It may not be the best of times to be shopping for a home in Jamaica. In general, it is more difficult to qualify for a mortgage now, as lenders attempt to deal with increasing loan defaults, clamping down on new credit in the process.
Mortgage rates are also more expensive, ranging up to 20.5 per cent, and are subject to change, according to economic conditions.
The purpose of purchase and whether or not you are a first-time buyer will affect the price of your mortgage.
If you are not going to occupy the property, but rent to tenants, the rate will be higher.
You may, however, combine building society funds with a cheaper National Housing Trust loan and reduce the monthly payments.
Scotia Jamaica Building Society (SJBS) is currently lending only 70 per cent of the purchase price. Other building societies have reduced the mortgage amount to 85 per cent.
But, a wide array of mortgage products exist in Jamaica, the most affordable of which is offered by state-owned NHT.
Additional cash
To buy a house, in addition to the 15 per cent to 30 per cent deposit, depending on the institution, you will need an additional 12 per cent of the purchase price in cash to cover other transaction costs such as valuation reports and attorney's fees.
From SJBS - which offers mortgages at 17 per cent interest for all its residential loans - if a 30-year-old plans to buy a house which is priced at $5 million, he or she will get no more than $3.5 million.
The monthly payment will be $50,350 for 25 years. Mortgage officer Viviene Isaacs notes that the qualifying salary for this loan will be no less than $130,000 before tax and the borrower should have no other significant obligations apart from the new mortgage.
In other words, if you are already paying out one-third or a half of your salary in motor vehicle and education loans, you will almost certainty be turned down for this loan.
Getting more funds
In applying for a mortgage, you may consider joining with another individual to qualify for more funds.
In the case of the NHT, which lends individuals a maximum of $3.5 million, two co-applicants with the right salary level could get $7 million.
A single individual aged 30 would pay $25,450 per month on the maximum loan allowed.
That individual, if he/she co-joins with another on, say, a $5 million loan, would pay a mortgage of $26,185 monthly, while the 'joiner' would be expected to pay $10,990. Together, they would pay $37,145 monthly for 30 years. Joining with someone else is fraught with problems - it requires finding a partner that can be trusted over the long haul - and you should consider the pros and cons carefully before doing so.
NHT interest rates vary from two to eight per cent, according to income.
A salary of $32,000 monthly will qualify you for a $1.6 million mortgage loan from the Trust at interest of two per cent.
Getting the maximum
An individual earning $80,000 will qualify for the maximum $3.5 million loan but will pay 6.0 per cent.
You may not be able to get a mortgage loan from your credit union, but you could consider another type of loan to fund your real estate purchase.
COK Credit Union, for example, offers loans for repayment over 10 years.
To get $3.5 million to buy a home, you would be expected to pay back $84,885.17 monthly. The interest rate on this loan is s 24 per cent per annum on the reducing balance.
Your take home pay should be at least $231,000 per month net, after tax. Share requirements - money in your credit union account - would be 10 per cent or $350,000.
For a house valued at $5 million the maximum loan available from Victoria Mutual Building Society (VMBS) is $4.25 million or 85 per cent. Maximum repayment period is 25 years and the monthly payment for a 30 year old would be $61,120 at the lowest interest rate of 16.99.
Interest rates
Rates can be as high as 20.5 per cent, depending on the purpose of your purchase.
The qualifying salary for a 30-year-old would be no less than $240,000 before tax.
VMBS does not lend money for coops such as Westport in Portmore where sales have to go through community approval before they can be concluded.
Wanica Purkiss, mortgage and operations executive at Jamaica National Building Society, says women can access up to 85 per cent financing to purchase or construct residential properties. Cheaper loans are available the bigger your downpayment.
Features of the women's mortgage include :
The option to apply under the Joint Financing Mortgage Programme which combines JNBS loan with your NHT benefits.
Discounted interest rate
A discount on interest charges is available to JN members who save 5 per cent of the loan amount for a minimum period of 12 months. The applicable interest rate is 14.25 per cent.
Women who go with JN will also receive $200,000 free on content insurance if the mortgagor insures the contents for a minimum of $1 million.
For men, the interest rate on JN mortgages is also 14.49 per cent but there is no free content insurance nor other deal sweeteners.
JNBS offers loans at rates of 13.75 per cent to 14.25 per cent.
FirstCaribbean Building Society offers 90 per cent financing, the highest of the four building societies, but the mortgage rate is 20 per cent.
For a house valued at $5 million which is perhaps a two bedroom in Portmore, a 30-year-old will be offered a $4.5 million 25-year mortgage loan.
Payback would be $75,530 monthly.
The qualifying salary required would be $250,000 gross monthly income with no other debts.
To apply for a mortgage, the various institutions require a deposit, which can be as low as five per cent of the purchase price and as high as 30 per cent; a sales agreement; photocopy of the Certificate of Title; valuation report done by an approved valuator; surveyor's report done by a commissioned land surveyor; and property tax certificate.
You may also be requested to open an account with the loan institution.
avia.ustanny@gleanerjm.com