Us­ing a fam­ily mem­ber’s NHT ben­e­fits

Jamaica Gleaner - - BUSINESS - Oran Hall Oran A. Hall, prin­ci­pal author of ‘The Hand­book of Per­sonal Fi­nan­cial Plan­ning’, of­fers per­sonal fi­nan­cial plan­ning ad­vice and coun­sel. fin­viser.jm@gmail.com.

QUES­TION: I am sav­ing to­wards pur­chas­ing a home and would like to start the process this year. I have $1 mil­lion in sav­ings to­wards this goal, but it seems to just be my deposit. I would like to know if I ap­ply for an NHT loan and am ap­proved, do they have a clos­ing cost I would have to pay up­front like the other fi­nan­cial in­sti­tu­tions? I am con­sid­er­ing ask­ing a fam­ily mem­ber to sign over the ben­e­fits they qual­ify for to me so I may use only the NHT as the mort­gagee. Could you please ad­vise how this works?

– Ta­mar FI­NAN­CIAL AD­VISER: The clos­ing costs cover a range of ex­penses which are in­curred in the process of ac­quir­ing prop­erty. Most are gen­er­ally shared by the buyer and seller whose le­gal rep­re­sen­ta­tives act as their agents. The Na­tional Hous­ing Trust (NHT) does not re­quire any up­front pay­ments from con­trib­u­tors/ben­e­fi­cia­ries, just a re­ceipt to say the deposit has been paid along with the doc­u­ments re­quired to do the nec­es­sary pro­cess­ing.

The NHT, how­ever, as­sists its con­trib­u­tors with the clos­ing costs by al­low­ing them to ac­cess their con­tri­bu­tions that are not yet due to be re­funded with the ex­cep­tion of the con­tri­bu­tions for the year im­me­di­ately be­fore the year in which the loan ap­pli­ca­tion is be­ing made. This means that con­trib­u­tors ben­e­fit­ing from this fa­cil­ity in 2017 would be able to ac­cess con­tri­bu­tions for the pe­riod 2010 to 2015. The NHT would re­tain the con­tri­bu­tions for the last year for which it should have a record for con­tri­bu­tions made – 2016 in this case.

The NHT will also lend you money to pay the clos­ing costs as a part of the loan to pur­chase a prop­erty if you meet the fol­low­ing two con­di­tions - if you pay a deposit of at least 10 per cent of the pur­chase price of the prop­erty and if the sum you bor­row is less than the amount for which you qual­ify. For ex­am­ple, if you qual­ify for $4 mil­lion but bor­row only $3 mil­lion, the NHT will lend you $1 mil­lion to­wards the clos­ing costs.

One way in which con­trib­u­tors can as­sist an­other to own a home is by co-ap­ply­ing but choos­ing not to have their name on the ti­tle, mean­ing they would have no in­ter­est in the prop­erty but would not be able to ap­ply for an­other loan un­til 15 years have passed if the full amount of the en­ti­tle­ment has been used.

The NHT would ef­fec­tively grant two loans, the terms and amounts of which would be de­ter­mined by the age and in­come of the ap­pli­cants, both of whom must be con­trib­u­tors and thus younger than 65. An ap­pli­cant opt­ing not to have an in­ter­est in the prop­erty who has never owned a home would have an en­ti­tle­ment of $5.50 mil­lion and one own­ing a home but with­out pre­vi­ously re­ceiv­ing an NHT ben­e­fit would have an en­ti­tle­ment of $2.5 mil­lion.

MU­TUAL AR­RANGE­MENTS

There would thus be two re­pay­ment terms and amounts but one per­son would, by mu­tual ar­range­ment be­tween the bor­row­ers, make the monthly mort­gage pay­ments. In such an ar­range­ment, the co-bor­row­ers need not be re­lated.

There are two ar­range­ments which al­low par­ents to as­sist their chil­dren to own a home. In one, a par­ent, who must be un­der 65 and a con­trib­u­tor to the NHT, and owns a home but has not re­ceived an NHT ben­e­fit can bor­row up to $5.5 mil­lion to as­sist an off­spring to build a house or to buy one on the open mar­ket.

The child can also ap­ply, mean­ing there would be two loans with dif­fer­ent re­pay­ment terms and amounts based on the age and in­come of each ap­pli­cant. Both would make such pay­ments to the NHT but the par­ent’s pay­ment would stop at age 70.

The other Par­ent As­sist Pro­gramme fa­cil­ity is for par­ents over 65, mean­ing they would no longer be con­trib­u­tors to the NHT. They would not be able to get a loan but would be able to as­sist their chil­dren to qual­ify for se­lec­tion to own a hous­ing unit in an NHT scheme by us­ing their points. Only the child would qual­ify for a loan in this case.

Such par­ents should never have re­ceived an NHT ben­e­fit and must have not have re­ceived their full NHT re­funds, mean­ing that at least one re­fund should still be due to them.

There are ways for NHT con­trib­u­tors to as­sist fam­ily and non-fam­ily mem­bers to re­alise home own­er­ship ei­ther by co-ap­ply­ing, bor­row­ing to as­sist or us­ing their points to boost the chances of se­lec­tion and the NHT can also as­sist qual­i­fied con­trib­u­tors with their clos­ing costs.

I

PER­SONAL FI­NAN­CIAL AD­VISER

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