The National Housing Trust is a mortgage provider and developer of family homes, like the unit shown here.

The National Housing Trust (NHT) will lengthen the repayment period for its mortgages by a decade, to 40 years, as well as allow borrowers to carry their debt up to the age of 70 - a policy shift that will increase the number of people eligible for its loans and lower the amounts they have to shell out monthly to service the debt.

"We are in the process of rolling it out now," the NHT's managing director, Earl Samuels, told the Financial Gleaner.

"We will be increasing the mortgage terms up to 40 years and up to age 70," Samuels said.

At present, the NHT - a $115 billion government agency funded by a five per cent payroll tax that is shared between employers and employees - lends for a maximum of 30 years and borrowers have to clear their debt by age 65.

But a recent study by the NHT found that even with its rates, at between two and six per cent, being well below what obtains on the private mortgage market, up to 80 per cent of its contributors were ineligible to borrow from the Trust.

Their salaries are too low, or they are too old.

The NHT lends a maximum of $3.5 million to individual borrowers, but two persons can also combine for such a loan for a maximum of $7 million.

Mortgages from the Trust can be mixed with those from private lenders.It was not immediately clear by how much the new policy will change the profile of an NHT borrower, since the Trust's online calculator has not yet been reconfigured for the new 40-year time line.

Under the current 30-year mortgage, an analysis offered by the Trust indicated that a 30-year-old earning $18,270 weekly, and who borrows $3.5 million at six per cent, would repay $24,917.02 monthly to clear the debt in three decades.

At age 60, assuming that the terms of the loan remain fixed, the homeowner would have repaid a total of just under $9 million.

Larger debt

Under the 40-year programme, the monthly repayments would be smaller, but the debt larger.

Using a general mortgage calculator, the borrower with the same profile - a 30-year-old with a $3.5 million loan at six per cent - would repay $19,257 per month, and $9.87 million over the 40 years.

When NHT's salary rider is attached, however, it could bring down that cost.

Samuels, the NHT boss, said the new arrangements will affect "mortgages being processed now".

The upward movement in the age limit of borrowers had to be cleared by the trust's insurers, who would not go beyond age 70.

"We insure the life of the borrower so in the event of death ... the insurance would pay off the loan (and) the property could pass to their beneficiary or estate," Samuels explained.

Earl Samuels, general manager of National Housing Trust. - File

"But the insurance company will not provide insurance coverage beyond age 70."

Samuels made it clear that the policy change will apply only to mortgages by the NHT and would not affect the arrangements borrowers had with private lenders.

"Loans through the other institutions are issued based on their underwriting conditions," he said.

Home mortgages from private institutions are typically for 25 to 35 years, the Financial Gleaner found.

None of the companies have yet said if they will follow the NHT in extending the life of their mortgages.

Building societies offer terms of 25 years to 35 years, the latter tenure offered by Jamaica National Building Society.

In the meantime, Samuels said that this policy change is only one of several that the NHT, in collaboration with others in the housing sector, is putting to the Government to help reduce the cost of homes in Jamaica, where the Golding administration has said that the issue of shelter is near the top of its agenda.

"For example, we are looking at if any tax rebate is possible for the construction sector in order to bring down costs," he said.

The water and housing minister, Dr Horace Chang, recently triggered widespread debate on the shelter question when he reported in Parliament that up to 900,000 Jamaicans, or a third of the population, lived in squatter or informal communities.

The intent of the NHT's initiatives to make housing more affordable was to "lessen tendency for people to live in informal settlements".

NHT hopes to create some 7,000 new mortgages this year, taking the complement since inception in 1979 to 136,470.

dionne.rose@gleanerjm.com