If you’re thinking about buying a house in Jamaica through NHT, then you want to make sure you fully understand the fundamentals before jumping in.
This is a financial decision that can affect the rest of your life either positively or negatively(if done wrong).
So What Is A Mortgage?
A mortgage is a type of loan that is given to a borrower in order to buy a piece of property. The loan is given with the intention of being paid back over a set period of time, usually 15 or 30 years.
The property that the loan is being used to purchase serves as collateral for the loan.
If the borrower defaults on the loan, the lender can seize the property. Now bear in mind, not all loans are mortgages.
However, loans can also be given for other purposes, such as to start a business or consolidate debt.
The process of getting a mortgage in Jamaica to purchase land, a house or to build a house starts with getting pre approved by the National Housing Trust (NHT).
Or the financial institution that you hope to borrow from.
Do This Before Getting A Mortgage In Jamaica
You should shop around for a mortgage when you are buying a house.
This is because a house is likely to be the biggest and most expensive thing you ever buy in your life.
You will be committed to making these payments every month for the next 25 to 30 years. Therefore, you definitely want to get the best deal.
There are 2 main things to look for when choosing a Jamaican financial institution:
- Interest rate
- The repayment period.
Besides the cost of the property, these are the 2 biggest factors that will determine your monthly payment.
The interest rate is the cost of borrowing the money for a loan. The greater the interest rate, the more expensive your loan will be.
Buying A House In Jamaica Through NHT
The average interest rate for Jamaican commercial banks on mortgages is about 7.5%.
The NHT (National Housing Trust) offers interest rates between zero and 4%, depending on your income.
NHT loans are available to 2 applicants who wish to combine their incomes in order to purchase a housing unit that is not being sold by the NHT.
The maximum loan amount that the applicants can receive is 13 million Jamaican dollars, with 6.5 million Jamaican dollars allocated for each applicant.
If an applicant desires to purchase a housing unit that costs more than the maximum loan amount, they may do so by supplementing the loan with another source of financial funding.
NHT Joint Financing With Other Institutions
Most financial institutions offer joint financing with the National Housing Trust (NHT).
This means that you can borrow from both the NHT and the bank. Your NHT loan will have a lower interest rate, which can help to lower the cost of the mortgage.
The repayment period will determine how low your monthly payments will be going forward. A mortgage that has a repayment period of up to 40 years will have much lower monthly payments than lets say a mortgage with a 20 year repayment.
However, a longer repayment period means that you will pay more interest to the bank in the long run.
How long a bank or the NHT will give you to repay is determined by your age, with younger borrowers allowed to repay over a longer period of time.
So, it’s best to start early.
The amount you’re seeking to finance is another factor to look at. Some financial institutions, depending on your ability to repay, will offer mortgages that cover the entire purchase price of the property or even more.
For example, Jamaican National offers a mortgage that provides 110% financing. The extra 10% can be used to buy furniture or pay closing costs, for example.
However, the interest rate will be higher for this benefit.
Other institutions usually allow you to borrow up to 90 or 95% of the purchase price of the house, which means that you would have to save up that deposit.
Here’s what will be required to open a bank account:
- A government-issued ID (e.g. driver’s license, passport)
- A letter from your employer
- 2-3 most recent pay slips or financial statements
- Proof of address (e.g. utility bill)
- Your tax registration number (TRN)
You will be assigned a mortgage officer who will do a pre-interview with you to determine how much you want to borrow and what you will use the money for.
Whether you want to buy a house or land, or build a house, they will need to know.
After You Apply For Buying A House In Jamaica Through NHT
After you submit an application, a financial institution or NHT will look at information like your employment history, income, debts, and credit score to decide how much you can afford to borrow.
If you’re eligible, you’ll get a preapproval letter that says how much money you can borrow.
Now that you have this letter, you can start looking for a property that falls within your price range.
Keep in mind that many realtors won’t show you any properties unless you have a pre-approval letter, to save themselves the time and effort in case you are denied a loan.
Getting pre-approved, then, also saves you the potential disappointment of being turned down later on.
You can use a mortgage calculator on a bank’s website to get an estimate of monthly payments and closing costs before you go into the bank.
This way, you know exactly what you can afford and you can look at properties within your budget.
When You Find A Property To Buy Through NHT
When you have found the property you would like to buy and have your pre-approval, you can make an offer to the seller.
If the seller accepts, you will need to hire an attorney to draw up the sales agreement for the property, or the bank will have their attorneys do it on your behalf.
Banks typically request an evaluation report, a copy of the title of the property, current property tax certificate and peril insurance for full replacement cost of the building.
Some banks may also ask for a structural engineer report.
The structural engineer will spend some time to properly examine the house to make sure that there are no major problems. Therefore, it may be a good idea to have somebody examine the house.
Banks typically ask for proof of life insurance when considering a mortgage because they want to be sure that, in the event of the borrower’s death, the proceeds of the life insurance policy will be enough to cover the remaining mortgage payments.
The bank will also usually require the borrower to pay legal fees, stamp duties, a commitment fee, and a mortgage registration fee.
Jamaican banks have different fees, so be sure to look out for those when you’re shopping around for a loan.
Once you’ve found a bank you’re happy with and paid the necessary fees, you can sign on the dotted line and they’ll disburse the loan so you can finally move into your new home.
This is the process for taking out a first mortgage for your new home.
You may be wondering if there can be a second mortgage or a third mortgage. The deposit that you paid plus any mortgage payments that you’ve made represent your equity in the home, meaning that’s the amount of the property that you actually own.
If you bought a $10 million home and put down a down payment of $1 million, you have $2 million in equity in the home.
The bank owns the other $8 million. You can use the $2 million in equity as collateral for another loan, called a second mortgage.
This allows you to use your status as a homeowner to unlock value in your property. This new loan can be used for a variety of things, such as buying another house, building an addition to the house, paying for college tuition, investing in a business, or buying stocks.
Now You Know The Process Of Buying A House In Jamaica Through NHT
Buying a home will be one of the most critical decisions you will have to make. So doing the research will make the process way much easier and less overwhelming.