Oran Hall | NHT financing for closing costs comes with conditions
QUESTION: I am purchasing a house using the Joint Financing Mortgage Programme facility offered by the National Housing Trust. After finding the deposit and contract cash, I heard that I have to find the closing cost. Can I get that from the NHT as a part of the loan?
FINANCIAL ADVISER: The NHT will lend you money to pay the closing costs as a part of the loan to purchase the property if you meet the following two conditions - if you pay a deposit of at least ten per cent of the purchase price of the property; and if the sum you borrow is less than the amount for which you qualify. For example, if you qualify for $4 million but borrow only $3 million, the NHT will lend you $1 million towards the closing costs.
The NHT also assists its contributors with the closing costs by allowing them to access their contributions that are not yet due to be refunded with the exception of the contributions for the year immediately before the year in which the loan application is being made. This means that contributors benefiting from this facility in 2017 would be able to access contributions for the period 2010 to 2015.
The reason the NHT gives for retaining the contribution for the last year for which it should have a record for contributions made - 2016 in this case - is to balance its accounts, that is, the NHT needs to balance the interest the contributor pays on the loan with the interest the contributor earns on the NHT contributions.
The Joint Financing Mortgage Programme is a facility for non-home owners and it allows qualified NHT contributors to buy or build their homes using funds from the NHT and the mortgage-lending financial institutions which have established a partnership with the NHT to provide such funding.
All processes, including pre-qualification, approval, disbursement, servicing and closure are done through the mortgage-lending institution.
This is a convenient facility for borrowers because they can access funding for homeownership from two institutions at the interest rate charged by each while relating to just the financial institution rather than to both the financial institution and the NHT. It also allows NHT contributors to own homes costing more than they could purchase by just using their NHT benefit.
Two persons can join to apply to borrow the money required to own the same house. This is advantageous to the applicants as it makes them eligible for more funds than each would have been able to borrow individually as the total loan amount is determined by the income of both applicants.
In cases in which there are joint applicants, it is particularly important that the monthly mortgage payments are made in full and on time as the mortgagors are jointly and separately liable for repayment of the loan.
The costs incurred by a purchaser on a transfer of property amount to approximately 5.25 per cent of purchase price broken down as follows:
Stamp Duty of approximately 4 per cent of purchase price (shared by purchaser and vendor equally);
- Registration fee of approximately 0.5 per cent of the purchase price (also shared by the purchaser and vendor equally) payable to the Registrar of Titles;
- Legal fees for acting for a purchaser in the transfer of a title range from 2 per cent to 3 per cent of the purchase price, plus General Consumption Tax of 16.5 per cent. Each party has to pay his own attorney's fees for the transfer;
- Additional legal fees are often incurred in respect of the preparation of the Agreement for Sale, letters to the utility companies, and letter of possession.
The website of the Real Estate Board of Jamaica mentions these costs and other valuable information relating to the purchase of property.
The ability to make the monthly mortgage payments and to make the deposit are important considerations when contemplating the purchase of property. Equally important is the ability to pay all the other associated costs.
- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. email@example.com