What Happens to Property Taxes When You Refinance Philippines FAQ

No. Refinancing does not trigger a new appraisal by your local government unit (LGU), and it does not change the assessed value of your property. Your annual real property tax bill is calculated by your city or municipality based on the property's assessed value — not on how much you owe the bank or who your lender is. When you refinance, ownership of the property does not transfer; you remain the registered owner throughout. Only the mortgage annotation on your Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) changes from your old lender to your new one. As a result, your RPT obligation for the year remains exactly the same regardless of whether you refinance with BDO, BPI, Security Bank, or any other Philippine lender.

Yes, documentary stamp tax (DST) applies to the new mortgage contract created when you refinance. Under the National Internal Revenue Code (NIRC), a real estate mortgage is subject to DST at a rate of ₱10 for every ₱2,000 (or fraction thereof) of the loan amount. This works out to roughly 0.5% of your loan amount. For example, if you're refinancing a loan of 3,000,000, the DST on the mortgage would be approximately 15,000. The DST is typically collected by your new lender as part of the closing costs and remitted to the Bureau of Internal Revenue (BIR) on your behalf. It is a one-time cost — not an annual charge — so it's important to factor it into your break-even analysis to confirm that the interest savings from your lower rate still outweigh the upfront fees.

Transfer tax is not charged when you refinance. This is one of the most common misconceptions among Filipino homeowners. Transfer tax — paid to the LGU — is imposed when ownership of real property is transferred from one person or entity to another (e.g., when you buy a home from a developer or a previous owner). In a refinance, ownership of the property stays with you at all times. What changes is simply the lien holder annotated on your title: your old bank's mortgage is cancelled and your new bank's mortgage is registered in its place. Because no sale or transfer of property ownership occurs, LGU transfer tax does not apply. The same logic applies whether you are refinancing a house-and-lot or a condominium unit.

While transfer tax and capital gains tax are not applicable, refinancing does involve several government-related fees. The main ones are:

• Documentary Stamp Tax (DST): Approximately 0.5% of the loan amount, paid to the BIR on the new mortgage contract.
• Registration Fee: Paid to the Registry of Deeds (RD) to register the new mortgage annotation on your TCT or CCT. This is a tiered fee based on the loan amount — typically ranging from around 4,000 to 12,000 for common loan sizes.
• Cancellation of Old Mortgage (RD Fee): A separate Registry of Deeds fee to cancel the old lender's annotation, usually a few hundred to a few thousand pesos.
• Notarial Fees: The new mortgage contract must be notarized; fees vary by notary but are typically 1,000 to 3,000.

Banks may bundle these into a single "processing fee" or itemize them separately. Always ask for a full fee disclosure before signing.

Many Philippine banks collect monthly escrow payments from borrowers to cover annual real property tax (RPT) and, in some cases, fire insurance premiums. When you refinance, here is what typically happens:

1. Your old lender closes your escrow account and should refund any remaining escrow balance to you, usually within 30 to 60 days of the loan being fully settled.
2. Your new lender may set up a new escrow account. Not all banks require escrow — some mandate it while others make it optional. Check your new loan offer carefully.
3. Your monthly payment amount may shift slightly even if your interest rate drops, because the escrow component is recalculated based on the current year's RPT bill and insurance premium.

Practical tip: make sure your RPT payments are current before you refinance. Some lenders will check for outstanding RPT arrears as part of their due diligence, and unpaid taxes could delay or complicate your application.

Unpaid RPT arrears can complicate your refinance and may cause delays, but they do not automatically disqualify you. Here's what to expect:

• Title search and due diligence: Your new lender's lawyers will review your title and may flag any RPT delinquency notices or tax liens attached to the property.
• Some banks require a clean RPT record — specifically an up-to-date official receipt from your LGU — before they release the loan proceeds.
• Other banks allow you to clear arrears at closing — meaning the RPT balance is paid out of the refinance proceeds before the remainder is applied to your old mortgage balance.

The safest approach is to settle any outstanding RPT before beginning your refinance application. Obtain the latest RPT official receipt from your city or municipal treasurer's office and have it ready as part of your document checklist. Nook can guide you through exactly which documents your target bank will require.

For most Filipino homeowners who use the property as their primary residence, refinancing costs such as DST and registration fees are not deductible from personal income tax. The Philippine Tax Code does not currently provide a specific deduction for home mortgage interest or refinancing costs for individual taxpayers using the standard deduction (OSD) or the basic personal exemption framework. However, there are two situations where deductibility may be relevant:

• Self-employed individuals or business owners filing itemized deductions: If the property is used partly or wholly for business, a portion of mortgage interest and related costs may be deductible as a business expense. Consult a certified public accountant (CPA) for your specific situation.
• Rental property owners: If you refinance a property you rent out, the interest expense and related fees may be deductible against rental income. Again, seek professional tax advice.

For most salaried homeowners, the primary benefit of refinancing is the direct monthly cash-flow savings from a lower interest rate — not a tax deduction.

As a rough guide, total government-related fees on a Philippine home loan refinance typically fall between 1% and 2% of the loan amount, depending on your lender, the loan size, and your LGU. Here's an illustrative breakdown for a 3,000,000 loan refinance:

• Documentary Stamp Tax (0.5%): approximately 15,000
• Registry of Deeds registration fee: approximately 6,000 to 8,000
• Cancellation of old mortgage (RD fee): approximately 1,000 to 3,000
• Notarial fee: approximately 1,500 to 3,000
• Miscellaneous (handling, document authentication): approximately 2,000 to 5,000

Estimated total: approximately 25,500 to 34,000 for a 3,000,000 loan. Banks also charge their own processing and appraisal fees on top of these. Moving from a 7.5% rate to 5.99% on a 3,000,000 loan over 20 years can save over 270,000 in total interest — so even with upfront fees, the math typically favors refinancing. Use Nook's free calculator to run the numbers for your exact loan.

The legal and practical responsibility varies by fee type:

• Documentary Stamp Tax: Under the NIRC, DST on a loan document is primarily the obligation of the borrower, though banks often collect and remit it on your behalf. Some banks absorb this cost as a promotion — always check the fine print.
• Registry of Deeds fees: These are the borrower's responsibility and are almost always collected by the bank from you as part of closing costs.
• Appraisal fee: Paid by the borrower directly or collected upfront by the bank.
• Annual real property tax: Always your responsibility as the property owner, regardless of who holds the mortgage. If your bank escrows for RPT, they collect it monthly from you and pay the LGU on your behalf — but you are still the taxpayer of record.

Ask your new lender for a complete Schedule of Fees in writing before you commit. Nook works with all major Philippine banks and can help you compare not just interest rates but the full cost of switching.

The break-even point tells you how many months it takes for your monthly interest savings to recover the upfront costs of refinancing. The formula is simple:

Break-Even (months) = Total Upfront Costs ÷ Monthly Savings

Here's a worked example. Suppose you have a 3,000,000 outstanding loan balance with 15 years remaining, currently at 8% p.a. You refinance to 5.99% p.a. through Nook:

• Monthly payment at 8%: approximately 28,670
• Monthly payment at 5.99%: approximately 25,310
• Monthly savings: approximately 3,360
• Total upfront costs (fees + bank charges): approximately 60,000
• Break-even point: approximately 18 months

After 18 months, every monthly payment represents pure savings. Over the remaining 15-year term, total savings could exceed 540,000. If you're switching from a Pag-IBIG loan to a private bank, the savings potential can be even greater depending on your current rate. Nook's advisors can produce a personalised break-even analysis for your specific situation — for free.