Purkiss
Becki Patterson, Business Writer
A mortgage is among the most common, if not most significant, of loans that people acquire in Jamaica. Yet, it is the type of loan that persons often complain is frustratingly difficult to execute.
Part of the difficulty borrowers have is the several steps they usually have to take between identifying the property they want to buy, concluding a lending agreement with the mortgage provider, and actually taking possession of the property.
The requirements for traversing this seeming maze were some of the issues addressed by Wanica Purkiss, a mortgage specialist at Jamaica National Building Society, at the recent personal finance seminars hosted by First Global Bank.
A mortgage, Purkiss explained, is "money loaned on the security of freehold property (real estate) and the borrower performs the conditions of the mortgage by repaying a given sum (principal and interest) over an agreed period of time".
"A mortgage deed is a legally binding agreement," she said. "It sets out the terms and conditions of a mortgage loan between the mortgagor and the mortgagee.'
Features of this type of loan are that it is long term, that is, the borrower may have up to 35 years to repay, the borrower presents collateral, and there is a schedule for repayment of principal and interest.
The borrower must be able to satisfy the lending institution's loan-servicing criteria.
Along with the concern for repayment, the lender also checks on the borrower's ability to fund the transaction costs. For purchase of a home, these are:
Legal Costs
Attorney's costs Preparation of sale agreement. Statutory Costs - Transfer
Half of the stamp duty Half of the registration fee.Cost to produce documents to support loan
Valuation report Surveyor's identification reportAccording to Purkiss, mortgage companies use what they label as the 'Five Cs' in assessing the potential borrower:
Character - the willingness of a borrower to repay debts. Capacity - ability to generate the necessary cash flow required to meet obligations.
Collateral - the quality, value and marketability of the security. Capital - the borrower's financial position in terms of assets, liabilities and net worth; Conditions, which may be required of the borrower in order for him or her to get the loan. Conditions could also refer to external factors that can affect the decision to lend or not to lend, such as the state of the economy.Useful steps in buying a home
If you are thinking of purchasing a home for say $10 million and need to borrow around $8.5 million, here are some of the steps that Jamaica National Building Society's Wanica Purkiss suggests you should take to make the process easier.
Obtain pre-approval from your mortgage-loan provider. Where appropriate assess your National Housing Trust benefit for funding under the Joint Financing Mortgage Programme. Identify financing for interim funding. Use your pre-approval to shop for a suitable property.
Engage the services of a realtor, whose expertise can be useful in identifying a suitable property; Engage the services of an attorney-at-law who practises in conveyancing.Limits the borrower might want to consider
Purchasing a unit that is now affordable or can be improved on in later years. You may not be able to afford your dream home at this time.
Where affordability is an issue, you may consider purchasing with a trusted family member or trusted friend. You may want to consider your options to construct a dwelling in stages as against purchasing a completed unit.Owning property may create wealth, bring peace of mind
Like other borrowings, a mortgage is a debt, but it often brings with it a "peace of mind in the security of ownership/property tenure", said Purkiss.
There is also the fact that with this kind of debt comes the acquisition of assets and creation of wealth.
Moreover, having the debt may allow for the "holding of cash for emergency and other investment purposes and the ability of the borrower to utilise equity in property for other purposes, e.g. education for your children".
Other advantages are that a mortgage can be transferred with a change in ownership; borrowing can provide a means of monthly income in later years, e.g. reverse mortgage and an individual's consistent repayments over time helps to establish credit worthiness.
business@gleanerjm.com
