
- A fresh schedule of monthly payments is issued; your due dates prospectively follow this schedule.
Continuing Collateral and Insurances.
- The real estate mortgage remains annotated on your title.
- MRI/SRI (Mortgage Redemption Insurance/Single Borrower’s insurance) and Fire Insurance must be kept current; arrears may be collected or loaded into the restructured plan, per policy.

Does the “Term” Reset?

Short Answer

Yes—functionally. Restructuring restarts your payment clock with a new schedule over a newly agreed term. However, this reset is bounded by Pag-IBIG’s program limits, such as:

Maximum loan term (e.g., up to a long tenor commonly used in housing finance) and
Maximum borrower age at loan maturity (e.g., maturity cannot exceed a stated age cap).

In other words, you can often extend your remaining term to lower the monthly amortization, but you cannot exceed Pag-IBIG’s institution-wide caps.

What Does Not Reset

Your loan’s history. The account will reflect it has been restructured.
Collateral/mortgage. The original mortgage continues to secure the obligation.
Eligibility constraints. Any program-specific limits (e.g., maximum exposure, prior restructurings) still apply.

What Happens to Prior Payments?

They remain credited. All principal and interest payments already made are permanently applied to your account under the original schedule. They are not forfeited and not refunded.
They reduce the basis of the restructured loan. After crediting all prior payments, Pag-IBIG computes what remains due. That net amount—after any condonation (e.g., of penalties) and with any authorized capitalization (e.g., certain accrued interest)—becomes your new principal for purposes of restructuring.
Penalties and Charges.
- Penalties (e.g., for late payment) are often condoned if you apply and qualify under a restructuring/condonation window and comply with conditions (e.g., full compliance with documentary and down-payment requirements).
- Other charges (legal, foreclosure-related, insurance arrears) may be paid upfront or rolled into the restructured amount, subject to rules.

Legal Framework and Concepts

HDMF Charter (Pag-IBIG): The Fund is empowered to set loan policies, including restructuring and condonation programs consistent with its mandate to expand housing finance and preserve the Fund’s soundness.
Civil Code on Obligations & Contracts (Novation). Restructuring typically effects objective novation of terms (rate, tenor, amortization) without extinguishing the principal obligation unless expressly stipulated. The mortgage remains unless a release is executed.
Mortgage and Foreclosure Regime. The real estate mortgage continues to secure the restructured debt. If you default again, the account may proceed to foreclosure under the relevant foreclosure laws and procedures; restructuring aims to cure default and avoid this outcome.
Consumer and Data Disclosure. Pag-IBIG must provide clear disclosures of the new schedule, rate, term, and total cost so borrowers can make informed decisions. Borrowers should receive copies of the Restructuring Agreement and Updated Disclosure Statement.

Typical Eligibility and Process

Who may apply. Borrowers in arrears or at risk of default, including accounts with pre-foreclosure status or returned checks, subject to program criteria.
Documents. Valid IDs, Restructuring Application, updated income documents, marital/co-borrower consents, and any mortgagor’s insurance updates.
Assessment. Pag-IBIG evaluates capacity to pay, sets an affordable amortization, and confirms compliance with term/age caps.
Agreement & Effectivity. Upon approval and execution of the Restructuring Agreement, the new schedule becomes binding; prior penalties/charges are treated per program rules.

Accounting Mechanics You’ll See

Accrued Interest: Often capitalized into the new balance unless the program requires partial upfront settlement.
Penalties: Frequently condoned if you enter the program and satisfy conditions.
Insurance: MRI/Fire premiums must be current; arrears may be collected or included according to policy.
Fees: Expect reasonable processing/notarial fees. (Amounts vary by program and are disclosed at application.)

Practical Effects for Borrowers

Lower monthly due (with a longer tenor) but higher total interest over the life of the loan.
Clean slate on penalties (where condoned), but not on principal—you still owe the restructured amount.
Credit record will show the account as restructured, which lenders view differently from a never-delinquent account, but far better than a foreclosure.

Worked Illustration (Hypothetical)

For illustration only; actual figures depend on your account and program terms.

Unpaid principal: ₱1,200,000
Accrued interest to cutoff: ₱60,000 (capitalized)
Penalties: ₱35,000 (condoned)
Restructured principal: ₱1,260,000
New tenor: 20 years (within program caps)
Program rate: applied per current Pag-IBIG schedule
New monthly amortization: computed from the restructured principal, rate, and tenor; Pag-IBIG issues the official schedule.

Key point: All past payments remain applied. The “reset” is the future schedule, not a deletion of history.

Frequently Asked Questions

1) Will I get back the money I already paid? No. Prior payments remain credited and reduce what you still owe—they are not refunded.

2) Can the term always be extended to the maximum? Only within Pag-IBIG’s caps (maximum tenor and age at maturity) and subject to underwriting of your capacity to pay.

3) Will my interest rate change? Yes, the restructured account follows the program’s rate and repricing scheme in effect at approval.

4) Are penalties automatically waived? Not automatically. Condonation depends on qualifying for a program and complying with its conditions.

5) Do I need a new appraisal or new mortgage? Usually no new mortgage is executed (the existing one stays); appraisal is typically not required for pure restructuring (unless the transaction involves additional credit or specific program triggers).

6) What if I default after restructuring? The account can again become delinquent and may proceed to foreclosure. Some programs limit how often a loan can be restructured.

7) Can I prepay after restructuring? Yes, prepayment or pre-termination is generally allowed. You may save on future interest; check for any admin steps or fees.

Borrower’s Checklist

Request a Statement of Account (with itemized principal, interest, penalties).
Confirm program eligibility and what will be condoned.
Compare options: (a) catch-up plan; (b) restructuring; (c) asset sale; (d) dación en pago—as last resort.
Verify caps: maximum tenor and age at maturity.
Review the Disclosure Statement: new rate, term, repricing cycle, total finance charge.
Keep MRI/Fire Insurance current.
Calendar the new due dates and enroll in auto-debit if available.

Bottom Line

Term “reset”? Yes, in effect—you get a new amortization schedule and possibly a longer term, subject to Pag-IBIG caps.
Prior payments? Fully preserved. They remain applied and reduce your restructured balance.
Penalties/charges? Often condoned under program rules; accrued interest is usually capitalized or partly settled.
Security and obligations remain. The mortgage stays, insurance must be kept active, and default can still lead to foreclosure.

Professional Tip

Before signing, ask for two computations: (1) a shorter tenor (higher monthly, lower total cost) and (2) a longer tenor (lower monthly, higher total cost). Choose the plan you can sustain without missing payments; consistent on-time payments after restructuring matter more than squeezing out a marginally lower rate you cannot maintain.

This article is for general guidance and does not substitute for specific advice on your account. For exact numbers and current program rules, obtain Pag-IBIG’s official statements and disclosures for your loan.