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Every few weeks, you see this on your payslip — a flat P100 salary deduction for HDMF contributions. Only a few people know exactly what this is; even fewer would know what this monthly contribution can do for them.

The basics

HDMF, which stands for Home Development Mutual Fund, is more commonly known as Pag-IBIG. But did you know that Pag-IBIG is also an acronym? It means: Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya at Gobyerno.

Patterned after our Southeast Asian neighbors' own provident funds — Singapore’s Central Provident Fund and Malaysia’s Employees Provident Fund — the Pag-IBIG Fund Law of 2009 was created to be both a national savings scheme and a capital formation system. The fund provides an opportunity for Filipinos to set aside money for the future, and, from the small amounts of money it would pool from its members, it could generate long-term funds that could be used to finance sectoral needs, such as housing.

If you are enrolled under SSS or GSIS, membership is required in the Home Development Mutual Fund. However, even non-SSS or GSIS members may opt in. As a member of the HDMF, you must contribute a minimum of P100 every month for at least 20 years. Most companies have this deduction already built into your payroll and some companies would even go as far as matching your contribution to yield you a higher return.

Pag-IBIG

Now, here are 5 things to maximize your Pag-IBIG membership that you may not have known:

Savings + Dividends

The hard-earned money that you’ve been religiously putting into this fund every month actually belongs to you and not the government! After 20 years of monthly contributions, not only will you be able to withdraw the entire amount you’ve been saving up, but you will also get the dividends that your money gained during this time. If you multiply P100 x 20 years x 12 months, that’s 24,000 pesos. Multiply this by the yearly prevailing interest rate, (let’s say 4%) and your total accumulated savings could reach the mid-30 thousands, which — by the way — is tax-free!

Additional contributions

You’ve just found out about the tax-free earnings you could make from parking the equivalent of McDonald’s meal into your Pag-IBIG account every month and you’re probably already thinking of different ways you could make this amount even bigger. Well, don’t sweat because you actually can! The 100-peso monthly contribution is only the required minimum amount, meaning there’s nothing stopping you from increasing your regular deposits to avail of the even higher dividends. Pag-IBIG actually encourages this as it’s a win-win for both parties — they get more money to invest, and the more money they can invest, the bigger the possibility of a higher interest rate for your dividends. If this has successfully convinced you to make a bigger contribution, just inform your HR department that you would like to increase your monthly contributions so they can help you set it up.

In need of a house?

If you’re looking to buy or build a new house, Pag-IBIG is another option you can consider, as they offer housing loans up to 6 million pesos. Doubling up the minimum monthly contribution from one to two hundred pesos will make you eligible for this after just 2 years of regular contributions. To make the loan more affordable and flexible, Pag-IBIG allows up to 3 members of the same family to be tacked into a single loan for the same property.

Calamity loans

If your area has recently been put under a state of calamity, then the calamity loan may be for you. This loan helps members of disaster-stricken areas get back on their feet by allowing them to borrow up to 80% of their total accumulated savings on a 5.95% interest rate, which they can apply for within 90 days of the calamity declaration. Similar to the housing loans, only members who have made 2 years of regular contributions may avail of this.

Multi-purpose loans

If you are fortunate enough not to live in an area frequented by natural disasters and are also not in the market for a house, you may still avail of a short-term loan from Pag-IBIG. This financial assistance may be used for: house repair, minor home improvement or enhancement, tuition or educational expenses, health and wellness, livelihood, or other purposes. Unlike the other loans, your multi-purpose loan value is determined by the number of contributions you have made, with the minimum being 24 months.
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