Home-equity loans up even as mortgages decline
New mortgages might be drying up as financing houses get increasingly wary of bad debt and first-time homeownership moves further beyond the reach if many, but some banks are reporting a spike in borrowings, using residential property already owned as collateral.
First Global Bank (FGB) has reported a 68 per cent increase in home-equity loans for January to September 2009, but none of these were US dollar-denominated, unlike the 2008 period when 11 such loans were issued.
At FGB, interest rate for home- equity loans spread over up to seven years is 19.75 per cent, while those extending between seven and 10 years attract 20.75 per cent.
Purposes for which the FGB loans were taken include debt consolidation, home improvement and business start-up, according to Kerry-Ann Stimpson, the bank's assistant vice-president of marketing and public relations.
Up to November, the country's biggest bank, Scotiabank Jamaica, was offering 25-year home-builder's loan. Most institutions expect repayment within five years, with some extending the repayment time to between 12 and 15 years.
At the time, Scotiabank's then vice-president of retail banking, Elena Villafana Sylvester, said home-equity loans remained strong with the demand being driven by renovations, debt consolidation, education financing, or even medical expenses.
Funds available for loans on titled real estate range from 50 per cent to 75 per cent of the value of the property, industry sources say.
In general, the banks are usually satisfied once the borrower demonstrates the ability to repay, the money is required for a useful purpose and sufficient collateral is being put up, among other considerations.
Getting the maximum available on a property is determined by a number of factors, such as personal income, length of employment, duration of current residence, and existing liabilities. Borrowers are also charged the cost of insuring the loan.
Other than central bank aggregates and data from individual banks and building societies, the current new mortgage is borne out by the monthly tally of mortgages, including liens registered against house titles reported by the National Land Agency (NLA).
The numbers reported by the NLA show the decline trend since 2007. From 1,706 mortgages in January that year, the number fell to 1,255 by December, 1,555 in August 2008 and 767 in December that year. In August 2009, some 833 such titles were registered.