Oran Hall | Getting a mortgage loan in Jamaica
ADVISORY COLUMN: PERSONAL FINANCIAL ADVISER
QUESTION: I have a friend in Jamaica right now looking to get a mortgage. Can you help or send him in the right direction?
FINANCIAL ADVISER: The main mortgage lending institutions in Jamaica are the National Housing Trust, NHT, the commercial banks, the building societies, the credit unions and one of the life insurance companies.
To get a mortgage, you must be able to satisfy the mortgage-lending institution that you are able to meet your financial obligations to it.
Although the building societies do not restrict lending to their customers, they require prospective borrowers to open an account into which the closing costs can be lodged.
Credit unions tend to require non-members to apply for membership when applying for a loan, the life insurance company lends to policy holders and non-policy holders, and although banks do not require prospective borrowers to have an account prior to making the loan application, they usually require that an account is opened to facilitate the repayment of the loan.
You may be able to get financing of up to 95 per cent of the value of the property or purchase price, whichever is less, but various types of institutions have their own limits so this does not apply to all mortgage lenders. The maximum sum offered by the lenders also varies. For example, the insurance company lends up to $30 million for residential mortgages but credit unions lend up to $25 million. You may borrow for up to 40 years from the NHT, depending on your age, but it is quite common for lending institutions to lend for up to 25 years.
A mortgage-lending institution usually requires that borrowers earn a monthly income that is thrice as much as the monthly mortgage payment. They require proof of employment in the form of a letter from the employer of the prospective borrower and verification of income by requiring salary advices for the last two or three months.
The self-employed are required to submit proof of income by submitting bank statements over various periods, depending on the lending institution, and a current financial statement from an accountant.
The process of applying for the mortgage begins with what is described as the pre-qualification process, which primarily serves to enable the lending institution to determine if you meet the minimum requirements for the loan. This includes providing proof of age, a breakdown of your monthly expenses and income, and proof that you have the closing costs.
Once the application form and pre-approval documents have been submitted, it is advisable to make contact with the lending institution which will then arrange an interview to determine if you will be granted the loan.
The lending institutions have what is called a pari passu arrangement with the National Housing Trust whereby they combine to lend the required funds to qualified NHT contributors, but the NHT has set dollar limits on how much each qualified borrower can access.
Like other institutions, NHT allows individuals to make joint applications for loans, and, because it lends at lower rates than the other lending institutions, borrowing a portion of the funds from the trust effectively makes the mortgage cheaper.
The NHT also provides mortgage funding to qualified contributors other than through the pari passu arrangement. The following are the basic requirements to qualify for a loan from the NHT: you should have identified the house that you wish to buy, have agreed on a price with the seller and drawn up a formal sale agreement, have the registered certificate of title for the property available, have made at least a 5 per cent deposit on the property, earn an income that allows you to repay the loan, be contributing to the NHT at the time of applying, have made at least 52 weekly contributions, 13 of which were made during the 26 weeks before the date of the loan application, be able to account for your contributions and have paid up, with interest, any outstanding contributions due in the last three years and be between the age of 18 and 65 years.
The NHT lends contributors money to buy a house being sold on the open market by an individual or agency other than itself. This is a loan for persons who do not own a home, but a contributor who owns land or who has legal permission to build on a plot of land and is ready to start building a house may apply for a build-on-own-land loan. It also offers a construction funds loan for contributors who have bought land with a house lot loan or serviced lot loan and want to build on it.
There are certain costs and requirements associated with borrowing to purchase a property. They include legal costs, charges payable to the government, a valuation report done by an approved valuator, a registered commissioned land surveyor’s report, property tax certificates, a sales agreement and a copy of the certificate of title.
It should not be hard to get a mortgage if the requirements are met. The financial institutions are always itching to add one more client to their books.
Oran A. Hall, principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.