By Ayanna Kirton, Staff ReporterAS WITH any financial investment, the decision to purchase your own home requires a significant amount of planning. Because it is highly unlikely that the average first-time buyer will be able to finance a home entirely on their own, it is important to examine all the options available to help fund the new investment. The most convenient way to purchase a new home is through a mortgage. When you borrow money from a savings and loan organisation, a mortgage is the agreement between you, the potential homeowner and the organisation which gives them the right to take possession of the property given as security if the loan is not repaid. Credit unions are extremely helpful resources for first-time homebuyers.
Micah Davis, general manager of the University of the West Indies, (UWI) Mona and Community Credit Union, says that most mortgages can set you back at least $25,000 a month. It helps therefore to purchase a home as a joint investment between you and your partner. Not only will the combined incomes help to reduce the financial strain but it will also increase your chances of getting loan approval, which is based primarily on your annual income. Most mortgaging companies stipulate that borrowers should earn at least three times their monthly payments. If you are under 30, Mr. Davis admits that you may not be financially equipped to purchase a home immediately. He adds that this should not prevent future homeowners from saving towards their goal.
"The best thing to do is to start saving through salary deductions. Create an account specifically for this in order to build a savings base. The monthly deductions will help to develop some discipline and consistency in your savings patterns. Unlike a car, a home is a medium to long-term investment which requires financial stability, which can be attained and maintained within the next three to five years."
Most mortgaging companies will lend you up to 90 per cent of the cost of the house, you will be required to pay the remaining 10 per cent on your own or with the help of the National Housing Trust (NHT). It can provide a $800,000 loan to anyone who has been employed by an NHT participating company for three years and has contributed consistently to the Trust monthly.
The Jamaica National Building Society (JNBS) is another organisation, which can facilitate first-time home purchases. The JN Home Express Mortgage Plan was designed with first-time homeowners in mind. They offer a special interest rate of 14 per cent. One of the plan's more attractive features is the opportunity to get 10 per cent of your mortgage principal (your first mortgage payment) back in cash. This can be used to buy furniture or even add to the deposit required to buy your new house. You can also decide on the loan term ( the length of time within which you'll be required to pay off the loan). See http://www.jnbs.com for additional benefits and requirements.
Credit manager of GSB Co-operative Credit Union, Janet Richards, adds that age also plays a major part in the mortgaging company's decision making process. "Your age determines the time period within which you will be required to pay off your loan, the younger you are the longer that period will be." She offers the following tips for potential home-buyers:
Decide whether you would
prefer to buy a house or land.
Decide what you can afford to purchase.
Once you have determined
how much you can spend, think about the area you'd like to live in.
Take the time to research the prices of the houses available in the area you're interested in.
Try to pay off any outstanding loans you may have with other lending institutions. If your funds are tied up in other
financial commitments you may not be readily approved for a mortgage.
The more you make per annum, the higher your interest rate will be.
In addition to the mortgage, the deposit required for the property can also be borrowed from your credit union.
Find the best organisation (bank, building society, or credit union) whose terms and conditions are suited to your needs. Have them explain the process and all its requirements.
Join a credit league. If you are a member of the credit union, interest rates are 2 per cent lower (than the 18 per cent for non-members).
