Professional couple wants to know ... Do we qualify for an NHT loan?

Oran Hall, Contributor

QUESTION: I have read your column and I hope you can be of assistance to me. I am interested in purchasing a house. I saw one that I like selling for J$8.5 million with an upfront 10 per cent discount. I am twenty-five years of age and have been a teacher for almost four years now. I don't have any children currently. I am married. My husband has a degree in engineering but he has only been working for six months. Is there a chance we can still get the money at National Housing Trust (NHT) to cover the cost of the house based on our finances?

- Carlene

PFA: Your being able to make that purchase depends on several factors, including whether you are able to make the required deposit, pay the necessary legal and administrative fees, and source funds to cover a significant portion of the cost.

Let us look at whether you qualify to borrow from the NHT.

To qualify, you should be a contributor at the time you are applying. You should have made 52 contributions - 13 in the twenty-six weeks just before the date of the application.

If there are outstanding contributions, interest would have to be paid for the last five years or for one year if the contributor's income is less than J$7,500 per week.

Your husband has been working for only six months. Has he worked before? If yes, has he made the required amount of contributions considering that you alone cannot borrow all the required funds from the trust?

Depends on income

Applicants should be between 18 and 65 years old, so you both qualify on that score.

Although each of you may qualify for up to J$4.5 million, how much you ultimately can borrow depends on your income because the trust has to be satisfied that you can meet your obligations.

Additionally, the rate of interest is dependent on your income as you can see from the following salary bands and rates:

• J$4,070 - J$7,500.99 - 1%
  
• J$7,501 - J$10,000.99 - 3%
  
• J$10,000 - J$20,000.00 - 5%
  
• J$20,000 & more - 7%

If both you and your husband qualify, it is possible you would not need to access the Joint Financing Mortgage Programme whereby some funds would be provided by the NHT and the rest by another mortgage institution.

Further, if one applicant is not able to afford his or her maximum individual J$4.5-million loan but the other is able to afford a higher amount, then the applicant with the higher income may access up to J$2.5 million over his or her loan limit to facilitate the purchase.

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

Service charge

There is also a service charge of five per cent payable to the NHT to cover administrative costs and its legal fees. This is added to the loan amount and is included in the mortgage payment, so you would not have to find that amount upfront.

At your age and assuming that you earn J$90,000 per month, you would be eligible for a loan of approximately $4 million for 40 years at a rate of 7.0 per cent, which would require a monthly payment of approximately J$30,000.

Bear in mind that there are other costs. There is the cost of preparing the sales agreement of which you would pay 50 per cent, stamp duty and registration of 2.25 per cent and 0.25 per cent of the price, attorney's fees of 1.5 per cent to 2.0 per cent of the selling price, and the cost of the valuation report and the surveyor's ID report

From the information I have provided, you should be able to determine if your husband qualifies for a mortgage and if both of you can afford to make the purchase. All the best.

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