Creative finance means the deal structure does the work the bank usually does. In the Philippines these structures are legal, common and poorly understood, which is exactly why buyers get hurt. This page defines each term, shows how the deal is papered, and tells you where the risk sits.
Pasalo (assume balance)
What it is. The original buyer of a pre-selling or financed unit sells you their position: you reimburse part of what they have paid and take over the remaining installments or loan. “Pasalo” is Filipino for “take over”.
How it is papered. A Deed of Assignment or Transfer of Rights over the Contract to Sell, with the developer’s or lender’s written consent, and a new Contract to Sell or loan assumption in your name. Without that consent you own a promise from a stranger, not a property.
Typical terms. Reimbursement of 50–100% of the seller’s equity, sometimes at a discount when the seller is in a hurry; transfer fees set by the developer; the balance continues on the original schedule.
Risks. Hidden arrears, a developer that refuses the transfer, a loan you cannot qualify to assume, and sellers who collect from more than one buyer. Read 7 ways an assume-balance deal goes wrong without a licensed broker and browse pasalo condos for sale.
Rent-to-own
What it is. You rent the property now with a contractual right to buy it later at an agreed price. Part of the rent is usually credited toward the purchase.
How it is papered. A Contract of Lease with Option to Purchase, or a lease plus a separate Option agreement. The purchase price, option period, credited amount and what happens if you walk away must all be written down.
Risks. Losing the credited rent if you cannot close, a seller who sells or mortgages the property in the meantime, and price terms that were never fixed. Register or annotate the option on the title where possible. More in Rent-to-own homes and condos in the Philippines.
Subject-to existing financing
What it is. You buy a property and keep paying the seller’s existing bank or Pag-IBIG loan without formally refinancing it.
How it is papered. A Deed of Sale or Contract to Sell plus an agreement on who pays the loan, ideally with the lender’s consent to a formal assumption. Philippine lenders generally require the loan to be assumed or refinanced; an informal “subject-to” leaves the loan and the title in the seller’s name.
Risks. The lender can call the loan, the seller can default on other debts secured by the same title, and you cannot transfer title until the loan is cleared. Use this only with lender consent and an escrow arrangement.
Seller (owner) financing and installment sales
What it is. The seller is your bank: you pay a down payment and monthly installments directly to them.
How it is papered. Either a Contract to Sell (title transfers after full payment) or a Deed of Absolute Sale with a Real Estate Mortgage back to the seller (title transfers now, seller holds a mortgage). Installment buyers of residential real estate are protected by the Maceda Law (RA 6552): after two years of installments you get grace periods and a cash surrender value if you default; before two years you get a 60-day grace period.
Typical terms. 10–30% down, 1–5 year terms, interest above bank rates, often a balloon payment at the end that you refinance with a bank.
Risks. Balloon you cannot refinance, a seller whose title is not clean, and ambiguity over who pays taxes and dues during the term.
Developer in-house financing
What it is. The developer finances the balance of a pre-selling unit itself, usually for buyers who cannot get a bank loan yet (new to the country, foreign nationals, variable income).
Typical terms. Higher interest than banks, shorter terms (often 5–10 years), larger down payment. It is a bridge, not a destination: plan to refinance with a bank once you qualify. Check whether a bank would lend to you first.
Lease option and lease purchase
A lease option gives you the right to buy; a lease purchase obliges you to buy. Investors use lease options to control a property and sublet it while they arrange financing. Know which one you are signing.
Joint venture and equity partnering
You bring the cash, a partner brings the property or the ability to hold title (for example a Filipino partner or a Philippine corporation for land). Papered as a Joint Venture Agreement or shareholders’ agreement. Land ownership rules still apply: a foreign national cannot use a nominee to hold land. See who can own property here.
The paperwork, in one table
| Document | What it does | When you see it |
|---|---|---|
| Contract to Sell | Seller promises to transfer title after full payment | Pre-selling, seller financing, rent-to-own close |
| Deed of Assignment / Transfer of Rights | Moves a buyer’s position under a Contract to Sell to you | Pasalo |
| Deed of Absolute Sale | Transfers ownership now; basis for the new title | Cash or bank-financed purchase, seller-financed with mortgage back |
| Real Estate Mortgage | Secures a loan against the title | Bank loan, seller-carried note |
| Contract of Lease with Option to Purchase | Rent now, right to buy later | Rent-to-own, lease option |
| Developer / lender consent | Makes an assumption or transfer binding on them | Pasalo, subject-to |
Strategies that work here
- Buy the motivated seller’s equity at a discount. Pasalo sellers who moved abroad or lost income will take less than they paid. Verify arrears first.
- Control first, finance later. Lease option or rent-to-own while you build the two years of Philippine income or residency that banks want.
- Stack bank + seller. A bank covers 70–80%, the seller carries part of the down payment on a short note. Low cash in, two payments out; see the Invest guide.
- Refinance the bridge. Take developer in-house financing to close, then move to a bank when you qualify.
- Never skip the consent and the title check. Every structure above fails at the same two points. A licensed broker’s job is to get both in writing before your money moves.
Ask Trish AI which structure fits you
Tell her your cash, income source, citizenship and the property type. She matches it against the live listings and these rules, and Trish, a licensed broker, papers the deal properly.
