Low-income earners could pay $8,800 monthly for mortgage
Come July 1 when the new policy announced by Prime Minister Andrew Holness takes effect at the National Housing Trust (NHT), scores of contributors who own land are expected to converge on the housing entity to engage the Trust as they seek to access loans to build houses, while others will make single or joint applications to purchase houses on the open market.
The Gleaner has sought additional information from the NHT, particularly in relation to how the new policy will benefit low-income earners.
A 25-year-old minimum wage earner who approaches the NHT on July 1 for a loan could access up to $4 million, including a home grant. This means that this low-income earner would have a monthly mortgage payment of $8,808.58.
At the same time, a 45-year-old minimum wage earner could borrow $2.2 million and access a home grant of $1.5 million, bringing the total sum available from the Trust to $3.7 million. This middle-aged person would be required to pay a similar monthly mortgage of $8,804.90.
With a weekly income of $12,000, a 25-year-old contributor could access $4.5 million from the NHT and pay a monthly mortgage of $12,271.03. Another contributor in a similar age group who earns the same amount weekly and who wishes to purchase a house in a new housing development or who plans to build a house, can get up to $5.5 million from the Trust. This person's monthly mortgage would be $14,997.41.
However, a 45-year-old contributor earning $12,000 per week could borrow up to $4.25 million as of July 1 and end up paying a monthly mortgage of $ 17,009.36.
At present, a 25-year-old NHT contributor earning $12,000 per week can access up to $3.43 million at four per cent interest per annum, which means that the monthly mortgage is $17,285.69. Under the present policy, a 45-year-old contributor with a weekly income of $12,000 can obtain a $2.79 million loan from the NHT at four per cent per annum. This would attract a monthly mortgage of $17,300.84.
As part of the new policy announced by Prime Minister Andrew Holness during his contribution to the Budget Debate, persons earning between $7,501 and $12,000 will, as of July 1, pay no interest on loans from the NHT. The current applicable interest rate for this salary range is two per cent to four per cent.
On the question of home-improvement benefit amounting to $1.5 million, the NHT says the prime minister's announcement will affect the interest rates charged on home-improvement loans.
In the case of homeowners who have not received a previous NHT loan, this contributor would be considered a new applicant after July 1 and would enjoy the interest rate reductions applicable to his/her income group.
For persons who received a first NHT loan to buy or build a house and who are applying for a second loan 15 years later, for improvement, if that individual is still repaying the first loan, the new amount for home improvement would be subject to the new interest rate after July 1. However, the first loan would continue to be serviced at the original rate at which it was written.