Oran Hall | Eager to own a home
Published:Friday | May 4, 2018 | 12:00 AM
QUESTION: I am a 25-year-old married man. My wife and I are both police officers and we are earning a reasonable salary. I am desperately in need of a home. I would love for you to give me some advice as to how I can step through that door.
- Chris
FINANCIAL ADVISER: Perhaps the best route to home ownership is through the National Housing Trust, NHT, which lends to qualified contributors to build or to buy their home.
To buy, you could get a NHT scheme house loan or an open market loan. To build, you could get a build-on-own-land loan or a construction Loan. Other loan facilities include the NHT serviced lot loan and house lot loan. All of these are non-homeowners loans meaning that only contributors who do not own a house and have never received a benefit are eligible.
The NHT develops or finances the development of scheme houses, which are sold directly to contributors. When these units become available, they are advertised in the public media and contributors are invited to apply.
The NHT allocates units in its schemes using a selection process. Qualified applicants who are selected for its units are not required to make a deposit but must be able to afford the unit. An applicant who qualifies for less than the price of the house is required to fund the difference. If, for instance, the price of the house is $6.5 million and the applicant qualifies for a loan of $5.5 million, the applicant is required to fund the gap of $1 million.
The open market loan is for buying a house on the open market that is being sold by an individual or agency other than the NHT. If you need and can afford to borrow more, you may borrow the balance from a financial institution that is willing to enter into a joint financing mortgage arrangement with the NHT.
A NHT contributor who owns land or who has legal permission to build on a plot of land and is ready to start building a house may apply for a build-on-own-land loan, the construction funds loan is for contributors who have bought land with a house lot loan or serviced lot loan and want to build on it. The house lot loan is used to purchase land being sold by private individuals or companies and the serviced lot loan is used to purchase lots of land with basic infrastructure such as paved roads, water supply and electricity from the NHT.
The loan limits are $5.50 million per individual and $11 million for two joint applicants for the NHT scheme house loan, open market loan, build-on-own land loan and construction loan. in the case of the construction loan, however, any previous loan amount will be deducted. The loan limits are $2.50 million per individual and $5.0 million for two joint applicants for the serviced lot loan, and the house lot loan.
There is no guarantee that a contributor will qualify for the maximum amount as how much an applicant qualifies for depends on age and income. Age is a very important factor in determining the term of the loan, that is, how long the applicant is given to repay the loan. The younger the applicant the longer the repayment term and the lower the repayment amount. Income is important as it determines how much the applicant can afford to borrow.
To qualify for an NHT benefit, you should be between 18 and 65; should be currently contributing to the NHT; have made at least 52 weekly contributions 13 in the last 26 weeks just before the date of application, earn an income that allows you to repay the loan; and have paid with interest any outstanding contributions due in the past three years.
The NHT lending rates are better than the rates of other mortgage-lending institutions being 4 per cent per annum for persons earning between $20,001 and $30,000 per week and 6 per cent for persons earning $30,001 per week or more.
Perhaps the most important matter to consider is the deposit on the house, which ranges from 10 per cent to 20 per cent of the price depending on what is agreed with the seller. Additionally, the purchaser pays closing costs - the range of expenses incurred in settling the transaction - of approximately 5.25 per cent of the purchase price of the house plus GCT of 16.5 per cent on the attorney's fees.
Determine what both of you can afford and where you would like your home to be. Explore your best options for financing from the NHT and other financial institutions, if necessary, then make a decision if they are congruent. If you do not have the required funds, save as if your life depends on it.
- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel.