Financial Adviser | Making additional contributions to NHT

QUESTION: I am a 20-year-old who is earning roughly $45,000 after taxes, and I am very interested in owning my own house by age 22. I am not satisfied, however, with just the amount contributed to NHT out of my salary. I was wondering if I could set up an account directly with NHT and pay, for example, $10,000 monthly separately from the contributions that are automatically deducted from my salary. If that is possible, would my chances of getting a loan from NHT to purchase a house in a year's time be feasible, and what range of money would I be getting - still under $4.5 million or over?

- Jovanni

FINANCIAL ADVISER: I find it interesting that there is so much interest in borrowing from the National Housing Trust (NHT) for home ownership based on the questions I have been receiving from readers and from young people, in particular.

The NHT does not accommodate what you are asking about, but it allows contributors who are employed by other persons and who also earn additional income from self-employment to contribute on the additional income they earn.

It seems that you will only be able to increase your NHT contributions by securing a higher-paying job or engaging in some self-employment activity. But it is not only the dollar value of your contributions that qualifies you for a loan.

To qualify, you should be a contributor to the NHT and should have made 52 contributions to the NHT, including 13 in the 26 weeks just before the time of the application. You should also have paid, with interest, any outstanding contributions due in the last three years and be between the ages of 18 and 65.

How much applicants qualify for is a function of their ability to repay, which itself is a function of their income. It is, therefore, not automatic that applicants will qualify for the $4.5 million that you mentioned. You could qualify for much less if your income is small.

It is commendable that you have set yourself a solid goal in that you have set a time by which you expect to own your own home. There are some considerations that you should take into account, though. You should consider whether you can realistically own your home by the time you have set.

You should also determine the type of house you want to own and in what location as these do have a very strong bearing on the cost. If the NHT loan is all you are considering for purchasing the house, consider whether it is sufficient to make the purchase.

Bear in mind also the expenses associated with the transaction. These closing costs can be quite high. Fortunately, the NHT does not require that these service charges, as the NHT calls them, are paid up front as they effectively roll them into the monthly mortgage payments.

Although each delay makes the fulfilment of this dream more costly, I suggest that you do not become disheartened but look closely at which of the NHT options suits you best: build-on-own-land, open market loan, or NHT scheme house.

- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning'. Offers personal financial planning advice and counsel. finviser.jm@gmail.com