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Financial Adviser | Buying a house on $7,750 weekly salary

Published:Sunday | September 20, 2015 | 12:00 AMOran Hall

ADVISORY COLUMN: PERSONAL FINANCE

QUESTION:

I am earning $7,750 per week but I am paid every two weeks. I would like to purchase my own house and would like your expertise on the matter. If you can, please advise me on the best way to go.

- Reader

FINANCIAL ADVISER:

It does not seem that your income would enable you to purchase a house readily on the local market, but I dare not say it is beyond you for I do not know what resources you have access to. The National Housing Trust (NHT) seems to be your best chance of getting a mortgage.

If you are a contributor to the NHT, its Open Market Loan and Scheme House Loan would seem to be your best options. In the former case, the facility is for buying houses from sellers other than the NHT. The latter is for contributors who buy houses directly from the NHT.

Other facilities include the Build on Own Land Loan, which is for persons who own land or have legal permission to build on a plot of land. All are Non-Homeowner's Loan facilities, which are for persons who do not own their house and have never received a loan from the NHT.

To qualify for a loan from the NHT, you must be a contributor at the time the application is being made, must have made 52 weekly contributions, 13 in the 26 weeks just before the date of application, and must have paid up, with interest, all outstanding contributions due for the last three years.

Applicants should be between the ages of 18 and 65 and should be earning an income which allows them to repay the loan. Your age determines the term of the mortgage, that is, for how long you will be able to borrow the money. The rate of interest payable is dependent on your income, as you can see from the following salary bands and rates:

ï Minimum wage J$7,500.99 1%

ï $7,501- J$10,000.99 3%

ï $10,001- J$20,000.00 5%

ï $20,001 & more 7%

The rate applicable to you would be three per cent, but because you have not stated your age, I am not able to say how much you would be able to borrow and what your monthly mortgage payment would be. This figure would also take account of the cost of repaying the five per cent service charge which the NHT charges on its mortgages.

This is less than the charges that would apply when borrowing funds from other mortgage-lending institutions. It covers administrative costs and legal fees are added to the loan amount and is included in the mortgage payment, so you would not have to find that amount upfront.

Because the NHT lends up to 95 per cent of the market value or valuation of the property, to purchase a home on the open market, you would have to find at least five per cent of the cost for the deposit to the vendor.

Ultimately, even if you can source a loan from the NHT, you would need to have the deposit and the difference between what the NHT will lend and the rest of the purchase price. Given the price of houses on the local market, you could be facing a tall order.

Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. finviser.jm@gmail.com.