Can I Refinance if My Home Value Decreased After Purchase?

The Loan-to-Value (LTV) ratio is the percentage of your property's current appraised value that you're asking to borrow. Banks use it as a measure of risk — the higher your LTV, the more of the property's value is covered by debt, and the riskier the loan appears to the lender.

The formula is simple: LTV = Outstanding Loan Balance ÷ Current Appraised Property Value × 100.

For example, if your outstanding home loan balance is 3,000,000 and your property was recently appraised at 4,000,000, your LTV is 75%. If your property's value has dropped to 3,500,000, your LTV rises to approximately 86% — potentially pushing you above the bank's maximum acceptable threshold.

When refinancing, Philippine banks typically require your LTV to fall within a certain limit (usually 70%–80%) before they will approve a new loan. A decreased home value raises your LTV even if you haven't changed anything about your loan, which is why a drop in property prices can directly affect your ability to refinance.

Yes, in many cases you can still refinance — but the path forward depends on how much the value has dropped and where your resulting LTV ratio lands relative to your chosen bank's requirements.

Here are the most common scenarios:

• Minor decrease, LTV still within limits: If your property's value dropped slightly but your outstanding loan balance keeps your LTV at or below 80%, most Philippine banks will still consider your application. Your refinancing process may look much like a standard application.
• Moderate decrease, LTV slightly above limits: You may need to make a partial lump-sum payment to bring your outstanding balance down before applying, or explore lenders with slightly higher LTV tolerance.
• Significant decrease (near or underwater): This is the most challenging scenario. Banks are unlikely to approve a refinance where the loan balance meets or exceeds the property's current value. In this case, you may need to wait for values to recover or explore other strategies outlined in the questions below.

Working with a mortgage broker like Nook gives you access to multiple lenders at once, increasing your chances of finding one whose criteria fits your situation — without paying any fees for the service.

An underwater mortgage — sometimes called negative equity — occurs when your outstanding loan balance is greater than your property's current market value. For example, if you owe 5,000,000 on your home loan but your property is now worth only 4,200,000, you are underwater by 800,000.

This situation is uncommon in the Philippines compared to markets like the US, because Philippine banks typically require a down payment of at least 20% at the time of purchase — giving borrowers a built-in equity cushion. However, it can occur in areas where oversupply has driven prices down, or in specific property segments like pre-selling condos that have struggled to appreciate.

If you are underwater, your options include:

• Wait and continue paying: Over time, your loan balance decreases and property values may recover. If you can afford your current payments, staying the course may be the most practical choice.
• Make additional principal payments: Any extra money applied directly to your principal reduces your loan balance and improves your LTV ratio.
• Negotiate with your current bank: Some banks may offer loan modification options, particularly if you have a strong payment history.
• Consult a mortgage broker: Nook can review your full financial picture and advise on the most realistic path to refinancing, even in difficult situations.

When you apply to refinance, the bank will commission an independent property appraisal conducted by a licensed appraiser — either on their accredited panel or from a firm they approve. This appraisal is based on your property's current condition and comparable recent sales in your area, not what you paid for it or what the developer originally listed it for.

The bank uses this appraised value — not the purchase price, not the tax declaration value, and not the Zonal Value from the Bureau of Internal Revenue — to calculate your LTV ratio for the refinancing application.

Key things to know about the appraisal process:

• You typically pay the appraisal fee (usually between 3,500 and 6,000, depending on the bank and property location).
• The appraisal is valid for a limited period, usually 3 to 6 months.
• You can request a copy of the appraisal report for your records.
• If you believe the appraisal is too low, some banks allow you to request a review or submit comparable sales data to support a higher valuation — though this is not guaranteed to change the outcome.

Improving your property's condition before the appraisal (fresh paint, repaired fixtures, clean surroundings) can sometimes support a higher valuation, though major renovations are rarely cost-effective solely for this purpose.

LTV requirements vary by bank, but here are the general guidelines across major Philippine lenders:

• BDO, BPI, Metrobank, Security Bank: Typically up to 70%–80% LTV for refinancing
• RCBC, UnionBank, Chinabank: Generally up to 70%–75% LTV
• PNB, EastWest Bank, PSBank: Typically up to 70%–80% LTV depending on property type and location
• Pag-IBIG (HDMF): Up to 90% LTV in some cases, making it more accessible for borrowers with higher LTV ratios

Keep in mind that these are guidelines and the actual approved LTV can vary based on factors like your income, credit history, property type, and location. Properties in high-demand urban areas (Metro Manila, Cebu, Davao) tend to receive more favorable appraisals and LTV considerations than properties in areas with weaker demand.

A mortgage broker like Nook can match you with the lender whose LTV criteria best suits your current situation, saving you the time and risk of applying to banks whose requirements you don't meet.

Yes — and this is one of the most effective strategies available to homeowners whose decreased property value has pushed their LTV above acceptable limits. By paying down a portion of your outstanding loan balance before applying to refinance, you directly lower your LTV ratio and improve your chances of approval.

Here's a practical example: Suppose your outstanding balance is 4,000,000 and your property was appraised at 4,500,000, giving you an LTV of approximately 89% — above the 80% maximum most banks require. If you make a lump-sum payment of 400,000, your outstanding balance drops to 3,600,000, and your LTV falls to 80% — right at the threshold for most banks.

Before making a large payment, check whether your current bank charges a pre-payment or early settlement penalty. Many Philippine banks impose a fee (typically 2%–5% of the amount prepaid) if you pay down your loan significantly within a fixed-rate period. Factor this cost into your calculations.

If you have savings or a lump sum available, this can be a worthwhile investment — because refinancing to a lower rate (e.g., from 8.5% to 5.99%) could save you significantly more over the life of the loan than the one-time penalty you pay to get there. Nook can help you model these numbers so you can make an informed decision.

It can, yes. Most Philippine banks use a risk-based pricing model, which means the interest rate they offer you is partly influenced by the perceived risk of your loan. A higher LTV ratio (caused by a lower property value) signals more risk to the bank, and some lenders may respond by offering a slightly higher interest rate or requiring additional conditions.

That said, even if you're offered a rate slightly above the very best available, refinancing can still generate significant savings if you're currently paying a high rate. For example:

• If you're on a rate of 9% and refinance to 6.5% on a loan of 3,000,000 over 20 years, you'd still save approximately 35,000 to 45,000 per year in interest.
• The best rate currently available through Nook is 5.99% per annum, though the exact rate you're offered will depend on your lender, LTV, income, and other factors.

The most important thing is to compare multiple banks simultaneously rather than accepting the first offer you receive. Nook does this on your behalf, presenting you with options across multiple lenders so you can evaluate the full picture — rate, terms, fees, and LTV requirements — in one place.

Pag-IBIG (HDMF) home loans can be refinanced to a private bank — and this is actually a move many Filipino homeowners make to access lower interest rates and more flexible terms. If your property value has decreased, Pag-IBIG's relatively higher LTV tolerance (up to 90% in some cases) may work in your favor if you're staying within the Pag-IBIG system.

However, if you're looking to refinance from Pag-IBIG to a private bank, the private bank's appraisal and LTV requirements will apply. This means a decreased property value could be more of a constraint when moving to a commercial lender.

Key considerations for Pag-IBIG borrowers:

• Pag-IBIG loans have their own redemption and release processes, which can take 2–4 months.
• Private banks will conduct their own independent appraisal — they will not simply accept Pag-IBIG's original valuation.
• Your contribution history and employment status will also be assessed.

For a detailed look at this transition, see our guide on refinancing a Pag-IBIG home loan to a private bank, which walks through the full process and what to expect at each stage.

Condominiums in the Philippines — particularly those in high-density developments or in areas with significant oversupply — have historically been more susceptible to value fluctuations than landed properties like house-and-lot units. Several factors contribute to this:

• Oversupply in certain areas: Pre-selling condo units, especially in Metro Manila's secondary cities and provincial growth corridors, sometimes launch at prices that the resale market struggles to sustain.
• Developer reputation and project completion risk: Delays or quality issues can negatively affect perceived value.
• Market sentiment: The condo market tends to be more sensitive to economic cycles and interest rate environments than landed properties.

For condo refinancing, banks will appraise the unit based on current comparable sales in the same building or development. If similar units have been selling at lower prices, this will be reflected in your appraisal — regardless of what you paid.

The LTV calculation and refinancing process for condos is fundamentally the same as for house-and-lot properties, but some banks apply stricter LTV caps for condos (e.g., 60%–70% vs 80% for houses). If you own a condo and are exploring refinancing options, our guide on refinancing a condo loan in BGC covers the key considerations in detail, including how appraisals work for high-rise units.

Nook is the Philippines' first digital mortgage broker, and our role is to simplify and strengthen your refinancing application — especially in situations that aren't straightforward, like a decreased property value.

Here's how we help:

• Multi-bank access: We work with multiple Philippine banks and compare their rates, LTV requirements, and approval criteria simultaneously. This means we can quickly identify which lenders are most likely to approve your application given your current LTV situation.
• Financial modeling: We help you understand exactly how much you need to pay down (if anything) to qualify, and whether the savings from refinancing justify any upfront costs.
• Application support: We guide you through the documentation process and help you present your application in the strongest possible way.
• 100% free to borrowers: Nook's service costs you nothing. We are compensated by the bank when a loan is successfully placed, with no fees passed on to you.

Even if your situation feels complicated — whether it's a decreased property value, a challenging credit history, or an unusual property type — it's always worth getting a professional assessment before assuming refinancing isn't possible. Start a free consultation with Nook today to understand your real options.