Financial Adviser | NHT assistance for a second home purchase

QUESTION: I currently have a mortgage which incorporates an NHT portion with one of the building societies. I am now interested in selling this property and buying another somewhere else. If I sell this, can I get any NHT assistance with the next purchase? If so, what are the limits and criteria? Also, how much would I be able to access? I am 55 years old and earn $200,000 per month.

- Cleve

FINANCIAL ADVISER: Having already received a National Housing Trust (NHT) benefit, there are two options available to you - apply for a Fifteen-Plus Loan; or write to the NHT before selling the property you now own seeking special permission to transfer the benefit to the house you are planning to purchase.

The Fifteen-Plus Loan is for contributors who previously received an NHT loan at least 15 years ago and now wish to repair the property that they bought at the time - or some other house that they now own and occupy - or if they no longer own a house and are seeking a second opportunity at home ownership.

Where the loan is being used to purchase or construct a residential property:

- The funds may not be used to acquire an NHT scheme benefit, whether a house or serviced lot;

- The applicant must demonstrate that he/she is not the owner of a residential property; and

- The applicant must not have lost the previous property owned due to default on his/her NHT mortgage.

Using the Fifteen-Plus Loan, a contributor can borrow as a single applicant or may co-apply with one other qualified NHT contributor to access a higher loan limit to purchase property on the open market.

In your case, if you received the NHT benefit to purchase your home more than 15 years ago, you could pursue that option, but the sum of $1.5 million towards making a purchase would be rather small given today's reality regarding the price of houses.

In the second option, you would not really be getting a new benefit; you would get a loan of the same amount as the sum needed to eliminate the principal portion of the debt from the existing benefit. This would be used to cancel the existing debt, but would count as the NHT's contribution to the new purchase, so you would get no new funds. If, for example, you had received a mortgage of $4 million and have paid back $1 million to the NHT, the amount required to close with the NHT would be $3 million.

The NHT would give you a loan of $3 million on the same terms as the original loan. You would pay the same rate of interest and you would be required to pay off the loan at the time the old loan was scheduled to be paid off. If then, the term of the original loan was 25 years, but it is now five years since you got it, you would be required to pay off the new amount in 20 years.

Still, using the example above, bear in mind that $3 million of the money in the current house came from the NHT and is to be transferred to the new house. When the current house is eventually sold, that is a consideration that must be central in how you treat with the sales proceeds. That sum should go towards the purchase of the new house.

Where the NHT is concerned, it would not matter if the original benefit was granted a year ago, or eight or sixteen years ago.

Of interest, though, is that, if the original benefit was granted more than 15 years before the application in respect of the new house, you would be eligible for the Fifteen-Plus benefit as well, but not to purchase a housing unit. The benefit could only be used for home improvement. You could apply for it at the time you are requesting the special approval regarding the new purchase, or you could do so later.

It goes without saying that the home improvement facility would apply just to the new house you plan to purchase.

The question you have to answer is which benefit would put more money towards the acquisition of the new home. If you only recently made the first purchase, considering the larger benefit in recent times, it is likely that the Fifteen-Plus option could be the less attractive of the two, but it could be the more attractive option if you made your first purchase more than 15 years ago. In such a case, it is very likely that the sum you now owe to the NHT is less than the $1.5 million that would be available to you under the Fifteen-Plus option.

Your question has allowed us to see that the NHT has two primary objectives: to allow its contributors to acquire a home and to allow them to improve on that home, giving consideration to wear and tear or the need to expand to meet the needs of the contributor or the contributor's family.

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